SEATTLE, March 25, 2020 /PRNewswire/ -- It has been a
wild ride for mortgage rates over the past month, which touched
record lows then rebounded just as fast. Low rates are typically
associated with healthy housing demand and a strong market –
especially now that we've entered home shopping season –
but early signs indicate the market is
slowing.
As the calendar turned and the Federal Reserve made its first of
two March interest rate cuts, mortgage rates reached record lows.
This sparked a historic flurry of refinance activity, which jumped
as much as 79% in a week and 479% from a year earlier, prompting
the Mortgage Bankers Association to double its forecast for
refinance originations in 2020i.
But mortgage rates have jumped sharply in the days since, up a
full percentage point since hitting record lows, baffling market
observers as they moved counter to other measures such as Treasury
yields. Despite these recent gains, rates are still low relative to
historic norms, sitting about 60 basis points lower than this time
last year.
In a typical market, low mortgage rates would be expected to
continue to boost demand -- the most recent reading on home
sales in February was strong, suggesting that buying demand
remained healthy at the start of the year despite a historic
shortage of inventory, in part because of low mortgage rates that
make monthly payments more affordable.
But today's market is, of course, anything but typical as some
jurisdictions have mandated or recommended citizens remain at home
in an effort to slow the spread of COVID-19. The effect these
recent mortgage rate movements are having on the housing market has
been overshadowed by broader economic factors, and the most
prominent impact may have already come to pass with the temporary
boom in refinances.
One sign of analysts' reading of the market is Bank of America's
ratings downgrade for some of the nation's largest homebuilders,
suggesting the bank believes COVID-19 will harm consumer sentiment
and slow home building. If correct, that dive in consumer sentiment
would presumably slow sales activity regardless of mortgage rate
movements as some would-be buyers turn down their risk tolerance
and stay out of the market. Early data suggests this may be the
case as real estate showings have dropped off steeply since
March 11ii.
Recent data on the economy at large have been less than
encouraging as well, including a surge in weekly jobless claims.
The Federal Housing Administration's decision to implement a 60-day
moratorium on foreclosures and evictions for many homeowners
reduces the risk of a wave of foreclosures, which would likely
drive down home values. There is no indication to this point that
home values have been affected by the slowdown.
"The U.S. housing market has entered truly uncharted territory,
shaken by the COVID-19 pandemic and a corresponding, sharp economic
contraction that has already caused millions of Americans to lose
their jobs," said Zillow Economist Jeff
Tucker. "Rock-bottom mortgage rates have provided some small
financial relief for homeowners and buyers, but it hasn't been
enough to avoid a slowdown. The big question at the moment is to
what degree measures being taken by local, state and national
legislators will help limit the number of foreclosures in the
months ahead."
More will be revealed in the coming weeks as this unprecedented
situation continues to unfold, and Zillow economists will be
closely monitoring each development.
Week -
2020
|
Average 30-Year
Mortgage Rate*
|
Week -
2019
|
Average 30-Year
Mortgage Rate*
|
January 2,
2020
|
3.72
|
January 3,
2019
|
4.51
|
January 9,
2020
|
3.64
|
January 10,
2019
|
4.45
|
January 16,
2020
|
3.65
|
January 17,
2019
|
4.45
|
January 23,
2020
|
3.60
|
January 24,
2019
|
4.45
|
January 30,
2020
|
3.51
|
January 31,
2019
|
4.46
|
February 6,
2020
|
3.45
|
February 7,
2019
|
4.41
|
February 13,
2020
|
3.47
|
February 14,
2019
|
4.37
|
February 20,
2020
|
3.49
|
February 21,
2019
|
4.35
|
February 27,
2020
|
3.45
|
February 28,
2019
|
4.35
|
March 5,
2020
|
3.29
|
March 7,
2019
|
4.41
|
March 12,
2020
|
3.36
|
March 14,
2019
|
4.31
|
March 19,
2020
|
3.65
|
March 21,
2019
|
4.28
|
*Freddie Mac Primary
Mortgage Market Survey
|
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i Mortgage Bankers Association's Refinance Index,
March 11, 2020:
https://www.mba.org/2020-press-releases/march/mortgage-applications-increase-in-latest-mba-weekly-survey-mba-doubles-2020-refinance-originations-forecast
ii ShowingTime, "Impact of COVID-19 on Real Estate Showings
in North
America": https://www.showingtime.com/impact-of-coronavirus/
View original
content:http://www.prnewswire.com/news-releases/despite-low-mortgage-rates-coronavirus-is-slowing-the-housing-market-301029424.html
SOURCE Zillow