Mortgage rates in the U.S. have reached their lowest level in three years, but these rates have not been successful in reviving the depressed housing market due to the continued flooding of the market with foreclosed properties.

Fannie Mae’s chief economist Doug Duncan that the reduction of interest rates will encourage some buyers to acquire their first homes, but the rising unemployment rate and the continued increase in foreclosures have been blocking the recovery of the housing market.

Nevertheless, the federal government’s efforts to help the mortgage securities sector prompted a bond recovery that reduced 30-year mortgage loan rates to 5.5 percent. The reduced interest rates also increased the number of home purchase applications by 38 percent and the number of home refinancing applications by 203 percent, according to the Mortgage Bankers Association.

Mortgage lenders also said that more borrowers refinancing their mortgage loans have shifted away from flexible-rate loans as lenders moved away from loose lending requirements to prevent further foreclosures.

Even with some movements in the purchasing side of the housing market, the inventory of unsold foreclosed homes continues to increase, putting supply at near record peaks. Although home prices have been decreasing to their lowest levels, consumers have not been responding to the housing market because of fears of unemployment and further declines in the national economy.

According to the U.S. Labor Department, the nationwide unemployment rate has reached 6.7 percent in December, the highest since 1993. The unemployment rate is computed by dividing the total number of unemployed workers by the total number of civilian employees. In November, more than half a million jobs were lost, bringing the annual total job loss to nearly 2 million in 2008.

Many financial analysts believe that the unemployment rate could reach eight to ten percent, potentially increasing the number of homeowners in danger of foreclosure. In just the first week of November, eight of the largest employers in the U.S. terminated 15,000 employees from their work force.

 Author Resource:->  Cassiano Travareli has been educated in the finer points of the foreclosures market over 5 years. Read about the following article Unemployment & Foreclosures Continue to Depress Housing Market by Cassiano Travareli.

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