- The average 30-year fixed mortgage rate fell to 2.98%, the lowest percentage recorded by Freddie Mac, dating back to 1971.
- It should be good news for home buyers, but there are many mixed signs in the property market.
- Evidence shows that millions are at risk of eviction or foreclosure, which has only been avoided through established temporary moratoriums due to the pandemic.
- And people who can afford to buy a home face a vendor market and inventory shortages, so the affordability crisis of the 2010s has continued into 2020.
- Finally, just because mortgage rates are low doesn’t mean it’s easier to get a mortgage. Lenders have been adjusting their standards during the recession.
- Visit the Business Insider home page for more stories.
For the first time since they began tracking in 1971, mortgage rates have fallen below 3%.
Freddie Mac reported that the average 30-year fixed mortgage rate fell to 2.98% as rates have come closer and closer to the 3% mark, setting record lows along the way in the past four months.
Although mortgage rates are not directly linked to the interest rate set by the Federal Reserve, they often move together, and the Fed has kept rates low during the coronavirus pandemic and related recession.
“Mortgage rates fell below 3 percent for the first time in 50 years,” reads the Freddie Mac report. “The decline has led to increased demand from home buyers and these low rates have been capitalized on asset prices in support of financial markets. “
However, home buyers have to deal with many mixed signals.
The compensatory force and the wave of delayed foreclosure
Chief among them is what Freddie Mac calls “the countervailing force for the economy” in the form of increasing new virus cases. Thus, the economic recovery has stalled, putting many temporary layoffs “at risk of ossifying into permanent job loss.”
This countervailing force naturally has plenty of negative by-products. A third of Americans missed a home payment in July, according to an Apartment List survey, compared to 30% in June. Late payments on the home often lead to bank foreclosure on mortgages, which at a normal time would lead to a wave of foreclosures and evictions.
Fortunately, the pandemic era has also seen a mosaic of eviction and foreclosure protections temporarily implemented at the federal, state and local levels. That’s a good and necessary thing, because a CoreLogic report showed a lot of mortgage delinquencies in April, the most recent month for which data was available. He said the proportion of mortgages that went from being current to 30 days past was the highest in at least 21 years.
Some positive signs are also mixed. CoreLogic found that the foreclosure inventory rate, the proportion of mortgages at some stage of the foreclosure process, was also the lowest in at least 21 years, largely thanks to moratoriums.
Once the moratoriums expire, which is slated to occur multiple times this summer, that number could skyrocket. The New York Times reported that 20 million tenants could face eviction, and Moody’s predicted in April that 15 million homeowners could face foreclosure. The Federal Reserve Bank of Atlanta warned earlier this month that “the threat of patience turning into foreclosure has regained power” as infections began to escalate beginning in late June.
Therefore, a wave of foreclosures and evictions could be coming, which would only be delayed a quarter of the year.
The strange 2020 market is favorable for sellers.
Many homebuyers have flooded the market to take advantage of low rates and, in many cases, to flee the city life exposed by the pandemic.
Home sales officially exceeded pre-pandemic levels in June, according to Redfin, a remarkable benchmark considering how much real estate activity stopped during the second quarter of the year.
Not only have houses been sold, but prices have also risen, and Redfin noted they hit a new record in June. Prices have been fueled by resistance from sellers to the list right now: June marked the fourth consecutive month of double-digit declines for the new lists.
Business Insider reported on the affordability crisis before the pandemic hit the U.S., adding that that dynamic has been an inventory crisis in the pandemic era.
“[If] rates go up and you want to move to a bigger house, not only do you have to pay more for the bigger house, but you also have to pay more to borrow money. That starts to make trading less attractive, “Realtor.com chief economist Danielle Hale was quoted in the report.” There could be fewer entry-level properties for resale. It creates a housing shortage for first-time buyers. “
“Homeowners who had low fixed interest rates were the least likely to list their homes for sale,” Black Knight economist Andy Walden said in the Realtor report.
Just because the rates are low doesn’t mean it’s easier to get a mortgage
Finally, there is another problem that homebuyers have to be aware of.
Mortgage lenders don’t have to give you a mortgage just because the rates are low.
The Mortgage Availability Index, which measures how easy it is to get a mortgage, fell to its lowest level in five years in March.
“Thousands of Americans who were foreclosed from the housing market due to the affordability crisis of the past decade may finally see homeownership as within reach, especially given historically low mortgage rates,” said Redfin senior economist Sheharyar Bokhari in a March report looking at the restriction on loans. standards “But unfortunately, they now face another obstacle and may not be able to get a loan.”
The most recent index, for June, showed an even bigger drop.
“The mortgage loan offer fell again in June as investors further reduced their willingness to buy giant loans and those with lower credit scores,” said Joel Kan, associate vice president of economic and industrial forecasting for the Bankers Association. Mortgage.
June was the lowest level of the index since April 2014, and all of its sub-indexes fell to lows not seen from 2014-2015.
The huge 30-year mortgage that just fell below 3%? Kan said its availability fell 57% in June.
