According to a recent report by the CALIFORNIA ASSOCIATION OF REALTORS® (C.A.R), 2008 marked a year of rising home sales, declining home prices, stricter loan underwriting standards, and the financial market meltdown.  However, despite the negative media coverage, many home buyers realized that current low mortgage rates and lower home prices provided an opportunity to purchase a home that previously may have been out of reach.


MAKING SENSE OF THE STORY FOR CONSUMERS

·      The most-recent survey from Freddie Mac shows interest rates on 30-year, fixed-rate mortgages averaged 5.19 percent in December 09, the lowest level in 37 years.  While lower interest rates have resulted in a dramatic jump in homeowners seeking to refinance, now also is a great time to purchase a home. The lower interest rates also are making mortgage payments more affordable, especially on larger homes that previously may have been out of reach.
 

·      In addition to lower monthly mortgage payments, a lower interest rate also allows more home buyers to qualify for larger mortgages with less income. Generally, a buyer applying for a 30-year, fixed-rate mortgage loan of $200,000, with an interest rate of 5.5 percent, needs an income of $46,000, assuming a 10 percent down payment.  If the rate drops to 4.5 percent, the borrower would need an income of $40,000 to qualify for the same mortgage loan.

·      Despite the increase in the number of homeowners who sold their homes at a loss, home Sellers who owned their properties for a longer period of time were less likely to experience a loss from their home sale, according to the “State of the California Housing Market 2008-2009”  report.

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