Mortgage rates drop to 4 percent

Freddie Mac's recent Primary Mortgage Market Survey found average mortgage rates dropped drastically when nervous investors bought up U.S. Treasury bonds in response to growing concern over the European debt market. The 30-year fixed-rate declined to 4 percent, the second lowest reading since the 3.94 percent report in early October.

The survey found the 15-year fixed-rate average dropped 0.7 points to 3.31 percent down from 3.38 percent last week. Frank Nothaft, vice president and chief economist at Freddie Mac, said that while investors were concerned over the European markets, the U.S. economy grew 2.5 percent in the third quarter and consumer spending rose 0.6 percent in September.

Fannie Mae's third quarter National Housing Survey found that while consumers remain hesitant to make large purchases, many are still motivated to own a home. The consumers who remain most pessimistic about their finances know someone who has defaulted on their loans and are wary of that happening to them.

The survey found 92 percent of homeowners who know defaulters say owning makes more sense than renting, while 89 percent of owners who do not know defaulters. In addition, 67 percent of owners and 52 percent of renters who know defaulters believe owning a home is a safe investment, while 70 percent of owners and 52 percent of renters feel the same way but do not know defaulters.

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