The National Association of Realtors announced last Thursday that sales of existing homes across the country sank by 3.0 percent during March, but the group still managed to find a silver lining to the downward movement. As much as I want to see a housing recovery, I’m not sure that their hopes are well founded.

According to the NAR, existing home sales fell in March to a seasonally adjusted annual rate of 4.57 million, a 3 percent decline from the previous month and a 7.1 percent drop from March 2008. The national median home price for existing homes-single family, condos, townhomes and co-ops- decreased 12.4 percent in the past year to its present $175,200. But the price was up 4.2 percent from February

Yet as the NAR sees a much larger percentage of business coming from first-time home buyers, they have hope that recent tax credit extensions and rock-bottom interest rates will keep things moving.

One the NAR website, President Charles McMillan said:

“The housing market always heals from the bottom up, and with large numbers of first-time buyers entering the market it will become a little easier for sellers to trade up or down, according to their needs.”

The NAR’s chief economist Lawrence Yun had this to say:

“The share of lower priced home sales has trended up, indicating a return of many first-time buyers, which we also see in a parallel member survey. Sales in the upper price ranges remain stalled because of higher interest rates on jumbo loans.”

“Buyer traffic has been rising, and real estate offices are getting phone inquires about the tax credit,” he added. “By early summer we should be seeing a positive impact on home sales from record-low mortgage interest rates in addition to the stimulus provisions.”

As has been discussed before, those low interest rates are not available to everyone, and certainly not to all prospective first-time buyers. Whether or not the NAR sees the kind of summer uptick it is hoping for may depend more on credit standards and the availablility of mortgage credit for all buyers.

Freddie Mac released the results of its weekly mortgage interest rate survey today and it turns out long-term rates are down again. The average rate on a 30-year fixed rate mortgage slipped down to 4.80 percent, excluding points, during the week ended April 23, from 4.82 percent.

Rates on 15-year FRM loans were unchanged, but rates on one-year adjustable rate mortgages are now higher than 30-year FRM loans at 4.82 percent, a historical first in the Freddie Mac survey.

Here’s what Freddie Mac’s vice president and chief economist, Frank Nothaft had to say about the mortgage situation.

“Interest rates for 1-year ARMs exceeded those for 30-year fixed-rate mortgages over the last two weeks; this is the first time this has happened since Freddie Mac began collecting data for ARMs in January 1984. The housing market is showing further signs of possible improvement. House prices rose for the second consecutive month in February, the first back-to-back increase since April 2007, according to the Federal Housing Finance Agency.”

Yet for many people, low interest rates may not be enough or even the right tool for helping the housing market stabilize.

According to a comment in response to a posting by Peter Boockvar on  The Big Picture blog  the real issue at hand is the new, stricter lending standards. There are fewer and fewer loan programs available, especially for those with less than perfect credit. And while this means low interest rates are of little use to many potential homebuyers when they don’t end up qualifying, as commenter CPJ13 says, maybe its for the best.

…Some of the criticism for why housing hasn’t rebounded is misguided (”rates need to be lower and more affordable”, “houses need to come down in price”, etc.).

The real reason that we’re correcting so sharply - and will continue to for a long time - is that ‘historically normal’ guidelines have been reapplied to the home-buying process. Everyone got so drunk on cheap, free and loose credit that once the spigot is shut off to all but those who ’should’ be buying houses, it’s a painful process and we’re not nearly through it.

People now have to think about SAVING for a down payment; they have to consider their overall credit (late on credit cards? collections? Etc.)…

Simply stat[ed]… it’s going to take a loooong time for housing to recover if we stick to currently guidelines and standards. It’s a good thing - but yes, it will be painful…

Market indicators are pointing to an earlier economic recovery from the current recession, perhaps even before the end of 2009, according to statements Monday from Federal Reserve Vice Chairman Donald Kohn.

“The crosscurrents in the recent data and a bit more favorable financial news of late stand in contrast to the uniformly bleak picture of a few months ago,” Kohn said during a speech to the University of Delaware. He added that recent developments “may be an early indication that conditions are falling into place for real GDP to decline at a slower rate in the second quarter and to stabilize later this year.”

Kohn pointed to reports of home sales and new home starts starting to bottom out and even move upward again, and consumer spending leveling out during the first quarter of 2009 as indications that the recession may be over soon.

And while he did comment that the current economic downturn will probably be one of the deepest and longest since World War Two, he also saw plenty of reasons to be optimistic. “I don’t think it is premature to start to ponder the shape that a recovery — when it occurs — would be likely to take.”

