May 13th, 2011 11:49 AM by Robin Bain
NEW YORK Mortgage rates have hit lows for the year and could soon be near the decades-low levels of last year.
Those rates, along with falling home prices, are providing an incentive for buyers. They're tempting for refinancers, too.
Still, analysts say the combination isn't likely to lift the depressed housing industry or contribute much to the overall economy. In many metro areas, real estate is straining under the weight of foreclosures, higher down-payment requirements, tighter credit, still-high unemployment and buyers' expectations of even lower prices.
"If people aren't confident about the economy, about jobs and home prices, they certainly aren't going to sign up for the biggest purchase of their lives," said Greg McBride, a senior analyst at Bankrate.
But for those with jobs, money and creditworthiness, today's rates can be tantalizing.
This week, a qualified buyer could expect to finance a home over 30 years at an average fixed rate of 4.63 percent, according to mortgage buyer Freddie Mac. That's the lowest average rate in five months. In November, the rate hit a four-decade low of 4.17 percent.
The 15-year fixed mortgage, popular with refinancers, is down to 3.82 percent. That's also the lowest point since December.
Mortgage rates have fallen for four straight weeks, tracking the yield on the 10-year Treasury note. The 10-year yield has dropped as investors have snapped up Treasurys and other safe securities because of uncertainties about the global economy and the volatile prices of oil and other commodities.
Those who do feel ready to buy are having a harder time qualifying for a mortgage. The average credit score for a loan backed by Fannie Mae and Freddie Mac has jumped to 760, compared with 720 four years ago, according to the government-run mortgage buyers that back 90 percent of new loans. Fewer than half of American adults have credit scores as high as 760.
And banks are insisting on higher down payments. The median down payment rose to 22 percent last year in at least nine major U.S. cities, according to a survey by Zillow, a real estate data firm. That's up from 4 percent in 2006.
"Lenders are reluctant to hand out loans unless you can bring some skin to the deal, in the form of a bigger deposit," said Patrick Newport, U.S. economist for HIS Global Insight. "Until that changes, low mortgage rates aren't going to make that much of a difference. Credit is simply hard to get."