Adjustable rates also were stable, Walden noted, with the average for one-year adjustables remaining at 2.75% and five-year adjustables up slightly to 2.84%. A year ago 30-year fixed rates were substantially higher at 4.55%.
According to Frank Nothaft, Freddie Mac's vice president and chief economist, market concerns over tensions in the Eurozone have led to a decline in long-term Treasury bond yields, helping to bring fixed rates to new record lows this week. For example, Walden said, compared to a year ago, rates on 30-year fixed rates are almost 0.9% points lower, which translates into nearly $1,200 less in annual payments on a $200,000 loan.
Meanwhile, Walden cited an S&P/Case-Shiller 20-city composite home price index that showed annual home-value gains in March in seven cities and a monthly gain in 12 cities.
The Federal Housing Finance Agency reported that U.S. home prices climbed 1.8% in March, the largest monthly gain in at least two decades as housing recovery gains steam. The rise from the previous month topped analyst estimates, which ranged from a 0.2% decline to a modest improvement of 0.7%. Such factors as all-time-low rates and a dearth of properties for sale in many markets are working together to bolster demand for homes.
In addition, Walden reported, sales of new homes rose to a seasonally adjusted annual rate of 343,000 units in April, up 3.3% from March and 9.9% higher than a year earlier, the Commerce Department reported. The median price of a new home hit $235,700 last month, a gain of 4.9% from April 2011. The data provides additional evidence that the housing market is starting to rebound, according to reports in Crain's New York Business and The New York Times.
With rising rents, more renters are being swayed into home ownership, Walden said. Renters are starting to see that buying may be a better option for them.
Rents are increasing at about the same pace that home values are dropping, said Stan Humphries, Zillow's chief economist, who said, according to their surveys, home prices have dropped 3.1% year-over-year whereas rents have increased 2.5%.
"Herein lies the seeds to eventually more interest in buying on the part of consumers, which will help put a floor under home prices," Humphries told Investors Business Daily.
Recent housing surveys, including Zillow's, are showing home prices are starting to rise in recent months. Affordability in housing has been at record highs from the combination of falling home values and record-low rates. Humphries said that housing prices have rolled back to 2003 levels.
"That increased affordability in the face of rising rental prices will begin to get buyers off the fence this year," Humphries said.
This story contains 540 words.
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