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Mortgage interest rates continue to fall, amid concern about a sluggish U.S. economy and European government debt -- but U.S. home prices are declining in many markets, as well. What should Americans who are possibly thinking about buying a home do now?
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First, let's review the latest data, grim and not-so-grim:
First the grim news. The latest U.S.existing homes sales data do not reveal an encouraging picture, as sale unexpectedly declined 3.5 percent to a 4.67-million-unit annual rate from a 4.84-million unit annual rate in June, according to the National Association of Realtors.
The drop has increased concern about a double-dip recession in the housing sector, if not in the general U.S. economy. A Bloomberg News economists survey had expected July existing home sales to rise to a 4.90-million unit annual rate.
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What's more, home inventories also rose, to a 9.4-month supply at the current sales pace in July, up from a 9.2-month supply in June. A normal market typically has a 3- to 5-month supply.
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Now the decent news. The average interest rate for a 30-year, fixed rate mortgage has fallen to 4.15 percent -- a 50-year low, according to data compiled by Freddie Mac, Bloomberg News reported. The average rate at bankrate.com was 4.19 percent, down from 4.35 percent a week ago. The rates apply to borrowers with excellent credit.
Hence, on the bright side, mortgage interest rates are very low, but that low rate to a considerable degree reflects concern about the slow growth U.S. economy, and worries that the European government debt crisis could substantially damage Europe's banking sector, affecting the U.S. banking sector and economy, as well.
Ditto for the median price of an existing home, which fell to $174,000 from $182,100 a year ago, in July 2010.
The United States used to be an economy and social environment characterized by commercial givens -- basically, economic realities you could count on. An example: Real, median incomes will increase. Another: Median U.S. home prices will increase over a 10-year span.
Not so today -- at least early in the globalization era. For example, housing -- long considered an essential part of the American dream -- does not appear to be that slam-dunk, no-doubt-about-it, appreciating asset that it was for decades -- basically since the end of World War II in 1945 to the start of the Great Recession in 2007.
Propspective Home Buyers: Do Your Homework
So what's the appropriate stance for prospective home buyers in this sluggish and uncertain U.S. housing market? Do your homework.
As a preface, very few rules will stop a couple or someone whose found their "'dream house."
So if you've found it, and you feel you're going to be in the house for more than a decade, market conditions and cautions listed here aren't likely to stop you from purchasing it.