Kohn warned that the recovery is not likely to be quick and dramatic, but to take place gradually, especially if Americans continue to save instead of spend until they feel more confidence in the market.

As things start to pick up again, the risk of inflation will grow, requiring the Fed to step in and adjust its spending and interest rate policies, which, Kohn assured the crowd, the Federal Reserve is fully prepared to do.

“We are firmly committed to acting in a way that preserves price stability, and we believe we have the tools to absorb reserves and raise interest rates when needed,” he said.

Long-term mortgage interest rates fell in the latest week, according to Freddie Mac, one of the nation’s largest mortgage companies, remaining close to historic lows.

“Mortgage rates on fixed-rate loans and some ARM products eased this week,” said Frank Nothaft, Freddie Mac vice president and chief economist. “The housing industry is starting to exhibit some positive signs, albeit scarce and too early to tell how permanent.”

Nothaft continued, “In its April 15th regional economic report, the Federal Reserve reported that better-than-expected buyer traffic led to a scattered pickup in home sales in a number of its Districts over the 6-week period ending on April 6th. Factors such as homebuyer tax credits, low mortgage rates, and more affordable prices were cited as leading to more potential buyers. This may have added to the rise in homebuilder confidence in April, which rose to the highest level in six months, according to the National Association of Home Builders. Moreover, confidence increased in each of the four regions, led by the Northeast and Midwest.”

The average rate on a 30-year fixed rate mortgage (FRM) decreased to 4.82 percent, excluding fees in the week ended April 16, 2009, from 4.87 percent the previous week. One year ago, the average rate on a 30-year FRM was 5.88 percent.

Rates on 15-year fixed rate loans averaged 4.48 percent, down from 4.54 percent the week before. The current average rate is the lowest on record since the beginning of the Freddie Mac survey in August 1991. Last year at this time, the average rate was 5.40 percent.

And interest rates on one-year adjustable rate mortgages rose to 4.91 percent, an increase from 4.83 percent one week earlier. During the same week of April 2008, the average rate was 5.10 percent.

Although the Obama Administration contends that high interest rates and inflated monthly payments are to blame for the current U.S. foreclosure epidemic, a study released recently from the Boston Federal Reserve suggests that rising unemployment rates may be the bigger cause/

The study named “Reducing Foreclosures,” conducted and authored by Boston Fed economists Christopher Foote and Paul Willen, Atlanta Fed economist Kristopher Gerardi and former Boston Fed economist Lorenz Goette, found that homeowners are more likely to miss mortgage payments because of job loss than because their loan terms are too steep.

While Obama’s mortgage relief plans center on modifying loans for as many as 9 million homeowners, the new study suggests that the government could more effectively stem foreclosures by focusing on solutions for homeowners now out of work.

“An important implication of our analysis is that policies designed to reduce foreclosures should focus on ameliorating the immediate effects of job loss and other adverse life events,” the economists wrote in the study synopsis on the Boston Fed’s website, “rather than modifying loans to make them more ‘affordable’ on a long-term basis.”

Mortgage investors and lenders may suffer more loss from mortgage modifications than from foreclosures as well, the study said.

“It is true that lenders may lose a great deal of money with each individual foreclosure, but the loan modifications might have negative [financial effects] if they are sometimes extended to people who are likely to pay on time anyway,” the study concluded. “And the benefits of modifications are uncertain if borrowers have lost their jobs.” Such homeowners may end up in default again anyway.

Instead of loan modifications, the Fed paper recommends that the government implement programs like  loans and grants to homeowners who have lost their jobs, as well as assisting those who truly cannot afford their mortgages anymore in the transition from homeowning to renting again.

Interest rates grew on long-term U.S. mortgage rates during the latest week according to mortgage company Freddie Mac Thursday, representing the first increase in over a month.

“Mortgage rates rose slightly this week but still remained historically low,” said Frank Nothaft, Freddie Mac vice president and chief economist. “Interest rates for 30-year fixed-rate mortgages have averaged below 5.0 percent for the last four weeks, which should keep homeowner affordability at record levels.

“Given these low rates, housing demand has strengthened. Conventional mortgage applications both for refinancing and for home purchases have increased over the past five consecutive weeks ending April 3. Since the end of February, applications for home purchases were up about 22 percent and nearly 129 percent for refinancing, according to the Mortgage Bankers Association.”

