Record Low Mortgage Rates for the Long Term? – According to the Federal Reserve’s recent announcement, it plans to keep its benchmark interest rate near zero through 2022. This move could set the course for record low mortgage rates for the next three years. The Fed’s key rate doesn’t directly affect mortgage rates, but it often influences them. The federal funds rate is what banks charge one another for short-term borrowing. The Fed’s decision was a response to the economic impact of the COVID-19 pandemic. The Fed also announced it will continue to increase its bond holdings to help preserve the flow of credit. “The Federal Reserve’s view that a rate hike will not occur for three years is a signal to the market to expect an all-in accommodative monetary policy,” says Lawrence Yun, chief economist for the National Association of REALTORS®. “It is also very likely that the Fed will be aggressively purchasing mortgage-backed securities behind the scenes.”
Source and link to the full article: “Fed Holds Rates Near Zero—Here’s Exactly What That Means for Your Wallet,” CNBC (June 10, 2020)
More Homes Are Being Built as Buyers Rush Back – Based on the Commerce Department’s report, single-family permits, a gauge of future housing production, posted a double-digit gain in May as the new-home market showed an increase in activity. The pandemic in March and April brought the sector to mostly a standstill as economies shut down in an effort to curb the spread of the coronavirus. But as states reopen, home buyers are coming back and builders are ramping up production to meet demand. Permits to construct new houses in May rose 14.4% to a 1.22 million annual pace. Total housing starts, which includes single-family and multifamily construction, rose 4.3% to a seasonally adjusted annual rate of 974,000 units. Broken out, single-family starts moved just 0.1% last month, but builders were quick to point to the increase in permits as a positive sign that more activity is coming. Housing starts in the multifamily sector, including apartment and condo buildings, jumped 15% in May to a 299,000 pace.
Source and link to the full article: National Association of Home Builders and “Housing Starts Climb 4.3% in May as Buyers Return and Builders Aim to Speed Up Work,” MarketWatch (June 17, 2020)
Mortgage Applications Surge to 11-Year High – According to the Mortgage Bankers Association, home buyers are reemerging, and here’s the proof: mortgage applications to purchase a home reached the highest volume in more than 11 years. Record low mortgage rates are tempting more buyers into the market. Mortgage applications to purchase a home are 21% higher than the same week a year ago. Applications for home purchases ticked up 4% week over week. “The housing market continues to experience the release of unrealized pent-up demand from earlier this spring, as well as a gradual improvement in consumer confidence,” said Joel Kan, the MBA’s economist. Record low mortgage rates certainly are helping. The MBA reports the average contract interest rate on a 30-year fixed-rate mortgage dropped from 3.38% to 3.30% recently.
Source and link to the full article: “Homebuyer Mortgage Demand Spikes to 11-Year High, as Rates Hit Another Record Low,” CNBC (June 17, 2020)
Real Estate Continues Its Streak as a Favorite Investment – Based on the latest annual poll from Gallup, real estate continues to rank at the top of the list of the best long-term investments for Americans. About 35% of Americans picked it as their favorite investment, which has been the case since 2013. Meanwhile, Americans are less likely to view stocks or mutual funds as the best long-term investment, particularly waning after the COVID-19 pandemic struck the economy this spring. Twenty-one percent of Americans picked stocks as the best investment, down 6 percentage points from a year ago and at the lowest reading since Gallup started collecting such data in 2012. Only about one in six Americans view savings accounts or CDs (17%) and gold (16%) as their favored long-term investment. During the subprime mortgage crisis in 2011 and 2012, real estate was viewed as more risky, and gold finished first as the best long-term investment during that time. But as real estate values continue to climb in recent years, gold has faded and real estate’s investment potential has steadily risen in popularity.
Source and link to the full article: “Stock Investments Lose Some Luster After COVID-19 Sell-Off,” Gallup.com (2020)