Mortgage rates fall for second straight week

The benchmark 30-year fixed-rate mortgage fell 2 basis points, to 6.74 percent, according to the Bankrate.com national survey of large lenders. A basis point is one-hundredth of 1 percentage point. The mortgages in this week's survey had an average total of 0.26 discount and origination points. One year ago, the mortgage index was 6.93 percent; four weeks ago, it was 6.47 percent.

The benchmark 15-year fixed-rate mortgage fell 5 basis points, to 6.4 percent. The benchmark 5/1 adjustable-rate mortgage fell 11 basis points to 6.47 percent.

The good news is mortgage rates fell for the second week in a row. The bad news is they're still almost half a percentage point higher than they were three months ago.

Rates have been rising for most of the year and skyrocketed from mid-May to mid-June, when the average rate on a 30-year fixed climbed from 6.32 percent to 6.84 percent in four weeks. While this week's decrease is welcome news for borrowers, we're a long way from the middle of March, when the 30-year bottomed out at 6.16 percent.

Swooning housing market

Analysts haven't come to a consensus to explain why mortgage rates and associated bond yields have gone on their up-and-down trajectory of the past few weeks. One thing is clear, though: The housing market is swooning.

According to the National Association of Realtors, the pace of home resales has slowed dramatically -- down 10.3 percent in May compared with the previous May. The number of used houses on the market is a record 4.43 million. That translates into an 8.9-month supply.

Half of the houses resold in May cost less than $223,700 -- a 2.1 percent decline over the median price of $228,500 a year earlier. On a year-over-year basis, median resale prices have gone down 10 months in a row.

That's a sign of a genuine housing slump.