Residential Mortgage Rates Hit Historic Low

The Outlook
For many would-be homeowners, constraints ranging from down payment requirements to more stringent lending standards have offset the benefits of lower rates. As the multifamily absorption data demonstrate, a disproportionate share of unconstrained households has also opted to rent during the housing downturn, even as rudimentary measures of housing affordability have improved.
Aside from changing behavioral preferences, the user cost of homeownership has compared unfavorably to rental rates. The expectation that prices could fall further has been a key consideration in the user cost calculus, just as more optimistic expectations figured into rising ownership during the housing boom. Shifting the dynamic once again will require demand supported by job growth and not just a manipulation of the relative costs of renting and owning through the channel of mortgage rates. Our baseline forecasts do not show sustained housing price improvements at the national level until midyear 2013. Inasmuch as the employment and housing outlook remains reserved, apartment investors on the national stage should not expect that this latest milestone in the mortgage finance market will, by itself, alter the multifamily outlook.
dsc@chandan.com

Sam Chandan, Ph.D., is president and chief economist of Chandan Economics and an adjunct professor at the Wharton School.

Comments

  1. in your opinion, what’s better 30 years fixed rate mortgage? or the 35 years?