Lending Landscape - January 10, 2008

Trouble in the American economy and housing markets across the country are making it favorable to buy a new home. Besides price concessions, especially by builders, mortgage rates are headed down. If one is to believe forecasts in the press, mortgage rates should trend down throughout 2008.

In the past week, mortgage rates for fixed terms came down significantly.

Application volume jumped while fixed interest rates tumbled. The average interest rate for traditional, 30-year fixed-rate mortgages fell to 5.73 percent from 6.05 percent the previous week. The average interest rate for 15-year fixed-rate mortgages, which are often used to refinance mortgages, dropped to 5.21 percent from 5.61 percent the prior week.

Short-term adjustable rates are trending up slightly, but anticipated rate cuts by the Fed at the end of the month should provide a correction.

In Utah the real estate slowdown and lower rates are making home ownership more affordable.

Stephanie Jensen, of Logan, who struggled to buy a home last summer, had been watching mortgage rates for weeks hover around 6 percent when one day they dipped. She locked in on a 30-year loan at 5.34 percent in July before rates quickly drifted back up.

"I'm now paying less each month for my mortgage than I was paying in rent," said Jensen, who received assistance from Utah Housing. Thomas said the lower rates also can help people with adjustable-rate loans that are resetting or already have reset by making it a bit easier for them to qualify for fixed-rate loans.

While Utah did see appreciation over the past few years, it didn't experience the extremes of some of the markets in California, Arizona and Nevada where extreme corrections are now taking place. Demand for housing below $250,000 remains strong while housing above $400,000 is seeing a slowdown.

The combination of lower prices for new homes and lower interest rates are definitely turning the Utah real estate market towards buyers.