By Erik Braunitzer and courtesy of Douglas Elliman Real Estate Company, agents for NYC Rentals. Edited by Devin Ratoosh

The latest news reports that interest rates on mortgages are finally falling back. Rates on 30-year and 15-year mortgages show a declining trend, which is making it easier for people to re-enter the real estate market or renegotiate mortgages. Home owners, sellers, and real estate companies around the world are taking notice.

The Associated Press has reported that interest rates on 30-year options are back to the record low that was set in the fall of 2011: 3.94%. Additionally, the average rate on 15-year fixed options has slipped to 3.21%. Having dropped from 3.27%, this is a new record. Though rates have consistently been below the high of 5%, people worry that this could still be a rough year for real estate. Some think that sales could be the worst our country has seen in over 20 years.

The reason for these concerns is that low rates do not always lead to increased home sales. Though interest rates are low, sales are not increasing. The sales numbers for 2011 were one of the worst in 13 years, and this year’s rates are not looking great. Some report that this year’s sales rates will be even worse than last year.

A key factor leading to sluggish sales is the high unemployment rate. Mortgage applications have risen but not by much. Many people just do not have the income to invest in a mortgage and many cannot qualify under the banks tight lending standards . Many are scared that they will lose their jobs and are unwilling to invest in property without a stable income. And of course, no one wants to sink money into a home only to have it lose value over time.

Though rates for 30-year fixed options have been below 5% most of the year, it doesn’t make much of an impact because few homeowners can afford to refinance. Though interest rates on loans may be low, there are fees attached to applications and transactions leaving few homeowners able to take advantage.

President Obama and his administration have formed a refinancing program to assist underwater borrowers. The Home Affordable Refinance Program (HARP) allows non-delinquent owners whose mortgages were owned or guaranteed by Freddie Mac and Fannie Mae on or before May 31, 2009 and have a Loan to Value ratio greater than 80% to refinance and lower their monthly payments. Though this is a move in the right direction, The Mortgage Bankers Association says that these refinancing loans only account for a small number percentage of the problem. Thus, many banking and financial experts are telling people not to get their hopes up about mortgage rates and the real estate market.

Experts say that it will take some time for the economy and the real estate market to right itself. Low interest rates are a good sign. However, unemployment rates will need to fall if people are going to be able to afford mortgages.

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