30-Year Fixed Rate Mortgage Falls To A New Record Low

According to Freddie Mac’s weekly survey, rates on a 30-year fixed-rate mortgage averaged 3.88% for the week ending yesterday, which is a new record low, down from 3.89% the previous week and 4.74% a year ago. Rates on 15-year fixed-rate mortgages averaged 3.17%, up slightly from 3.16% last week and below 4.05% a year earlier.

The five-year Treasury-indexed hybrid adjustable-rate mortgages, or ARM, averaged 2.82%, unchanged from last week and below 3.69% a year ago. The one-year Treasury-indexed ARM rates averaged 2.74%, down from 2.76% the prior week and below 3.25% last year.

Mortgage rates are lower because they tend to track the yield on the 10-year Treasury note, which recently fell below 1.9%. This European sovereign debt crisis is largely to blame for this move lower in Treasuries. There is no end in sight concerning European crisis, which means that rates will most likely remain low in 2012, especially the first half of the year.

Even with these record low rates, the housing market continues to struggle. In a government report on housing starts that was released yesterday, US builders ended 2011 with a third straight year of dismal home building and the worst on record for single-family home construction, despite modest improvement at the end of the year.

In December, builders broke ground on a seasonally adjusted annual rate of 657,000 homes, the Commerce Department said. A rise in single-family home construction was offset by a huge decline in volatile apartments. For the entire year, builders started just 606,900 homes. That’s only slightly better than the previous two years. And it’s roughly half the 1.2 million that economists equate with healthy housing markets.

So as the housing market continues to weaken and mortgage hit all time lows, is now a good time to buy a home?

If you are looking to buy real estate for a long term investment, now could be a great time. When I say long term I mean about 10 years because I think the real estate market could continue to be weak during the short and medium term time horizons.

Also, if you own real estate and haven’t already done so, now is a very attractive time to refinance your mortgage and lock in these exceptionally low rates.

What do you think? Are you taking advantage of these extremely low rates? When do you think the housing market will bottom out?  Join the discussion below!

— Matt Grossman

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About the Author: Matt Grossman