Mortgage rates hit rock bottom in South Florida

Mortgage interest rates have dropped to an all-time low, which experts say could cheer the depressed South Florida housing market.

The average for a 30-year fixed-rate mortgage fell to 4.71, Freddie Mac, the federally run mortgage finance company, reported Thursday. That's the lowest recorded since Freddie Mac first started weekly mortgage rate surveys in 1971. Rates dropped 0.07 percent since last week.

For prospective homebuyers, "The sharp drop in home prices, tax credits and now record low mortgage rates put a lot of affordability in your quarter," said Greg McBride, a senior financial analyst at Bankrate.com in North Palm Beach.

But low rates won't cure all of the housing market's ills. The rates won't resolve the extremely low prices home sellers are getting, as they put their homes on a market crowded with foreclosures and short sales. And they can't counteract the impact of high unemployment, which economists say is a primary reason people are losing their homes.

Low rates may also be out of reach for borrowers who are deeply underwater – meaning they owe more on the mortgage than the home is worth. Only those who are slightly underwater can qualify to refinance a home loan and take advantage of lower rates. About half of South Florida's homeowners are underwater to some degree, according to statistics from First American Core Logic, a real estate analysis firm.

Still, the ray of hope provided by low mortgage rates is the possibility they'll hasten the market's recovery, which is still at least a year away, according to Moody's Economy.com.

"If mortgage rates remain this low for an extended period of time it could speed up the degree to which we work off excess [housing] inventory," said economist Chris Lafakis who tracks Florida's economy at Moody's Economy.com.

The Moody's Economy.com forecast calls for Florida home prices statewide to fall throughout 2010, for a total decline next year of 21 percent, before stabilizing in 2011. Some areas will be hit even harder. For Miami, Moody's foresees a price decline next year of 28 percent and stability to come six months afterward, in mid-2011.

The bright spot in the housing picture is that homes with these low price tags are selling. In Fort Lauderdale, the number of units sold has been higher than last year for nine straight months, said Richard Barkette, chief executive officer of the Realtor Association of Greater Fort Lauderdale. The Realtor Association of Palm Beach said that the number of condos sold in November was 21 percent higher than the year before and single family home sales were up 44 percent from November, 2008.

Low rates "will induce a wider array of buyers to qualify," for home mortgages, Barkette said.

The Federal Reserve is pumping $1.25 trillion into mortgage-backed securities to try to bring down mortgage rates, but that money is set to run out next spring. The goal of the program is to make home buying more affordable and prop up the housing market.

McBride said he expects mortgage interest rates to remain at this extremely low level low only until the end of the year, when rates may start climbing again.

For homebuyers, this week's rate drop is a second chance to grab a deal. Mortgage interest rates were nearly this low back in April, when twice the average for 30-year mortgages touched 4.78 percent, before heading up to as high as 5.6 percent in June.

The Associated Press contributed material to this report. Harriet Johnson Brackey can be reached at hjbrackey@sunsentinel.com or 954-356-4614.