Low mortgage rates could hurt home sales

In a recent poll from Fannie Mae, 33 percent of consumers believe mortgage rates will rise in the next 12 months. This means the majority of Americans do not expect rates to rise in the near future, giving them no incentive to acquire a home loan.

Business Insider reported that low mortgage rates also make it less desirable to hold a high-rate mortgage from the past. This can lead many homeowners to ditch their current mortgages that were acquired with a higher rate, and invest in a new lower rate loan. This will hurt their credit scores, and also harm the housing market. By bailing on their original mortgage from the past, homeowners will forfeit their properties to lenders, pushing more distressed homes into the market and further hampering home prices.

Recent data from Clear Capital shows home prices in the United States increased 3.5 percent in the third quarter compared to the second quarter of 2011, but experts predict home prices will fall throughout the remainder of the year.

Alex Villlacorta, director of research and analytics at Clear Capital, said price gains have slowed throughout 2011, which could lead to a projected 3.2 percent drop in national home prices through the first quarter of 2012. In addition, more than a million foreclosure actions have yet to move forward, and that delay will result in an oversaturated market for 2012.

"We can't expect to see home price appreciation until we work through these distressed assets," Villacorta told real estate professionals at a recent meeting. 

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