Aug. 11, 2011, 10:51 a.m. EDT

By Amy Hoak, MarketWatch

CHICAGO (MarketWatch) — Mortgage rates hit new lows this week, as worries about European debt markets drove investors to U.S. Treasurys, Freddie Mac’s chief economist said on Thursday.

Rates on the 30-year fixed-rate mortgage averaged 4.32% for the week ending Aug. 11, the lowest the rate has been in 2011, according to Freddie Mac’s weekly survey of conforming mortgage rates. The mortgage averaged 4.39% last week and 4.44% a year ago.

Meanwhile, 15-year fixed-rate mortgages, as well as 5- and 1-year adjustable-rate mortgages, hit record lows this week.

Fifteen-year fixed-rate mortgages averaged 3.5% this week, down from 3.54% last week and 3.92% a year ago.

Five-year Treasury-indexed hybrid adjustable-rate mortgages averaged 3.13%, down from 3.18% last week and 3.56% a year ago. And 1-year Treasury-indexed ARMs averaged 2.89% this week, down from 3.02% last week and 3.53% a year ago.

To obtain the rates, the fixed-rate mortgages required payment of an average 0.7 point, while the adjustable-rate mortgages required an average 0.5 point. A point is 1% of the mortgage amount, charged as prepaid interest.

“Renewed market concerns about the European debt markets led investors to shift funds into U.S. Treasuries, pushing long-term yields lower,” said Frank Nothaft, vice president and chief economist of Freddie Mac, in a news release.

“Further, in its August 9th Federal Open Market Committee statement, the Federal Reserve noted that economic growth so far this year had been considerably slower than it expected and that overall labor market conditions had deteriorated in recent months, leading the Committee to conclude that an exceptionally low federal funds rate should be maintained at least through mid-2013. See story on Fed meeting.

“These developments helped to ease mortgage rates lower this week.”

Low mortgage rates are making homes more affordable. The National Association of Realtors’ affordability index indicates that over the past three quarters, homes have been more affordable than any other time since the group began keeping the index in 1970, Nothaft said.

According to a separate survey released by Bankrate.com on Thursday, 30-year fixed-rate mortgages averaged 4.46% and 15-year fixed-rate mortgages averaged 3.61%. Seven-year ARMs averaged 3.45% this week, while the 10-year ARM averaged 3.93%, according to Bankrate.

Aug. 11, 2011, 10:24 a.m. EDT

RealtyTrac has long predicted that 2011 would break foreclosure records once lenders broke through a logjam of processing delays. But now that the slowdown in foreclosure activity is ten months old, RealtyTrac’s Rick Sharga says it’s time to reassess. Click to listen to MarketWatch Breaking News> http://www.marketwatch.com/story/realtytrac-foreclosures-may-have-peaked-2011-08-11

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…It is the second consecutive monthly increase for NAR’s pending sales index and the trade group is expecting a 7.8% increase in existing home sales in 2011.

“In addition to exceptional affordability conditions, steady improvements in the economy are helping bring buyers into the market,” NAR chief economist Lawrence Yun said on Thursday. 

The pending sales index rose to 92.2 in November from 89.1 in the prior month.  The seasonally adjusted index is based on newly signed contracts on existing homes that should go to closing in a month or two. 

The index is down 5% from November 2009.

The Realtors are forecasting that existing home sales will rise to 5.12 million in 2011, up from 4.82 million in 2010.  This 7.8% increase would bring sales up to the 2009 level.

Meanwhile, NAR economists are expecting home prices to remain stable.

“The median existing-home price could rise 0.6% to $173,700 in 2011 from $172,700 in 2010, which was essentially unchanged from 2009,” NAR said.