SWFL real estate experts expect modest economic boost from record low mortgage rates

Record low mortgage rates should provide a modest boost to the Southwest Florida economy — but don’t expect home sales to soar, real estate and financial experts said.

The average rate on the 30-year fixed mortgage fell to 3.94 percent this week, the lowest rate ever.

“This is kind of like spitting in the ocean,” said Bob Matheson of Matheson Financial, which has offices in Naples and Estero.

The rates may encourage some potential home buyers to purchase, he said, but won’t be the answer to financial woes that he foresees getting worse.

“It’s a great idea,” Matheson said. “Not only are the rates less than 4 percent, but there are more restrictions on who can qualify.”

The lack of what he called “liar loans” — loans given to people with lax qualification-checking — is a sign that lending institutions are improving.

“I think they’re starting to make some sense again,” Matheson said. “...but I don’t think it’s going to be that dramatic.”

For those who can qualify, the rates are extraordinary.

However, Southwest Florida home sales are projected to increase only somewhat due to the mortgage rate drop, area real estate officials said.

“I think it’s a very good sign for people sitting on the fence thinking about buying a house or people looking to buy their first home,” President Naples Area Board of Realtors Brenda Fioretti said.

Mortgage rates could fall even further now that the Federal Reserve plans to reshuffle its portfolio of securities to try and lower long-term rates.

The average rate on a 30-year fixed mortgage dropped from 4.01 percent last week, the previous low, to 3.94 percent, Freddie Mac reported Thursday. The average rate on a 15-year fixed loan, a popular refinancing option, dipped to 3.26 percent, also a record.

Still, rates have been near historic lows for more than a year and have done little to boost home sales nationwide. Many people don’t have enough cash or home equity to get a loan, or they are reluctant to take the risk in the down market.

“It will help, but we’re not dependent on mortgages,” Fioretti said of the Naples area market. “Actually, over 60 percent of our transactions are cash transactions not impacted by interest rates. But, I think the low rates will be a positive factor in our upcoming season. It will give buyers the confidence and comfort that they need to buy.”

The lower rates could be particularly enticing for first-time buyers.

“There are some low down payment programs out there for first-time buyers and you add that to outrageously low interest rates and it’s a formula for success,” Fioretti said.

Nationally, this year is shaping up to be among the worst for sales of previously occupied homes in 14 years. High unemployment, scant wage gains and heavy debt loads have kept many people from buying. Others can’t qualify as banks are insisting on higher credit scores and 20 percent down payments for first-time buyers.

A drop in mortgage rates could provide some help to the economy if more people could refinance at lower rates.

But many homeowners have already refinanced within the past year. Most experts say rates would need to fall at least a full percentage point before it makes sense to refinance again because homeowners typically pay a few thousand dollars in closing costs.

To calculate average mortgage rates, Freddie Mac surveys lenders across the country Monday through Wednesday of each week.

The average rate on a five-year adjustable-rate mortgage fell to 2.96 percent. The average for the one-year adjustable-rate mortgage ticked up to 2.95 percent.

“I seriously doubt the rates will get much lower than this or that the rates will stay this low for very long,” Fioretti said. “So I think it’s a good incentive to make a move now if they’re thinking about buying a property.”

The Associated Press contributed to this report.

© 2011 marconews.com. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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