Where are Mortgage Rates Headed in 2012?

Mortgage rates dropped to record lows this week slipping to 3.89%, now the sixth week
below the 4% mark, according to Freddie Mac’s weekly survey as of Jan. 12, 2012.  The
average 30-year fixed-rate mortgages was already at 3.91% as of the January 5th
survey.  Rates may even fall to new lows early this year, particularly if the European debt
crisis continues without signs of improvement.

Look for rates to stay near historic lows says Erin Lantz, director of Zillow Mortgage
Marketplace.  The January 5th rate survey ties an all time record for the lowest mortgage
rates from the inception of the survey. In contrast, the highest average for mortgage
rates was 18.63%, for the week ending Oct. 9, 1981, according to Freddie Mac.

Financial troubles in Europe, combined with the Federal Reserve’ pledge to keep its
benchmark interest rate at a record lows, at least through mid-2013 will likely keep
mortgage rates from rising significantly.  “We may spend the entire year below 5%,” said
Greg McBride, senior financial analyst for Bankrate.com, referring to the average interest
rate for a 30-year fixed-rate mortgage. According to Freddie Mac, the 30-year mortgage
averaged 4.5% in 2011, with the lowest rates late in the year.

Whereas rates fell in the second half of 2011, they are expected to rise at least
somewhat during the second half of 2012, said Frank Nothaft, chief economist of Freddie
Mac.  credits "Operation Twist" a stimulus move that involves selling short-term
Treasuries in exchange longer-term bonds is scheduled to remain in effect until June
2012.”   The intent of the Federal Reserve’s, “Operation Twist,” is to keep long-term
interest rates low, and rates should remain well contained for the first half 2012.  The Fed
hasn't made a commitment to the program beyond the June cutoff.  

Nothaft also said that pending existing home sales rose 7.3% in November.  The increase
is the strongest since April 2010 and that construction spending rose by 1.2% in
November as well.  Rates will not remain at current rates indefinitely, so enjoy them while
they last.  The perfect storm of housing bargains and low mortgage rates look to continue
for the short term.  Happy house hunting!

Here are a couple of resources about  the 2012 Colorado housing market.
City of westminster more info
City of Broomfield more info
City of Thornton more info

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