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Its A Buyers Market Lower Home Costs And Lower Interest Rates Staff - Mortgage Lenders Plus.com

For those of you hoping to buy a house, here’s some news that fits in the “small miracles” category. Median home prices in the United States actually dropped in the last year. In August of 2005 that number was $229,000; in August of 2006 it was $225,000. That’s a 1.7 percent drop, which doesn’t look like much until you consider the fact that it hasn’t happened in a long time; and that it’s a drop concurrent with a reduction in current home mortgage rates.

Some economic analysts also make the point that this official drop in median home prices doesn’t reflect the true drop in home value. Builders who are stuck with inventory in markets that have suddenly cooled are offering remarkable concessions such as loans below current home mortgage rates, interior upgrades and underwritten closing costs. If the concessions made in increasing numbers of home sales were accounted for, the real price drop would be larger.

Other economic factors point to expanding opportunities on the horizon. Current home mortgage rates show that the interest rate index for a 30 year fixed mortgage dropped twenty basis points over the last month, from 6.49 percent to 6.29 percent. Other mortgage averages dropped accordingly, and with a real estate market that has officially pancaked, there are going to be fewer people attempting to refinance. If there’s no appreciation in the home to provide equity, there’s no room for a refi.

Add to that the fact that the inventory of unsold homes in the country remains enormous, and developers are continuing to outpace buyers coming into the market. Median home prices may continue to retreat, as developers can’t afford to call a halt in mid-project – they’re leveraged themselves and have deadlines to meet. One observer also points out that there are many more cancellations of home purchases before the close of escrow – and cancellations are never subtracted from sales volume.

All of this adds up to a housing market that should get even more attractive for buyers in the coming months. A number of economic indicators have been somewhat sluggish over the last several months, which leads to reduced consumer confidence, which leads to less purchasing activity. It’s hard to say where current home mortgage rates are headed, although the up tick that seemed to have legs a few months ago has abruptly gone into reverse. If the Fed reads the economy the same way Wall Street does, it’s doubtful that they’ll act to raise rates.

Meanwhile, with four million unsold homes on the market it’s going to be a while before demand catches up with inventory. Perhaps the most significant statistic in all of this is that reduced median home price over the last twelve months. Much of that skid presumably occurred over the second half of those twelve months and it may be an indicator of a continuing trend. So take heart – the home owners will be anxious to sell, and the home mortgage lenders anxious to lend.