30-year mortgage rate falls to 3.9 percent

The average rate on the 30-year mortgage edged down this week to hover again above record lows. Cheaper rates have spurred modest improvements in the battered housing market, but not enough to signal a recovery.

Mortgage buyer Freddie Mac said Thursday that the rate on the 30-year home loan fell to 3.90 percent from 3.95 percent the previous week. That's slightly above the 3.87 percent average rate hit two weeks ago, which was the lowest since long-term mortgages began in the 1950s.

The average on the 15-year fixed mortgage fell to 3.17 percent from 3.19 percent a week ago. It hit a record 3.14 percent four weeks ago.

Mortgage rates have been below 4 percent for more than three months. That has made home-buying and refinancing more attractive for those who can qualify.

Home sales have improved and the four-week average of home purchase applications was up a smidge last week, according to the Mortgage Bankers Association. Refinancing now makes nearly 78 percent of mortgageactivity.

But government programs have been propping up the relatively low level of mortgage applications. The Obama administration's revamped refinancing program, the Home Affordable Refinance Program, or HARP, now accounts for more than 20 percent of refinancing nationwide.

Elsewhere, the housing market is displaying signs of health ahead of the traditionally busy spring-buying season.

Builders are more optimistic and construction has picked up. The supply of homes fell last month to its lowest point in nearly seven years, which could send home prices higher.

Nationwide, home prices have fallen by 33 percent since hitting their peak in late 2006. Single-family homes are considered "undervalued assets" when looking at both rents and incomes, according to Capital Economics.

The job market is also improving, which is critical to a housing rebound. In January, employers added 243,000 net jobs — the most in nine months — and the unemployment rate fell to 8.3 percent, the lowest level in nearly three years.

But there are major obstacles in the way before people start buying homes again.

Foreclosures and short sales — when a lender agrees to sell a home for less than what is owed on a mortgage— are still piling up and driving down home prices, which fell for a fourth straight month in December, according to the Standard & Poor's/Case-Shiller home-price index.

The weaker economy has persuaded more young Americans to rent instead of buy. That has spawned a rise in apartment construction and a drop in the nation's homeownership rate.

Frank Nothaft, Freddie Mac's chief economist, said the low rates are helping lift the housing market. Still, home sales remain weak and it could take years for the market to fully return to health.

To calculate the average rates, Freddie Mac surveys lenders across the country Monday through Wednesday of each week.

The average rates don't include extra fees, known as points, which most borrowers must pay to get the lowest rates. One point equals 1 percent of the loan amount.

The average fees for the 30-year and 15-year loans were unchanged at 0.8.

For the five-year adjustable loan, the average rate rose to 2.83 percent from 2.80 percent, and the average fee was unchanged at 0.7.

The average on the one-year adjustable loan ticked down to 2.72 percent from 2.73 percent, and the average fee was unchanged at 0.6.