Cautious Homeowners Not Seduced By Record-Low Interest Rates

[marmar]

from HuffPost:



There's very little anyone can do to convince Americans to take out a mortgage.

Mortgage interest rates are lower than they've been in at least 40 years -- 4.37 percent, as of September 23, according to data from the St. Louis Fed -- but by and large, no one seems to care. Sales of new homes in August were at their second lowest rate ever, Bloomberg reported last week.

"What can Dr. Bernanke do when the shift in attitudes is so profoundly psychological?" Gluskin Sheff chief economist David Rosenberg asks in his letter today (free subscription required). He points to a report in Wednesday's USA Today that says Americans are increasingly paying down mortgages instead of taking out new loans or refinancing.

According to USA Today, 30 percent of homeowners who refinanced 30-year mortgages in the second quarter of this year shortened the term of the loan to 15 or 20 years, meaning they'd have to pay it back sooner. There's also been a dramatic shift away from taking out loans against home equity (using second mortgages to get immediate cash). Freddie Mac, according to USA Today, says holders of its mortgages borrowed only $8.3 billion against their homes in the second quarter of this year, compared to $21.8 billion a year earlier. What's more, 22 percent of these people actually put money back into their equity, the third highest rate since at least 1985.

Americans are chastened, Rosenberg says, pointing to another USA Today piece that shows a broad shift in risk-taking. Fewer Americans are moving homes, and more are delaying marriage -- even as the rate of "cohabitation" of couples (oddly, only opposite-sex couples) is at an all-time high. ............(more)

The complete piece is at: http://www.huffingtonpost.com/2010/10/01/record-low-mortgages-rates_n_747361.html

[mike_c]

1. mortgage rates might be low, but homes are still WAY overpriced....

I MIGHT be tempted when median home prices in my area decline by at least 50 percent. Certainly not before, and frankly, probably not even then. I've always felt that the mortgage finance system is crooked.

[bluerum]

2. Psychological? This elitist putz is a bit out of touch. People are out of work, worried about

losing their job if they are fortunate enough to have one, and a little short on that 20% downpayment required for a mortgage. That is economic reality, not simply cold feet.

[stray cat]

3. 20% down on a starter 300,000 one br house - who has 60,000 for a down payment

At least that's the situation in parts of the east coast

[msongs]

4. to get those rates u get screwed with upfront "costs" that are total scams BECAUSE - >

most of those so called costs cover some flunky typing into a computer for an hour or two, at the rate of $5K for the work. the only real work costs are home inspections/termite. everything else is just graft.