The average national rate on a 30-year fixed rate mortgage rose to 4.87 percent, excluding fees, during the week ended April 9, 2009, jumping up from 4.78 percent the previous week. One year earlier the average rate was more than a full percentage point higher at 5.88 percent.

Interest rates on 15-year fixed rate loans averaged 4.54 percent, inching up from 4.52 percent the week before. Last year at this year, the average rate on a 15-year FRM was 5.42 percent.

One-year Treasury indexed adjustable rate mortgages carried an average rate of 4.83 percent, an increase from 4.75 percent one week earlier. The current average rate is at its lowest since the week of September 29, 2005, a three and a half year low. During this week of 2008, the average rate was 5.18 percent.

While some analysts and legislators had been talking about mortgage interest rates moving down close to the 4 percent range this year, economists are now starting to believe that kind of drop is unlikely anytime soon, as rates have not yet fallen more than a quarter percentage point below five percent to date.

When trouble in the financial markets made mortgage money hard to come by recently, jumbo loans became doubly hard to get. These large loans, greater than the Freddie Mac and Fannie Mae conforming loan limits of $417,000 in most parts of the country, became much too risky for many banks to have on their books. But things may be changing soon.

According to a recent Wall Street Journal article, Bank of America is the first to start advertising low rates on jumbo loans again. “We decided it was time to really go after that market,” says Vijay Lala, a Bank of America product management executive. The bank is now offering 30-year fixed rate jumbo loans with interest rates in the upper 5 percent range.

Interest rates on average, have started to come down for mortgage interest rates, reflecting in part the dramatic drops in conforming interest rate averages, that now hover just under 5 percent for 30-year fixed rate mortgages (FRMs).  During the week ended, the national average for 30-year jumbo FRM loans was 6.5 percent, the lowest rate since May 2007, according to consumer loan information publisher HSH Associates.  Such rates are much more palatable to consumers than they were during the second half of 2008. The rates peaked at 7.9 percent during the week of October 31.

When the mortgage crisis made investors pull back from mortgage-backed securities, this was especially true of jumbo loans. The large mortgages are not bought by Freddie and Fannie, meaning that if there are no institutional buyers for them these large, riskier loans stay on the banks’ own books. But now, as the credit markets are beginning to loosen up and banks have more liquidity as Americans pull their money out of stocks and invest in safer venues, banks have more cash to make these type of large and profitable loans.

Yet while many lenders may start to lower their jumbo rates to compete with Bank of America, the loans may still require borrowers to jump through high hoops and hurdles. For example, those who apply for the Bank of America jumbo loan, must have a credit score of 720 or better, and contribute a full 20 percent as a down payment. Plus borrowers, must prove they have six months or more of reserves sitting in the bank.

For those worried about qualifying, it is always good to check first to see if a jumbo loan is required. While almost any home in California and parts of Florida required a jumbo during the housing boom, today housing prices have dropped significantly in the former real estate hot spots, and Fannie Mae conforming limits have risen in some of those regions, reaching $729,750 in the highest prices ares of the country.

Although economic reports were mixed this week, mortgage giant Freddie Mac announced that interest rates on long-term mortgages had dropped to a new all-time low in the latest week.

“Mortgage rates followed other interest rates lower this week amid reports of slower economic growth” said Frank Nothaft, Freddie Mac vice president and chief economist. “The final estimate of economic growth in the fourth quarter was revised lower and personal incomes fell 0.2 percent in February, below the market consensus.

“On a positive note, pending existing home sales rose 2.1 percent in February, marking the second increase in three months as potential homebuyers are taking advantage of historically low mortgage rates and falling home prices. Serving as a spur to sales, housing affordability reached an all-time high in February 2009 since the series’ inception in 1971, according to the National Association of Realtors. By region, sales surged by nearly a third in the Northeast and Midwest, but fell in the West.”

The average rate on a 30-year fixed rate mortgage (FRM) decreased to 4.78 percent, excluding fees, during the week ended April 2, 2009, from 4.85 percent. The current rate is the lowest in the 30-year history of the Freddie Mac weekly survey. The average interest rate one year ago was 5.88 percent.

Rates on 15-year FRM loans also declined in the latest week, dropping to 4.52 percent, also a record low for the survey, down from 4.58 percent the previous week. Last year at this time, the average rate was 5.42 percent.

One-year adjustable rate mortgages carried an average rate of 4.75 percent, a drop from 4.85 percent the week before. During the same week of 2008, the average interest rate was 5.19 percent. The current rate represents a four-and-a-half year low.