A proposal to offer federally subsidized mortgage rates as low as 4.5 percent could go a long way toward reviving the Phoenix metropolitan area's decimated housing market, according to analysts.
RL Brown, publisher of the Phoenix Housing Market Letter, said the projected low rates could bring in more buyers and help slow falling housing values.
In turn, more stable values could help slow rising foreclosures.
In September, Phoenix led the nation in declining home prices and in October, Arizona was pegged as No. 2 in foreclosures after Nevada.
The lower rates would be available only for purchases, according to the proposal, which is under consideration by the U.S. Treasury Department. They could not be used to refinance higher-interest loans.
The mortgage-rate program could get prospective buyers off the fence by offering a rate almost 1.5 percentage points lower than the 5.92 percent that large lenders are offering for 30-year, fixed-rate mortgages.
Buyers would have to document income, be able to afford the payments and qualify for guarantees from Freddie Mac, Fannie Mae or the Federal Housing Administration.
Thus, the initiative would be geared toward boosting the housing market to stem future foreclosures rather than helping people whose homes now are in the process of being taken back by lenders.
Besides stimulating sales, Brown said the low rates could send a message that there may never be a better time to buy.
Prospective buyers, paralyzed by the credit issues or the economy as well as mounting foreclosures, are keeping Phoenix-area home prices in a free fall, which is further feeding the downward cycle.
In September, metro Phoenix led the nation in falling home prices, logging a 32 percent decline in a year and 38 percent over two years.
RealtyTrac, a service that follows foreclosure filings, counted 17,507 Arizona foreclosure notices in October, up 35 percent from the previous month and 176 percent from October 2007.
