Best housing bargains may be yet to come

11.07.08
By Nicholas Storie

Home owners and buyers may find the credit crunch to be something of a double-edged sword in the coming months.

Mortgage rates have fallen somewhat in recent days due to the shaky economy, according to the latest figures from Freddie Mac. This week's Primary Mortgage Market Survey found the average 30-year fixed rate mortgage rate fell to 6.20 percent. Last week's average rate was 6.46 percent.

The rates also fell this week for 15-year fixed rate mortgages, to 5.88 percent from last week's rate of 6.20 percent.

With mortgage rates dropping, house hunters may want to take another look at their credit scores - which can make a big difference to the rates offered by lenders.

That means that despite a slight drop in mortgage rates, few are claiming that the end of the housing slump is on the horizon. Freddie Mac vice president Frank Nothaft observed that in October, about 70 percent of banks had tightened their lending standards for prime mortgages.

"Let's say 680 got you the best rate on a mortgage 24 months ago," consumer advocate John Ulzheimer told CNN Money. "Today you need to shoot for 780 to 820 to get the best deal."

One analyst with a gloomy short term view of the housing market is Stephen Gandel, senior writer for CNN Money. Gandel predicts in a November 7 column that home prices will fall even more by the end of the year because of a large inventory of unsold homes (18.6 million) and an ongoing increase in troubled mortgages.

Gandel also observes that prominent economists Nouriel Roubini and Patrick Newport are projecting 20 percent and 15 percent declines, respectively, in home prices next year.

"Add it all up and you have another lousy year for real estate," wrote Gandel, who suggested that one option for sellers is to wait until 2010 to put their homes on the market.

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