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Homie, Utah Realtors wage billboard battle along I-15

The Utah Association of Realtors has blanketed the Wasatch Front ... "Realtors are in the market every day," Dibo said. "They know real estate." While the Association does not mention Homie by name in its ads, others do. Berkshire Hathaway HomeServices ...

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Published: Sept 27, 2010 3:06 a.mET Share .st0{fill:#FFFFFF;} .st1{fill:#E12828;} .st2{fill:#FAEAEA;enable-background:new ;} .st3{fill:#FAD4D4;enable-background:new ;} It’ll take a steep drop in rates to get more buyers off the fence window.videoDomain = ''; By AmyHoak Editor CHICAGO (MarketWatch) — Imagine financing a home purchase with a no-interest mortgageYou’d probably never want to move againGranted, it’s doubtful you’ll ever have that luxury Luxury golf communities' home values are falling, done in by rampant overdevelopment, the economic downturn and waning interest in the sportPhoto: Zachary Bennett, Wall Street Journal. • 5 secrets for saving on a home remodel home-buying & selling advice • The top 10 threats facing real estate • Mortgage borrowers face litany of questions • 10 home-staging tips from a TV designer • How to buy one home and sell the other • The 7 upgrades we want the most • Kiss these 10 popular home features goodbye Mortgages • Why mortgage rates are so low • Mortgage fees are on the rise • Why you can't get the lowest mortgage rates • Refinancing window reopens for some • A 15-year mortgage isn't for everyone Home Video • • See the entire MarketWatch Guide to Real Estate But if rates continue to drop, as some in the mortgage industry suggest they may — especially after the Federal Reserve’s recent statement that it was prepared for more extraordinary measures to pump up the economy — mortgage rates could inch in the direction of 0%Continued concerns of deflation may also put pressure on mortgage rates“So long as the Fed allows the word ‘deflation’ to get bandied about, mortgage rates will ease lower,” said Dan Green, loan officer with Waterstone Mortgage, in Cincinnati, in an email How much lower? “In theory, the only stopping point there is is 0% — that’s where all nominal interest rates have to stop,” said Mike Larson, real-estate analyst for Weiss Research Think about it: 0% financing has long worked as an incentive in the auto industryAnd home builders have been known to pay down mortgage rates for their buyers, so these days it wouldn’t be unheard of for them to entice people with a 2% or 3% mortgage rate, at least for a period of time, Larson saidBut mortgages are different than car loans “Do I think we will see [0% mortgages] in our lifetimes? No, I don’t,” LarsonEven during times of deflation, try telling an investor that he’d do well to buy a security with zero return, said Keith Gumbinger, vice president of HSH Associates, a provider of consumer loan informationIt’d be a hard sellPractically, Jim Sahnger, mortgage planner with Palm Beach Financial Network, isn’t sure how a 0% mortgage would be funded, “keeping in mind that rates on the street come from lower priced coupons than what borrowers pay,” he said in an emailIn essence, to fund a 0% mortgage, the investor would get a negative return — “unless there were significant fees on the front to compensate for costs to originate, deliver, default, etc.” That isn’t to say mortgage rates couldn’t drop from their levels nowAfter all, two years ago, few people would have thought a 4% mortgage was possible, Larson said Rates on 30-year fixed-rate mortgages have dropped more than a percentage point since the end of the recession in June 2009, averaging 4.37% last week, according to Freddie Mac’s weekly surveyThis summer, the average rate on the 30-year loan broke record low after record lowSince 1975, fixed-rate mortgage rates have fallen over the 12 months following every recession, with the exception of the 1980 downturn, Freddie Mac chief economist Frank Nothaft saidThe 0.7-point decline from June 2009 to June 2010 was “the largest decline during the first year of recovery over the last six recessions,” he saidOf course, as Larson said, “this is not your father’s recession.” Hitting bottom We don’t know how much lower rates could fall, if they fall at allBut let’s continue to play a little game of ”what if mortgage rates hit zero.” Rates at or near 0% could bring more first-time home buyers out of hiding to seek out extremely favorable financing for a house, Sahnger saidGet more buyers in the mix, and demand for homes could kick up, thereby helping home prices to rise, he saidIf this 0% financing was available for refinancing, “demand would surge to the point where banks, title companies and appraisers would be over-capacity and understaffedIn theory, hiring would increase to meet demand,” Green said“In addition, refi-eligible homeowners would see a marked reduction in monthly payments, spurring consumer spending.” It’s important to note, however, that eligibility is no small