What if rates fell ... but home buyers didn't care?
Now, let's look at some interesting stats: The average 30-year fixed rate mortgage has come down in price by 26 basis points, from 6.8% to 6.54% between July 7 and August 11. That's a drop of 3.8%. The average rate on a 1-year adjustable rate mortgage has dropped 44 bps, to 5.97% from 6.41%. That's a drop of 6.9% (using Mortgage Bankers Association figures).
But during that same time, the Mortgage Bankers Association's purchase application index has DROPPED to 385.9 from 425. That's a decline of 9.2%. In other words, rates are falling but it is NOT prompting an increase in home buying activity.
So I ask you again: "What if rates fell ... but home buyers didn't care?" What if falling prices, surging inventories and a massive shift in buyer psychology keeps buyers on the sidelines even as rates fall? Food for thought.