Low rates typically spur waves of refinancing, but low rates aren’t enough to spur home purchases independent of other factors, such as a healthy economy that fuels job growth and household formation. That can lead to some of the dissonant headlines of the present, where home sales plunge even as mortgage rates reach generational lows.

Average rates on 30-year fixed-rate mortgages reached their lowest levels in more than 50 years this week. On Thursday, rates tracked by HSH.com hit 4.69%, down from 4.75% on Wednesday and an average 4.85% last week.Freddie Mac also said on Thursday that rates this week had fallen to an average 4.69%, which is the lowest level recorded since it began its survey in 1971. Brokers were quoting rates as low as 4.25% on 30-year loans on Thursday for well-qualified borrowers.HSH.com says you’d have to go back to at least the 1950s to find comparable rates—and those may not be perfect comparisons given how different the mortgage market was back then.Rates have fallen over the past month, first as the European debt crisis sparked a flight to safety that helped drive down rates for American borrowers. Over the past week, renewed concerns about the health of the U.S. economy have also put pressure on rates. Rates on 30-year fixed-rate jumbos are down to 5.65%, a seven-year low, while banks offered “hybrid” jumbo adjustable-rate loans with a five-year fixed rate of 4.49%, according to HSH.But if rates are so low, why isn’t demand for new loans picking up?
By Nick Timiraos, June 25, 2010 WSJ

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