Home loan rates continue to be one big incentive for home buyers (in addition to lower prices) – but homebuyers don’t seem to be taking the bait. Freddie Mac’s weekly mortgage market rate survey showed rates hitting another forty-year record low. Meanwhile, the Mortgage Bankers Association showed applications for home loans barely budged, and refinancing applications took up a larger share of the total number of applications. 30-year fixed rates continued to come in well-below 5% for homebuyers in Flagstaff this week as well as across the country.
See Freddie Mac charts of weekly home loan rates here. (I’m on vacation, so am not spending the time to download and republish the charts this week.)
Jobs numbers (the all critical key to improvement in the housing market) did not come in as well for the week as economists had hoped, but private sector employment was up – no matter how dismal the headlines may have seemed yesterday.
One Federal Reserve governor registered a strong dissent from the continued low rate posture the Federal Reserve continued to take this week. While Federal Reserve rates do not directly relate to mortgage rates, what the Federal Reserve is thinking about the economy does provide clues as to where the housing market is headed. Governor Hoenig said, “Job growth may be less than hoped for but is positive nonetheless. While we are not where we want to be, the economy is recovering, and, barring specific shocks and bad policy, it should continue to grow over the next several quarters." If that’s true, mortgage rates may be as low as we’ll ever see them.
Hoenig, who is president of the Kansas City Federal Reserve, is worried about the flat-lined CPI number pictured here. He doesn’t want it to sky-rocket as we come out of recession, forcing interest rates higher on recession fears and potentially suppressing the recovery. Most economists believe inflation fears should currently be the least of our worries. We’ll see. | 
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