Low Mortgage Rates, but Weak Housing Market

The mortgage and housing markets are back in the news at levels that seem reminiscent of 2009.

Bloomberg discusses low rates but a poor housing market:

U.S. mortgage rates are the lowest in at least four decades, with a 30-year fixed loan available at 4.09 percent. That didn’t help Alexis Wolf buy a townhome in Beaverton, Oregon.

“Unless you have family help, you’re stuck renting,” said Wolf, 26, a real estate broker who turned to relatives for a loan because she didn’t have the credit and employment history needed to qualify for a mortgage.

Wolf’s experience illustrates the predicament for Federal Reserve policy makers as they end a two-day meeting today to consider ways to boost economic growth. Low interest rates, the traditional medicine for a flagging economy, aren’t helping housing, which since 1982 has aided every recovery except the current one.

Sales of existing homes rose more than forecast in August to a 5.03 million annual pace as investors used cash to buy distressed properties, a report today from the National Association of Realtors showed. The sales pace has fallen from a peak of 7.08 million in 2005, before the housing boom turned into a subprime-mortgage bust that helped drag the U.S. into an 18-month recession.

Rising foreclosures, tighter lending standards and unemployment stuck near 9 percent for more than two years are all weighing on the market. Lower borrowing costs aren’t likely to make a difference, said housing economist Brad Hunter.

Unfortunately, mortgage defaults are picking up again:

Default notices sent to delinquent U.S. homeowners surged 33 percent in August from the previous month, a sign that lenders are speeding up the foreclosure process after almost a year of delays, RealtyTrac Inc. said.

First-time default notices were filed on 78,880 properties, the most in nine months, the Irvine, California-based data seller said today in a report. Total foreclosure filings, which also include auction and home-seizure notices, increased 7 percent from a four-year low in July to 228,098. One in 570 homes received a notice during August.