Mortgage rates at record lows

NEW YORK (CNNMoney) -- Mortgage rates have hit a record low, making homes even more affordable for prospective buyers.

According to mortgage backer Freddie Mac's Primary Mortgage Market Survey, the average 30-year fixed rate loan fell to 4.15% this week -- its lowest level in more than 50 years. Previously, the record low was 4.17%, which was set the week of Nov. 11, 2010. Last week, the 30-year rate was 4.32%.

The average for the 15-year fixed-rate mortgage was 3.36% this week, down from 3.5% last week.

"The Federal Reserve's policy statement last week and ongoing market concerns over the European debt market carried momentum into this week allowing all mortgage products in our survey to reach all-time record lows," said Frank Nothaft, vice president and chief economist at Freddie Mac.

The rock-bottom rates have made it even more enticing for those who are looking to buy a home to act now.

Housing affordability -- the percentage of homes sold during a quarter that are within the reach of people earning the median family income -- had already been trending near record levels before mortgage rates started to plunge, according to a report from the National Association of Home Builders (NAHB) and Wells Fargo released Thursday. The organization said that when a family spends 28% or less of its gross income on housing expenses it qualifies as affordable.

Yet, despite the extremely favorable conditions, most housing markets remain depressed.

"At a time when homeownership is within reach of more households than it has been for more than two decades and interest rates are at historically low levels, the sluggish economy and the extremely tight credit conditions confronting home buyers and builders remain significant obstacles to many potential home sales," said Bob Nielsen, NAHB's chairman and a home builder from Reno, Nev.

Sales of existing homes fell month-over-month in July, according to the National Association of Realtors (NAR), although they're up from 12 months earlier. Meanwhile, new home sales have been crawling along at about a quarter of what they were during the housing boom

While mortgage rates will probably head lower, any further rate declines would probably be small, according to Ken Johnson, a professor of real estate at Florida International University.

Rates closely track yields on U.S. Treasury bonds, which have also plummeted this week. The 10-year note hit a record low on Thursday, falling below 2% to 1.99%.

"The banks would fall into a liquidity trap [if rates go much lower]," he said. "If they can't make money lending, they'll stop."

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For now though, each tenth of a percentage point that a mortgage rate drops results in a savings of about $6 a month for every $100,000 borrowed. The monthly bill for homeowners getting $200,000 mortgages this week would be about $20 less than if their mortgages were issued last week. Over the course of a 15- or 30-year mortgage, that can result in considerable amount of savings.

According to NAHB, even before interest rates started diving, about 72.6% of all homes that were purchased during the three months ended June 30 were affordable to an American family earning the median income of $64,200.

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In some markets, such as Youngstown, Ohio, the most affordable major market in the nation, nearly 94% of all homes sold last quarter could be bought by families earning the area median income of about $55,000.

Syracuse, NY, at an index of 92.6%. Indianapolis at 91.6% and Dayton, Ohio at 90.7% were also very favorable markets for home buyers.

The least affordable market was New York City, where the median price of homes sold during the quarter was $424,000 and where only a quarter of homes sold during the quarter were affordable to those earning the median area income of $67,400.

Three other least-affordable markets were all in California: San Francisco at 27.5%, Santa Ana at 40.5% and Los Angeles at 41.6%.

NAHB and Wells Fargo's data underlines the stark contrast between expensive coastal markets, where most of the least affordable markets lie, and the heartland, where the most affordable cities are.

"I think prices are turning around," he said, "especially in middle America, but the turnaround will be very slow. "

The record-low mortgage rates, combined with increasing affordability in some markets, could be the catalyst needed for some home buyers who were sitting on the fence to stop renting and put some money on the table.

"It's silly not to buy right now -- if you can," said Johnson.