The headlines in the local Island Packet said “National Mortgage Rates Lowest in 57 Years.”  The actual article went on to say it was actually 37 years – it was a misprint – but who’s counting.  37 years is a long, long time - I was not even in the real estate business 37 years ago.

It is my opinion that the latest rate decline will have a positive effect on the ailing housing market.  My theory is that rates are part of the affordability factor which covers more than just interest rates (taxes, insurance, utilities, association fees, and things like this are combined to make up the total cost of ownership).  Most people will agree that mortgage rates are the most important factor in the total ownership package.

A couple of years ago, I said that I did not think mortgage rates could go any lower because they were already historically low.

This will be a big boost to first time home buyers which is the first leg in the snowball effect improving the overall real estate market.  The theory is that once they buy, the people that they buy their house from can buy a larger house and the people they buy their house from can buy a larger house and the snowball starts running down the hill.

With mortgage rates going down – it will also probably mean that interest rates on savings accounts are going to go down and people would take money out of the bank and invest in real estate because they are not making much money on they bank accounts. 

This is just another indication that 2009 is going to be a year of opportunity.