Mortgage Rates hit another all-time LOW

The average U.S. rate for a 30-year fixed mortgage dropped to 3.15% last week. It is the lowest ever recorded in a Freddie Mac data series that goes back almost five decades.

The rate fell from 3.24% last week, setting a new record low for the third time in three months, according to the report.

Mortgage rates have fallen after the Federal Reserve began buying mortgage-backed securities to stimulate demand, said Chris Low, chief economist of FHN Financial in New York. The Fed has purchased more than half a trillion dollars of MBS after restarting in March a bond-buying program it used during the financial crisis more than a decade ago.

When the initial plan of buying $200 billion of MBS didn’t lower financing costs, Fed Chairman Jerome Powell said on March 23 the central bank would buy whatever was needed to move rates. It worked.

“The Fed is by far the biggest player in the mortgage markets right now, the biggest buyer of mortgages, and because of that, they have almost complete control over the interest rate,” Low said.

That means the central bank has the ability to stimulate home sales by driving rates to lows that most people wouldn’t have thought possible a few years ago, said Low.

“Every economist had doubts about how housing would fare during COVID-19, but what we’ve seen has been absolutely remarkable,” Low said. “Home sales are holding up extraordinarily well, and that’s in large part because of the mortgage rates.”

Last week, applications for mortgages to purchase homes gained for the sixth consecutive week to a level that was 6.7% higher than a year ago, when the U.S. was having a normal “spring homebuying season”.

A seasonally adjusted index measuring purchase applications jumped 9%, the Mortgage Bankers Association said in a report on Wednesday. The so-called purchase apps were up 54% from early April when most U.S. states were under lockdown orders to keep people at home in an effort to stem the spread of COVID-19.

Is now the right time to purchase a new home or make investments in this real estate market?

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Most REALTORS® Confident That Home Prices Will Stand Firm

Many real estate professionals don’t foresee a significant drop in home prices from the COVID-19 pandemic, and certainly not to the degree of the Great Recession’s impact on the housing market. For residential property prices over the next 12 months, 38% of more than 4,000 REALTORS® say they expect prices to increase and 23% expect prices to remain stable, according to the March 2020 REALTORS® Confidence Index Survey, a monthly survey of real estate transactions conducted by the National Association of REALTORS®. 

“Although the pandemic continues to be a major disruption in regards to the timing of home sales, home prices have been holding up well,” Lawrence Yun, NAR’s chief economist, said in a statement following a report on pending home sales in March. “In fact, due to the ongoing housing shortage, home prices are likely to squeeze out a gain in 2020 to a new record high.”

Home prices were still rising across the country as the pandemic widened in scope in the U.S. in March. As of March, the median home sales price increased 8% year over year to $282,500, according to NAR.

“Prices have held up due to a combination of measures under the $2.2 trillion CARES Act passed plus the additional $484 billion funding passed April 23 to pay for unemployment insurance benefit claims and payroll assistance for small businesses,” Scholastica Cororaton, a research economist for NAR, notes on the association’s Economists’ Outlook blog.

The median list prices in several markets are still up compared to a year ago, according to realtor.com® data. For example, in Los Angeles, the median list price is up 16% compared to a year ago, while in Las Vegas and Denver, median listing prices are up by 3.6% and 3.5%, respectively, compared to a year ago. In the New York-New Jersey area, which has accounted for the largest share of coronavirus cases in the country, median listing prices are still up from one year ago by 2.9%.

As of April 18, 58 of the 100 largest metros were still seeing higher median listing prices when compared to a year prior, according to realtor.com® data. Properties were staying on the market longer—six more days during the week of April 18 compared to April 2019.

But markets like Washington, D.C., were seeing median list prices up by 4.4% the week of April 18 compared to a year prior.

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