The Marketplace Report: 30-Year Rate Close to 6 Percent
ALEX CHADWICK, host:
Back now with DAY TO DAY. I'm Alex Chadwick.
For the first time since the beginning of this year, interest on 30-year fixed-rate mortgages got close to 6 percent. That's according to the home mortgage giant Freddie Mac. Some economists have been predicting that once long-term rates started rising, the so-called housing bubble would at least start to seep some air. And in some hot housing markets, there are now signs that home sales are starting to cool off. From Los Angeles, "Marketplace's" Tess Vigeland is here.
Tess, first, regarding these long-term mortgage rates, fixed rates, is 6 percent an important number?
TESS VIGELAND ("Marketplace"): It might be for those looking for this traditional 30-year mortgage. So many prospective home buyers and even those looking to refinance are used to the last two, three years when we've had long-term rates of 5 percent, sometimes even 4 percent or less, so you hit 6 percent, and that does make a difference, a pretty big difference in how much you're paying in interest on your mortgage over the life of the loan and also, of course, in your monthly payments. But Nick Retsinas of Harvard's Joint Center for Housing Studies says people have short memories about these home mortgage rates.
Mr. NICK RETSINAS (Harvard's Joint Center for Housing Studies): If you look at it sort of historically, it's still pretty low. You know, if someone five or six years ago had said the rates in 2005 will still be below 6 percent or near 6 percent, you'd say, `No, that really sort of can't be.'
VIGELAND: But, you know, as these interest rates start to head higher, even though in these historical terms, they're still very low, some buyers might say, `You know what? Let's wait and see if they go back down again.' Then again, a lot of people are still getting ARMs, adjustable rate mortgages, that have lower rates, so that 6 percent barrier isn't going to be effective for them.
CHADWICK: And how about the reports that sales are finally starting to slow down in some of the really hot real estate markets?
VIGELAND: Yeah. It's true. There's a bit of air coming out of some of those markets, but Retsinas told me today that at least here on the West Coast, where you and I are, things are still red hot. But in New York, Washington, Boston, where he is, there is a bit of a slight cooldown in effect.
Mr. RETSINAS: Well, we're seeing a--houses on the market longer. We're seeing a particular sort of slowdown in high-end homes. We're not seeing any more of the phenomenon here of people bidding on homes. A slowdown almost had to come because of the mismatch of prices and income.
VIGELAND: And that's really what a lot of economists are now looking for is a slowdown in sales and maybe a leveling off of some of these price increases that we've seen the last few years.
CHADWICK: Well, what people talk about is, is this the moment of the housing bubble burst?
VIGELAND: Right. Again, it depends who you ask. I've spoken with some housing analysts who say, yes, it's a bubble; yes, eventually, at least in some of these crazy markets, it's going to pop. You might even see that lead to recession in those areas. But others, including Retsinas, say this is going to be a soft landing, so we still have to wait and see.
And today on "Marketplace," we're looking at how the National Hockey League is trying to market itself back into fans' good graces after a year away.
CHADWICK: Thank you, Tess Vigeland of "Marketplace," produced by American Public Media.