The ongoing financial crisis — and even bulls would have to admit after today’s 9% drop in the S&P 500 that it’s not likely to end soon — began in the real estate markets, and it won’t likely be over until some traction is found for sliding home prices. The Treasury Department and Federal Reserve are pulling out all the stops to get banks lending again. They’ve cut interest rates, forced banks to accept mounds of cash and still intend to buy mortgage back securities. But despite those moves, mortgage rates are actually going up — not an effective way to get people to start buying homes.
Rates on a 30-year fixed rate mortgage jumped nearly half a percentage point from October 3 to October 10, from 5.99% to 6.47%, according to the Mortgage Bankers Association, well above lows back in January, when the average 30-year fixed carried a rate of 5.5%.
So what’s going on? Shouldn’t the bailout benefit home buyers too? Mike Larson, real estate and interest rate analyst at Weiss Research and author of the Interest Rate Roundup blog, has his theory and it all comes down to supply and demand:
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