Interest Rates Remain Low

Mortgage rates in January continued their downward trend. According to Freddie Mac, during the week of January 24th you could have found a 30-year fixed-rate mortgage at 5.91 percent plus 6/10ths of a point. The same loan a year ago would have pegged interest at 6.96 percent -- and a year ago many people were pleased that mortgage rates had fallen below 7 percent.

The fall in mortgage rates represents a significant benefit for borrowers. A $100,000 mortgage at 6.96 percent costs $662.62 monthly for principal and interest over 30 years. At 5.91 percent, the monthly cost drops to $593.78 -- a savings of $826 annually, or more than a full monthly payment for principal and interest at the lower rate.

2002 Marked By Banner Sales, Price Increases

While much of the economy stalled in 2002, residential real estate continued to show steady growth, both in terms of unit sales and rising prices.

Based on the first 11 months of the year, new home sales are expected to total 976,000 units in 2002, a record according to the National Association of Home Builders. This year, predicts NAHB, unit sales will likely drop 3.4 percent. That still means an estimated 942,000 new homes will be sold, the second-highest number on record if the prediction proves correct.

For existing homes, 2002 was also a record year. The National Association of Realtors says a record 5.56 million existing homes were sold in 2002. Not only did sales reach historic levels, existing home prices also rose: NAR says the national median existing-home price for 2002 was $158,200, up 7.0 percent from 2001.

Like the builders, NAR expects a sales downturn this year. It estimates that 5.34 million existing homes will be sold, an estimate which if true would be the second highest total on record.

How To Prevent Freezing Pipes

In much of the United States -- including some locations which seem far below the frost belt -- icy temperatures can cause water pipes to freeze and rupture. The damage in such cases, reports the State Farm insurance company, can be extensive: "Even a one-eighth-inch (3 millimeters) crack in a pipe can send more than 250 gallons (946 liters) of water cascading onto your carpets, furniture and personal belongings each day."

The company points out that frozen pipes are not necessarily a problem only for northern homeowners.

"Homes in warmer climates are typically at greatest risk because pipes are often not properly insulated in crawl spaces and attics," says State Farm.

However, the insurer says there are measures homeowners can take to prevent frozen pipes:

• Wrap exposed pipes with insulation.

• Let the hot and cold faucets drip overnight and open cabinet doors to allow heat to get to uninsulated pipes under sinks on exterior walls.

• Insulate pipes in your home's crawl space or attic.

• Seal leaks that allow cold air inside.

• Look for air leaks around electrical wiring, dryer vents and pipes.

• Disconnect garden hoses and, if practical, use an indoor valve to shut off and drain water from pipes leading to outside faucets.

State Farm says homeowners should be careful when leaving for vacations or business trips because "if you're going away for an extended period of time, it makes sense to shut off and drain the water system. You must be aware, however, that if you have a fire protection sprinkler system in your house, it will be deactivated when the water is shut off."

Is Now The Time For ARMs?

Whether you're financing or refinancing, getting the best-possible loan is always important. There's no single mortgage which is right for everyone, but borrowers have been looking at adjustable-rate mortgages with more interest in recent weeks.

According to the Mortgage Bankers Association of America, nearly 14 percent of all borrowers in mid-January turned to adjustable-rate mortgages (ARMs).

Why? One reason is surely rates. "The average contract interest rate for 1-year ARMs decreased to a record low of 3.61 percent from 3.75 percent the previous week," said the association. Points also decreased slightly, to 1.00 from 1.01 the previous week.

ARMs typically feature more-liberal qualification standards than fixed-rate loans, which means many borrowers can obtain larger mortgages. Also, it's tough to overlook financing with start rates below 3.75 percent.

Alternatively, ARM interest levels can change, an expression which includes the possibility of higher rates and payments in the future.

What form of financing is best for you? Most borrowers are going with fixed-rate mortgages because of today's low rates and assured future costs, but in some cases ARMs may be worth considering.

For more articles by Peter G. Miller, please press here.

Published: January 28, 2003

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