Shared from the 12/29/2018 San Antonio Express eEdition

Falling mortgage rates could boost home sales

4.55% on 30-year fixed-rate deal; Freddie Mac forecasts possible reverse from drop in ’18’s second half

David Zalubowski / Associated Press file photo

The number of homes coming under contract across the nation fell in November, the 11th consecutive month of year-over-year declines in pending home sales, the National Association of Realtors reported.

After mortgage rates increased this fall — reaching a seven-year high of about 5 percent in October — real estate agent Angelina Keck watched buyers back out of contracts on new homes as their costs rose. But as mortgage rates have since fallen to a four-month low, properties are moving again, Keck said.

“You’re seeing people get off the fence,” she said. “I definitely saw a lot more action of houses closing and pending before the end of the year than I usually do.”

The average rate for a 30-year fixed-rate mortgage has fallen by nearly a half-point since early November, sliding to 4.55 percent this week, according to Freddie Mac, the government-sponsored mortgage finance company. As a result, Freddie Mac said, “The drop in mortgage rates should stem or even reverse the slide in home sales that occurred during the second half of 2018.”

Nationally, the number of homes coming under contract fell in November, the 11 consecutive month of year-over-year declines in pending home sales, the National Association of Realtors reported this week. Closed sales of existing homes dropped every month since February until reaching a three-year-low in September, the Realtors reported. New home sales fell to a 2½- year low in October, the Commerce Department reported.

In Houston, the slide in home sales was most prominent in September, the same month mortgage rates began rising significantly. The region’s sales fell 6 percent from the previous year, according to the Houston Association of Realtors, although Hurricane Harvey, which moved many closings in August 2017 into September, may have skewed the numbers.

But in November, as mortgage rates began to moderate, Houston-area home sales rose to outstrip the previous year’s, except for homes in the lowest price bracket, which have become harder to find.

“Now that rates are back down, people see it as an opportunity to lock in a rate under 5 percent,” real estate agent Amy Bernstein said. “So it helps the market.”

But Greg McBride, chief financial analyst at financial services company Bank-rate, cautioned people not to expect dramatic change in sales from the lower rates. “A pullback in mortgage rates helps,” he said, “but it’s not going to change a sluggish market into a buoyant market.”

McBride pointed out that mortgage rates are still higher than they were a year ago and that home prices have risen faster than incomes for several years, leading to an affordability issue that a 4.5 percent mortgage rate will not solve on its own.

In the meantime, McBride recommended borrowers compare lenders to find the lowest rates possible. “There’s a disparity of rates in the marketplace,” he said. “If you’re shopping around, you can still find rates in the low 4s, which can knock a big chunk off of your payment.”

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