due to the decline in the real estate market, will mortgage rates decrease anytime soon?

Answer 1

Housing prices and mortgage rates aren't really linked like that. Mortgage rates are linked to the interest rates on the 10-year bond.

Overall, mortgage rates are still near historical lows. It was not uncommon for someone to have a fixed rate well above 7% just 7-8 years ago. In the early 1980's interest rates were very high and mortgage rates were close to 20%.

These recent low rates are probably the reason that prices went up. House prices that were unaffordable with mortgage rates of ~8% became affordable to more people as mortgage rates slid downward. This caused more demand for houses which led to higher prices for housing.

As interest rates go up, houses become less affordable and more difficult to sell. The prices then stagnate or decline because of high supply (low demand).

Mortgage rates tend to drive the housing market, not the other way around.

Answer 2

yes, but not for to long. There is a point where mortgage companies will start to raise rates in order to keep up their profits growing. Let's say that they sell 100 mortgages a month at a 20% margin and 100K in profits. In two years, because of the lower market, they can only sell 70 with the same margin their profits are down to 50K. In order to increase their margin they are going to have to raise their rates. This is what happened in the late 70s and early 80s. It wasn't until the government's bailout of Chrylser that consumers gained enough confidence in the housing market that banks started to lower their rates.

Answer 3

YES!

Last weeks rate is just the first of many. But, home values are still only half way thru their fall!

I read a great real estate pricing article by a top San Diego real estate broker that I believe is the 'last word' on this subject. You can view the article at:
http://www.brokerforyou.com/brokerforyou/?p=161

Also, I would recomend subscribing to his real estate blog at:
http://www.brokerforyou.com/brokerforyou

This guy really calls it like he sees it! Plus, he has been dead on in his forecast. I'm really glad he is located in San Diego and not my area of LA!