As the economy tries to
recover from the shocks of COVID-19 pandemic, the US real estate sector is
slowly gaining momentum thanks to historically low mortgage interest rates. During
the lockdown, the housing market experienced a slow down due to sellers
withdrawing their listings as well as low demand from home buyers due to future
uncertainty. It was as a result of these dynamics that the real estate market
remained relatively stable without sudden price fluctuations. In order to
sustain the market stability, the federal government acted fast and reduced the
mortgage interest rate to a record low something which has not been witnessed
The recent mortgage rate
adjustment is the 11th lowest rate in the year 2020. We are already witnessing the positive impact
of these low interest rates as it’s driving the US housing market boom amid the Coronavirus pandemic. Data from Freddie Mac shows that the average US 30-year
fixed mortgage interest rate was reduced from 2.87% to 2.81% in October something
which have never happened for the last few decades.
When the borrowing costs
are historically low, many Americans and especially millennials are feeling motivated
to get into the housing market. This ever increasing demand for home ownership
is fueling the housing market rebound. The sales for both new and existing
homes are increasing amid the pandemic due to the rising demand from prospective
home buyers. As a result of increased demand for homes, the prices are steadily
From the look of things,
there are no signs that the wave of historically low mortgage interest rates is
going to stop anytime soon. We have already received confirmation from the
Federal Reserve Bank that the low interest rates are likely to remain the
unchanged for the next four years.
However, it’s important
to note that the increasing prices for homes due to low inventory and growing demand
from homebuyers could also slow down the home ownership journey for some
Americans who have been negatively affected by the COVID-19 pandemic. Even when
mortgage rates are historically low, some may not be able to take advantage of
this rates if they have lost their source of income during this pandemic
Apart from historic low
mortgage interest rates, the US housing market is also experiencing low
inventory and this is also contributing to the steady increase in home prices.
Currently, this is the best time for homeowners and sellers who might have shelved
their listings for the last few months when the market was full of uncertainty.
of Low Mortgage Rates on New Construction
As the demand for housing
continues to rise due to low mortgage interest rates, the construction of new
houses is rising in a move to breach the gap of low inventory. For the last few
months, the mortgage application for new homes have already skyrocketed to a
new record compared to a similar time last year.
However, the rate of
construction have also reduced because builders are facing some challenges due
to the new health regulations which have slowed down the level of interaction
and logistics and hence, driving the cost of construction higher.
Once some these
restrictions are lifted, we expect the cost of new construction to come down
and we are likely to see an increase in supply of newly constructed homes in
the coming months because demand is already there.
In states like Florida,
Carolina and Texas where there are less regulations, builders are able to construct
many new houses within a very short period of time to try and meet up with the
Impact of Low Mortgage Interest Rates on Refinancing
The mortgage refinancing
is also on the rise and it’s now accounting for over 60% of all mortgage
applications according to the recent statistics released by Freddie Mac.
Although refinancing has been the greatest drive of the mortgage market during
the pandemic turmoil, the announcements by Fannie Mae and Freddie Mac of
introduction of a 0.5% “adverse market refinance fee” of the total loan amount could
slow down the rate of application.
The high cost of mortgage
refinancing could crowd out many borrowers who are already struggling to make ends
meet during this Coronavirus pandemic. If the fee remains in place, borrowers
will be forced to be extra careful and ask for transparency from the lenders
before they can even agree to sign the contract. However, if the fee is
reviewed, borrowers can get reprieve and the low mortgage interest rates will
propel a strong US housing market.
From the recent trends, there
is a high likelihood that mortgage interest rates will remain low in the coming
months. However, bearing in mind that the presidential election is almost here
with us in November, we might experience a slight increase or decrease in the
interest rates for the first 90 days depending on the election results. The
real estate market has remained a relatively stable sector during the Covid-19
pandemic. With no housing crisis experienced and affordable interest rates,
this is without a doubt, a good investment area for both short and long-term goals.
Find Your Home and Discover the Best Options based on Your Needs! Call me today at (617) 913 2730 to find your perfect home. The housing market that has become more competitive due to low interest rates, rising prices and low inventory.
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