Is This A Good Time to Buy a House? Part 2: Mortgage Rates

The housing market is not yet fully restored to health, and may be backsliding a little. That is the view of many analysts based on recent sales and price data. Year-to-year, sales and prices continue broadly upward, but for each of the last several months they have declined in many markets, leading to that pessimistic assessment.

Such unneven progress should come as no surprise, considering the depth of the recession. As with the economy as a whole, we can expect the housing recovery will be slow and halting.

The good news is that the National Association of Realtors Pending Sales Index was up in February, suggesting another surge sparked by the second home buyer tax credit. And the Fed’s purchase of Fannie and Freddie mortgage securities ended in March with no uptick in interest rates, as the private market filled the gap.

Most analysts believe, however, that mortgage rates will gradually increase in the months ahead, due to improving economic activity, and could end the year as high as 6.0% for a 30-year, fixed-rate mortgage. Some put that number even higher, with further increases in 2011.

Is this a good time to buy? Prices are beginning to stabilize (that’s the best we can say, for now), and interest rates are as low as we can expect them, perhaps, for years to come. Over the life of the mortgage, a one-point increase in the rate could add as much as 19 percent to the cost of your home. Using any mortgage calculator, you can also see what it would do for your monthly payments. That should convince you — if nothing else will — that this may indeed be a good time to buy, if your personal circumstances favor it.

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About Ron Cohen

Retired, I've spent the past few years describing "the life of a pond in words and photographs:" http://atmywindow.com/. Recently I've created a new photo blog devoted to "people and places along my way:" http://www.roncohen.com.
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