Welcome to 2009: Interest Rates Hit an All Time Low

Thanks woodlywonderworks for this Flickr Photo

Yesterday this was posted on MSN.com’s Market Dispatch… 

Freddie Mac this morning said that the benchmark 30-year fixed mortgage rate fell to an average of 5.01%, with an average of 0.6 point for the week that ends today. That’s the lowest rate since Freddie Mac started tracking the numbers in 1971.”Interest rates for 30-year fixed-rate mortgages fell for the tenth week to a fourth consecutive record low due in part to the Federal Reserve’s recent purchases of mortgage-backed securities issued by Freddie Mac, Fannie Mae and Ginnie Mae,” Frank Nothaft, Freddie Mac chief economist, said in a statement. “On Nov. 25, 2008, the Federal Reserve announced that it planned to purchase up to $500 billion of these securities by the end of June of this year. For the sake of comparison, there were roughly $4.7 trillion of such securities backed by home mortgages available as of Sept. 30, 2008.”  

As we enter 2009 I was struck by the amount of activity in the real estate markets. If this is any indication of what 2009 will look like then I expect refinances and purchases to boom in the first quarter of this year. In December we wrote 5 offers on different properties and all of them had multiple bidders. This is a big difference compared to December of 2008 when most agents had zero offers in contract. We are not seeing the over bidding that we witnessed at the height of the market, but Bay Area properties which are listed at market prices are selling quickly a bit over their asking prices. This December we witnessed homes in North and East Richmond, which were hammered by the liquidity crisis, snatched up in less than 3 days!

We are seeing cheep financing coupled with low prices that is driving buyers into the real estate markets. This is healthy for it is beginning to clear out the foreclosure and short sale inventory that has plagued pricing for the last year and a half. In turn we believe this shrinking inventory will stabilize prices and subdue the skewed deep discounting that is caused by the banks fire selling as a means to getting real property off of their books.

This is a fantastic buyers market, and thus we are seeing the frozen gears of the market begin grind into motion.It is anybody’s guess as to when supply and demand will stabilize and a more normal market will arise. Yet, the signs of buyers returning to the markets are a definite plus and the longer rates remain low, the better off our markets will be. For the foreseeable future this will be a terrific market for buyers to get great values.