I thought I would pass along this bit of good news as we head into the holiday weekend… interest rates on fixed mortgages fell to their lowest point in 2011 to an average of 4.6% on a 30 year fixed mortgage!

There's been plenty of speculation from analysts pointing to increasing interest rates, which ramped up with the immediate jump after the Fed announced the second "quantitative easing" stage in November, but lingering concerns over Europe's ongoing debt crisis have kept U.S. issued debt as a "safe haven" for investors. As money moves into bonds it drives down the yield, and interest rates tend to track the yield of the 10-year Treasury note.

To still have rates this historically low is wonderful news for homebuyers, investors, and homeowners who are yet to refinance. We know where rates are headed, and we know that higher interest rates drive up the cost of owning, which in turn drives down the prices that buyers and investors can afford.

Why do we know rates are inevitably going to rise? We know that the government is wanting to wind down Fannie Mae and Freddie Mac, which will in turn leave the banks issuing the loans (BofA, Wells Fargo, smaller and local banks, etc) to assume more risk. To account for the elevated risk the banks will have to increase a homeowner's "skin in the game," which can come in the form of higher interest rates, down payments, and shorter loan timelines (i.e. 15 year loans instead of 30 year). Additionally, we also know that the government is working on outlining what makes a "quality residential mortgage," the sum of which is tighter lending standards that will push more borrowers out of the "conventional" loan programs and into other loan products that come with higher rates attached to them.

BOTTOM LINE: We should all relish in the fact that rates are still historically low. The combination of low prices and low interest rates has greatly improved the affordability of buyers. Traditional home buyers are able to buy a bigger house or move into that neighborhood they love so much but couldn't previously afford.

And investors? It's going to be a long time before we see another housing opportunity where investors have it so easy. With relative ease, we are finding and negotiating undervalued properties, that can be purchased with as little as 5% down, that also have a monthly positive cash flow for the investors. Investors are able to buy at low prices and lock in a fixed payment at historically low rates, then sit back and watch as market rents and their positive cash flow increase annually. This really is an unprecedented time for home buyers.

Enjoy the holiday weekend, and my deepest acknowledgement and appreciation for those who have and are serving our country. My thoughts and prayers are with the families who have lost loved ones, and to those with loved ones currently devoting their lives to protecting us.

- Robert E. Wasser - Seattle and Bellevue real estate market trends, statistics, news, and blog