Finally, some good news for the real estate & mortgage industry! After months of worries over a slowing industry and real estate inventory shortage, we’re seeing the first signs of a massive comeback – just in time for the Spring 2020 buying season!
The cause? Mortgage rates are at their lowest level in more than three years, potentially boosting the U.S. housing market as it enters the crucial spring selling season, according to the Wall Street Journal. They further state that the average rate on the 30-year fixed-rate mortgage, the most popular home loan in the U.S., dropped to 3.45%, according to data released Thursday by mortgage-finance giant Freddie Mac. That is down from 3.51% a week earlier and 4.41% this time last year. The average rate on the 15-year mortgage also fell to a three-year low of 2.97%. According to experts, this could be a historical opportunity for people who have an existing mortgage to refinance and for credit-qualified people to lock-in a low rate.
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U.S. home prices have risen rapidly in recent years, which means many would-be owners can’t afford to buy their first homes even with low rates. Moreover, the low rates telegraph investors’ concerns about the global economy.
Mortgage rates are closely tied to yields on 10-year Treasury notes, which recently hit their lowest level since October. That is because investors pile into haven assets such as government bonds when economic growth looks uncertain. Continued concerns that the corona virus will hurt Chinese economic growth are also weighing on investors and sending rates down.
Consistently low mortgage rates have helped the market recently, pushing home sales to a high mark for the year in December, when sales of existing homes rose 3.6% over the previous month to 5.54 million. Lenders extended a greater volume of home loans in 2019 than in any year since 2006, according to industry research group Inside Mortgage Finance.
Lower rates have also driven a bevy of refinancings. The volume of refinancing applications jumped 15% from the previous week to the highest level since June 2013, according to Mortgage Bankers Association data released Wednesday. The volume of mortgage purchase applications fell 10% from the previous week, though it was up compared with a year ago.
The reduced rates widen the pool of homeowners who could lower their monthly payments. Mortgage-data firm Black Knight Inc. estimates that 11.3 million U.S. homeowners would qualify for and benefit from a refinancing, the second-most on record. Average monthly savings would be $268.
To be sure, the Mortgage Bankers Association said mortgage credit availability fell in January, a potential sign of stricter lending standards. But the decline could also reflect the high level of refinancing expected through the first half of 2020. Homeowners who refinance often have high credit scores, raising the average score of approved borrowers.
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