1) June 2003 5.23
2) March 2004 5.45
3) May 2003 5.48
4) January 2008 5.48
5) December 2008 5.53
Although we looked over a period of 34 years it was interesting that three of the four months with the lowest mortgage rates were in 2003 and 2004. This was basically when Greenspan was cutting the fed rate to prevent the US from going into a recession. A lot of people now blame Greenspan for causing the housing bubble and our current problems. While he might be partially to blame personally I think the massive number of subprime loans (basically loans to people that have a poor credit history) and interest only loans contributed to the problem as well.
The main difference between today's low rates and the rates we saw in 2003 and 2004 is that 5 years ago pretty much anyone with a pulse could get a loan. In the current market rates are low but banks are much more restrictive about giving out loans.
Below are rates for the last few weeks.
December 4, 2008
30-yr 5.53 15-yr 5.33 5-yr ARM 5.77 1-yr ARM 5.02
November 26, 2008
30-yr 5.97 15-yr 5.74 5-yr ARM 5.86 1-yr ARM 5.18
November 20, 2008
30-yr 6.04 15-yr 5.73 5-yr ARM 5.87 1-yr ARM 5.29
November 13, 2008
30-yr 6.14 15-yr 5.81 5-yr ARM 5.98 1-yr ARM 5.33
November 6, 2008
30-yr 6.20 15-yr 5.88 5-yr ARM 6.19 1-yr ARM 5.25
It interesting that 5 year rates are significantly higher than 30 year rates. This is the first time 30 year rates have been significantly lower than the 5 year ARM. It pretty much means 5 year rates are pointless at this point. There is no real reason to get a 5 Year ARM when you can get a better rate on a 30 year loan.
Looking at mortgage rates is one thing but let's translate this into mortgage payments. Using our mortgage calculator we translated today's mortgage rates into a mortgage payment on a 200k house. For good measure we did the same thing with last weeks rates and last months rates.
December 4th
30-yr $1139.34
15-yr $1616.18
5-yr ARM $1169.68
1-yr ARM $1076.08
November 26th
30-yr $1195.24
15-yr $1659.74
5-yr ARM $1181.15
1-yr ARM $1095.75
October 30th
30-yr $1258.87
15-yr $1708.31
5-yr ARM $1245.77
1-yr ARM $1120.56
Looking back to October 30th we can see that payments have come down $119.53 or about 10%. This is pretty substantial. In contrast payments on a 1 year arm have only fallen by $44.48 or about 4%.
So what is going to happen moving forward? I would expect continued wild fluctuations in the mortgage market. We have been seeing large one week changes for the last month and there is no reason that we will not see more wild swings moving forward. Therefore if you are considering a house I would lock in at current rates instead of waiting.
So what about the proposal being considered by Congress to push rates down to 4.5%? I can't say for certain if this will happen or not. It looks on track to pass now but that could change. If it does pass I think it will spur allot of real estate activity. It's not just that rates will be lower but getting rates below 5% is kind of a psychological barrier. I think just seeing rates that are 4.xx will grab people's attention. But that said if there is an increase in activity I expect prices to move up. I highly doubt they will recover to what we saw a year or two ago but we will probably see higher prices than what we are seeing today at least temporarily. After the initial shock has worn off the economy will probably determine what happens with real estate prices.
Ki works as a realtor in Austin Texas. His site has a search of the Austin MLS. It also has a mortgage rates widget and a mortgage calculator widget.
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