Date June 11, 2005
Time 09:00 AM - 10:00 AM
Station CNN
Program Open House

GERRI WILLIS, anchor: It's a little like Christmas in June for homebuyers, as mortgage rates drop again this week. The 30-year fixed rate mortgage is now nearly a full percentage point lower than a year ago. Now, this has the National Association of Realtors changing their forecast for 2005, saying they expect sales to rise another 1.8 percent, to another record after an earlier prediction that sales would drop. Allen Chernoff takes a look.

ALLEN CHERNOFF reporting: For home shoppers like Jonathan Oakman, it's almost too good to believe. Just when experts were predicting mortgage rates were about to jump, they've taken another dive.

Mr. JONATHAN OAKMAN (Corcoran Real Estate Client): Our money goes farther. We would have had to probably look at a studio, if we hadn't been able to get these low interest rates. And we're much more happy with a one-bedroom; I think we'll be able to be in it longer.

CHERNOFF: Signs that inflation pressures are easing have pushed down long-term interest rates-including those for home loans. The average 30-year fixed mortgage rate in the nation is down to 5.55 percent. That's a steady decline over the past few months, from just over 6 percent in late March-the lowest rate since early February.

Mr. FRANK NOTHAFT (Economist, Freddie Mac): This is great news for the housing market. Housing demand is very interest rate sensitive. So any time we have low mortgage rates, or a decline in mortgage rates, that translates into a spurt in housing demand.

CHERNOFF: Low mortgage rates have been fueling the housing market. Declining rates mean lower monthly payments-though the way housing prices have been soaring, the drop in rate may only help to offset higher prices that Americans are paying for homes.

Mr. BOB MOULTON (Americana Mortgage Group): I think the housing market is going to continue to do well, but not as well as it has done the last five years. In the last five years, we've seen ten percent growth on average. I think we'll see closer to three to four percent in the stronger markets.

CHERNOFF: The recent drop in mortgage rates may not fuel another explosive boom in housing, but at long as mortgage rates remain low-and that's a big if-they should provide a floor for housing, minimizing the risk of any bursting bubbles.

Allen Chernoff, CNN, New York.

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