Rebounding Mortgage Rates Keep Home Sales Down

The rebound in interest rates may prevent already reluctant buyers from taking out a mortgage or refinancing their home according to a recent report from Capitol Economic's (subscription required).

Rates for 30-year, fixed-rate mortgages, the most common type of home loan, declined to 4.78% from 4.82% this week, but despite this slight drop, they've been climbing over the past month.

Rates have hovered near or at historical lows in the last several months, after falling from 6.48 percent in August. The recent bump comes after a record low of 4.17 in November, prompting economists to speculate that rates have bottomed out.

As Christopher J. Mayer, a senior vice dean and a professor at the

But despite the super-low rates, the housing industry has a difficult time getting Americans to take out a mortgage.

"What can Dr. Bernanke do when the shift in attitudes is so profoundly psychological?" Gluskin Sheff chief economist David Rosenberg asked in an October letter to clients (free subscription required). Rosenberg was referencing a USA Today report that more Americans are paying down their mortgages instead of taking out new loans.

Purchase applications for mortgages fell 3.7 percent last week, following a drop of 0.8 percent the week before Bloomberg reports. There's some hope more people will purchase homes in the near future based on an increase in mortgage applications over the last two weeks as prospective home buyers take advantage of the slight dip in the interest rate.

Bloomberg quotes a recent note from Steven Wood, president of Insight Economics LLC in Danville, California, to his clients, saying purchases "remain at a level that suggests home sales are relatively moribund."