matter, especially due to the ranks of homeowners who are underwater on their mortgages, meaning the home is worth less than what they owe on itWithout the help of a government program, many of those homeowners can’t refinance To refinance, a borrower also needs income and a decent credit scoreBut a recent study by Zillow Mortgage Marketplace found that nearly one-third of Americans are unlikely to qualify for a mortgage because their credit scores are too lowAnd only 47% of Americans qualify for the best rates; these are borrowers with credit scores of 720 or higher“We are in an era of historically low mortgage rates, reaching levels not seen in decadesCoupled with four years of home-value declines, homes are more affordable than we’ve seen for years,” said Stan Humphries, Zillow’s chief economist, in a news release “But the irony here is that so many Americans can’t qualify for these low rates, or can’t qualify for a mortgage at all,” he said For comparison’s sake — and to show how rates affect home affordability — consider a $200,000 home purchase, assuming a 20% down payment to bring the mortgage amount to $160,000The monthly payment of principal and interest for that home is $1,011, assuming a 30-year fixed-rate mortgage at 6.5%, Sahnger saidThat goes down to $811 for a 4.5% mortgage and $444 for a 0% mortgage, he said Keep in mind, “the impact of the tax deductibility of the mortgage interest shrinks the net impact of dropping from 4.5% to 0%,” Sahnger said Swift drop Today’s potential buyers have been conditioned to expect low rates, Larson saidRight now, “you have less of a reason for people to jump off the fence because the trend is their friend,” he saidIf rates were to take a sharp drop instead of continuing a step-by-step decline, however, heads might turnAs Gumbinger said: “The difference between a 4.5% and a 3.5% mortgage isn’t that greatIf we were at 10% and rates fell to 5%,” that drop would attract much more borrower interest“When you’re talking about incremental declines in interest rates, it does add some [demand] but not as much as you’d think.” Still, as always, low rates won’t mean much to someone who doesn’t have a job to buy a home or isn’t optimistic about the economyBuying a home is an expression of confidence in the economy, and these days, finding that confidence is difficult, Gumbinger said“People are concerned that tomorrow is not going to be better than today,” he said“And today isn’t that great.” Most Popular There’s one topic Trump just doesn’t tweet about anymore This is the best way to shop Toys ‘R’ Us liquidation sales Dow Theory sell signal is now just one step away from being triggered If you’re over 40 and work, you’re in for some big surprises Americans donate more than $1 billion a dayHere's how Mortgage Rates Powered by This advertisement is provided by Bankrate, which compiles rate data from more than 4,800 financial institutionsBankrate is paid by financial institutions whenever users click on display advertisements or on rate table listings enhanced with features like logos, navigation links, and toll free numbersDow Jones receives a share of these revenues when users click on a paid placement. Other NewsFrom Our Partners (!) Found: Financial Advisors in Your Neighborhood Don't Settle for 0.01% on Your Savings Interest - Earn up to 1.50% This Site Finds the Top 3 Financial Advisors Near You This Free Mortgage Calculator Makes Home Buying a Breeze These Banks Offer Over 140x what the Big Banks Offer on Your Savings Data Provided By Today's Interest Rates Mortgage Equity Savings Auto Credit Cards 30 yr fixed Jumbo 4.55% 30 yr fixed 4.33% 15 yr fixed 3.75% 10 yr fixed 3.63% 30 yr fixed refi 4.28% 15 yr fixed refi 3.72% 5/1 ARM 4.08% 5/1 ARM refi 4.03% National averages from $30K HELOC 3.45% $50K HELOC 3.56% $75K HELOC 3.42% $100K HELOC 3.56% $30K Home Equity Loan 5.14% $50K Home Equity Loan 4.84% $75K Home Equity Loan 4.84% $100K Home Equity Loan 4.72% National averages from 5 yr CD 1.66% 2 yr CD 1.04% 1 yr CD 0.9% MMA $10K+ 0.29% MMA $50K+ 0.45% MMA Savings 0.35% MMA Savings Jumbo 0.49% National averages from 60 Mo Used Car 3.91% 48 Mo Used Car 3.93% 36 Mo Used Car 3.95% 72 Mo New Car 3.85% 60 Mo New Car 3.73% 48 Mo New Car 3.64% 60 Mo Auto Refi 2.98% 36 Mo Auto Refi 2.57% National averages from AvgAPR Last Week 6 Months Low Interest 13.14% 13.14% 12.89% Business 13.93% 13.93% 13.68% Balance Transfer 15.63% 15.63% 15.38% Student 15.92% 15.92% 15.70% Airline 16.41% 16.41% 16.07% Reward 16.51% 16.51% 16.24% Cash Back 16.67% 16.67% 16.40% Instant Approval 18.82% 18.82% 18.60% Bad Credit 23.62% 23.62% 23.46% Source: Amy Hoak Amy Hoak is a MarketWatch editor and columnist based in ChicagoFollow her on Twitter @amyhoak. $(function () { if (typeof dianomiUnitCallback !== 'undefined') { var dianomiCallback = new dianomiUnitCallback(', , ', ', '); dianomiCallback.initialize('); } }); Amy Hoak Amy Hoak is a MarketWatch editor and columnist based in ChicagoFollow her on Twitter @amyhoak. 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