Before the economy entered a total nosedive, the first signs of real estate problems began with the credit crunch and out-of-control mortgage rates. Starting 18 months ago, mortgage rates began to spike — especially for jumbo loans over $417,000.
Over the last few weeks, mortgage rates have dropped significantly. While jumbo loans are higher, lending standards are stricter, and down payments are required, rates are once again becoming very attractive. According to Zillow, the average rate on a conventional 30-year loan is now 5.42%. On 15-Year loans the rate is now 5.11% — and some 15-year loans can even be found for under 5%. Jumbo loans, however, still remain well over 6%.
As mortgages continue to drop, the Treasury Department has begun to circulate a proposal for the government to boost the sagging U.S. real estate market by backing programs that would drop 30-year conventional mortgage rates nationally to as low as 4.5% for new home purchases. These rates would mark historic lows and would certainly drive new buyers into the market.
For downtown Austin, falling rates and new low rate programs would certainly spur demand, helping to fill out vacancies in many of the projects currently under development. These changes would be unlikely, however, to effect the tight commercial credit and investment markets, still making it hard for developers to bring new unfunded projects to market.
Here is the summary of the Treasury program from CNN:
NEW YORK (CNNMoney.com) — Lobbyists are pushing the Treasury Department to consider a plan to purchase mortgage-backed securities in the hopes of driving mortgage rates to as low as 4.5%, an industry source said.
Leave a Reply