(AP, ABC7) – Sonja and William Harrison have found a bright spot in the economic woes of the past week. They're re-financing a home in Washington D.C., taking advantage of mortgage rates that are at an all-time low.
“It feels really good to take advantage of it. We're not happy with where the economy is but we're glad there are some options to help,” Sonja Harrison said.
The rate on the most popular 30-year fixed mortgage dipped to 4.15 percent from 4.32 percent a week ago, Freddie Mac said Thursday. Its previous low of 4.17 percent was reached in November.
The last time long-term rates were lower was in the 1950s, when 30-year loans weren't widely available. Most long-term home loans lasted 20 or 25 years.
Ed Nolin has watched those same rates dip.
“It was just two hours ago we were talking about doing a refinance for 15 years,” the Alexandria resident said.
Five years ago, the average 30-year fixed rate was near 6.5 percent. In 2000, it exceeded 8 percent.
Most homeowners are paying rates more than a full percentage point higher than the current average. The average rate on all outstanding mortgages is 5.3 percent, Freddie Mac said, citing data from the Bureau of Economic Analysis.
Oil and gas prices fall
Oil ended the day trading below $83 a barrel on Friday, finishing down about 4 percent for the week. That could spell more relief at the gas pump.
The national average for retail gasoline is $3.59 a gallon, according to AAA, Wright Express and Oil Price Information Service. That's down 10 percent from this year's high of $3.98 on May 5.
Gas could be around $3.25 a gallon by Labor Day and may drop as low as $3.15 by the end of the year, according to Fred Rozell, OPIS retail pricing director.
While gas may be headed lower, it's still taking a big piece out of household income. The median U.S. household income before taxes is almost $50,000 a year. In July families spent about $374 a month on gasoline, or around 9 percent of household income, according to Rozell. For the year, monthly gas expenses average about 8.4 percent, compared with 6.7 percent in 2010.
“I think that's a benefit because it puts money in people's pockets so they know they have money to spend it's a confidence thing,” said Sean Hashemi, who lives in D.C.
Overall, economy still fragile
With uncertainty overseas, slowing growth and millions still looking for work, many are watching what they spend.
Fresh evidence emerged Thursday that U.S. home sales and manufacturing are weakening. Signs also surfaced that European banks are increasingly burdened by the region's debt crisis and sputtering economy.
The rising anxiety ignited a huge sell-off in stocks that led many investors to seek the safety of U.S. Treasurys.
Economists say the economic weakness and the stock markets' wild swings have begun to feed on themselves. Persistent drops in stock prices erode consumer and business confidence. Individuals and companies typically then spend and invest less. And when they do, stock prices tend to fall further.
"A negative feedback loop ... now appears to be in the making" in both the United States and Europe, Joachim Fels and Manoj Pradhan, economists at Morgan Stanley, said in a report Thursday. Both economies are "dangerously close to a recession. ... It won't take much in the form of additional shocks to tip the balance."
The risk of a recession is now about one in three, according to Morgan Stanley and Bank of America Merrill Lynch.
After all the volatility of the past month, the Dow Jones industrial average has lost more than 14 percent since July 21. That includes Thursday's drop of more than 419 points.
Some sectors of the U.S. economy still show strength. Retail sales are up. Gas prices have fallen. And job growth has been consistent, though below what's needed to reduce the unemployment rate.
Yet a consumer survey taken this month showed confidence in the economy fell to the lowest level in 31 years.