What low home prices and low mortgage rates mean to the Monterey Peninsula real estate market

Last week, the Wall Street Journal reported mortgage rates had declined to a 4-week low. The article is included in this blog, but what does this information mean to our local real estate market. On the Central Coast, home prices continue to decline in the high end areas of the Monterey Peninsula and inventory is still high.  This coupled with the historically low interest rates make this the 'sweet spot' in the real estate purchasing department.

From the Wall Street Journal . . . 
Home-mortgage rates declined for a second straight week, according to data released Thursday by Freddie Mac, but the housing market continued to face headwinds from a supply glut and the struggling employment situation.

The average 30-year fixed-rate mortgage fell to 4.71% in the week ended Jan. 13, reaching a four-week low, Freddie Mac said. The rate was 4.77% in the prior week and 5.06% in the prior year, according to Freddie Mac, a buyer of residential mortgages. To obtain the latest rate, the mortgage required payment of an average 0.8 point. A point is 1% of the mortgage amount, charged as prepaid interest.

The 15-year fixed-rate mortgage averaged 4.08% in the latest week, with an average 0.7 point, down from the prior week's 4.13% and the year-ago rate of 4.45%. Low rates could help a still-troubled housing market, which has been hobbled by persistent employment weakness and a large supply of homes.

Rates on five-year Treasury-indexed hybrid adjustable-rate mortgages averaged 3.72% in the latest week, with an average 0.7 point, down from 3.75% in the prior week and 4.32% last year. Also, one-year Treasury-indexed ARMs averaged 3.23% in the most recent week, with an average 0.6 point, down from 3.24% in the prior week and 4.39% a year ago. 

(Source: Mortgage Rates Decline to 4-Week Low by Ruth Mantell, Wall Street Journal Digital Edition, Jan 14th, 2011)