Mortgages Rates Fall for 11th Straight WeekMortgage rates for 30 year fixed mortgages fell below 5% for the first time since Freddie Mac started tracking the data which started in April 1971. Mortgage rates have been going down since November or 2008 when the Federal Reserve said they would start pumping money into the banking system to buy up some of their bad debt. They hoped that would free up money so the banks would start lending it out again and ease up on their criteria for lending so the housing market could get back on track.
Freddie Mac reported last Thursday that the 30 year fixed rate was now 4.96% breaking the previous record of 5.01% which was set the week prior. That was also the 11th straight weekly drop in the 30 year fixed rate, and that is well below the 5.69% which was what it was at a year ago.(Freddie
Mac)The average 15 year rate actually rose from 4.62% to 4.65% that is also the lowest that has been since 2003. The average on the 5 year ARMs also fell to 5.25% which is at it lowest since 2005 and at that point is was 5.24%. (Freddie Mac)What does all this mean to an investor? Well on the surface this sounds great you would be able to buy an investment property for a record low interest rate and if you qualify you could make out pretty good especially since there are so many homes in foreclosure now.
The problem is for investors even if you qualify in my area they are not allowing investors to carry more then 3 mortgages at a time, I was talking to an investor who owns a home on my route, and I was also taking to a few realtors that I no. Another problem for investors is even if you are able to buy a home cheap flipping it is almost out of the question, there are just not enough qualified buyers out there right now and there are so many homes to choose from it would be hard for you to sell your property especially when they can pick a foreclosure for less then yours.
For an investor your only bet right now would be to find someone to rent it to, but with all of these people losing their jobs that may not be as easy as it seems. So I hope you are prepared to take a loss on that property for a little while. If you are then it may not be as bad as it appears, you would be able to buy the house cheap and you would get it at a lower interest rate.
More bad news for investors is even though the Federal Reserve is pumping all of this money into the banking system the banks are still not lending out any of it. The banks are required to carry a certain amount of money in reserve and with so many people defaulting on their mortgages the banks are not lending out money so they can cover themselves on the defaults.
This is a vicious cycle and there does not seem to be an end in sight. With more and more people losing their jobs you would figure that more people are going to fall behind on their mortgages which in turn are just going to tighten up the banks even more. So with this continued cycle it does not appear that investing in real estate right now would be the best bet unless you also have a lot of money in reserve so you can ride out this tough time. If you do you could definitely benefit from buying houses a little cheaper now in hopes the market will eventually correct itself and you would be sitting pretty.
Reference:MSNBC http://www.msnbc.msn.com/id/7148582/Freddie Mac http://www.freddiemac.com/