Mortgage Rate News

The latest information on January new home sales is quite disappointing. Many analysts had been expecting that great mortgage interest rates, along with the home buyer tax credit, would result in an increase in new home sales for the month of January. Unfortunately, this has not been the case. Instead, new home sales plummeted 11.2% to 309,000.

CNN Money reports on the latest new home sales figures:

It was the lowest rate since the government began keeping records in 1963, and caught many economists by surprise. A consensus of economists surveyed by Briefing.com had expected January sales to rise to an annual rate of 354,000.

Meanwhile, there were an estimated 234,000 new homes for sale at the end of December, according to the report. At the current sales rate, it would take 9.1 months to sell through that inventory.

Clearly, there are other issues at work here, and people aren’t quite ready to buy new homes. It is true that the delinquency rate for mortgages has dropped, but that is not translating into sales of new homes. There could be any number of reasons that new home sales are so sluggish:

1. Continued high unemployment might be making it difficult for would-be buyers to feel comfortable buying a home. Plus, those without jobs or with reduce hours can’t afford to buy anyway.
2. Tighter lending standards are still largely in effect, with mortgage lenders reluctant to approve many. A high credit score is needed to get approved, but credit scores are dropping as credit card issuers cut credit lines and close accounts.
3. Difficulty getting a down payment together, as many mortgage lenders require at least 10% down these days, and even the FHA requires a down payment.

Clearly, other issues in the economy need to be addressed before things can turn around for the housing market. Indeed, until employment picks up, and until the economy can sustain its growth in some fashion, the home sales are likely to be sluggish.