Rising interest rates have already extinguished a short-lived refinance boom, with applications dropping precipitously over the past three weeks.
Mortgage rates, which slipped to a record low 4.78 percent on the popular 30-year fixed as recently as early April, have since risen above 5.50 percent, following the surging 10-year bond yield.
So now it appears as if the Obama Administration will need to come up with something more, which could be in the form of explicitly guaranteed rates.
Remember that whole plea for 4.5 percent mortgage rates to stabilize housing?
Then the National Association of Home Builders went a step further, calling for interest rates as low as 2.9 percent to spark sales and shed inventory; that wild proposal clearly fell on deaf ears.
Now the newly formed Housing Working Group of Business Roundtable, composed of the nation’s top CEOs, has called for lower mortgage rates to stimulate the housing market and lead an overall economic recovery, but it appears the only way that will happen now is with subsidized rates.
Unsurprisingly, the National Association of Realtors applauded the efforts of the roundtable group, asking for more concessions to spark flagging home sales and buoy corresponding home prices.
“NAR has called on Congress and the Obama administration to expand the first-time home buyer tax credit to all home buyers, regardless of income,” the Realtor group said in a statement.
“In addition, it is imperative to maintain mortgage interest rates below 5 percent, make the loan limit increases permanent, and strengthen foreclosure mitigation and loan modification efforts. These are all actions that BRT is fully supporting and we welcome their involvement.”
Seeing that lowering mortgage rates seems to be the Fed’s main solution to this housing mess, it appears likely something will be done to get rates back down near record lows.
Unfortunately, the repercussions of such a move could extend the housing crisis, keeping home prices elevated and subsequently pushing future home buyers out of the market.
Then there’s the cost of funding such a program, and the fact that subsidized rates tend to benefit the wealthiest of homeowners.