Dec 18, 2008 10:35 pm US/Central
All-Time Low Interest Rates, Time To Refinance?
(WCCO)
In 32 years of selling real estate, Tom Walters has never seen anything like it. In the upscale neighborhoods of Brooklyn Park's Edinburgh development, he's watched as custom homes sit on the market at bargain basement prices.
"It's probably the toughest year that I've experienced as far as price drops, we're not used to that," Walters said.
Falling home prices have pushed down homeowner equity by as much as 25 and 30 percent. But suddenly, the Edina Realty agent is optimistic. Walters hopes that falling home prices and extremely low mortgage rates will re-ignite a sick market.
"It has to be a combination of pent up demand. The thought that there's money available, I think a lot of folks thought there was not. And the rate is just phenomenal, right around 5 percent so that's quite a bit of motivation for most buyers," Walters said.
Just consider the rate rollercoaster of the past four decades. After peaking at a whopping 15 percent in the early 80s, the average 30-year fixed rate loan has fallen to a low not seen since 1971.
"At the close of today, a 30-year fixed rate was about 4.875 percent for a conventional loan. And a government loan was right about the 5 percent rate," said Marketplace Home Mortgage broker, Steve Rice.
While Rice is seeing a flood of folks interested in refinancing, not all homeowners will be helped by the extremely low mortgage rates.
For many people, the problem will be their home's shrunken equity. Let's say you have a $200,000 mortgage on a home that you paid $250,000 for several years ago. Because of declining home values, that house may now appraise at just $190,000. That's less than what you currently owe, making refinancing out of the question.
Today's low rates will, however, greatly benefit buyers. In the real estate world for Walters, it just may get a stalled market moving again.
"So there's some great opportunities out there to take advantage with purchasing and that's what I'm thinking is going to add a lot more stability, a lot more than the refinancing," Rice said.
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