Mortgage Rates at Record Lows
The good news for prospective homebuyers is that mortgage rates have fallen to historic lows. As of last week, the average 30-year fixed rate fell to 3.21%. A year ago, the average rate stood at 3.84%. And Freddie Mac’s rate fell to 3.13%. Some of the requirements for a Freddie Mac loan, are that at least one borrower must be a first time homebuyer, the property must be a one-unit primary residence, the borrower must put down at least 3% for the down payment, and have a reasonably good credit score. The Freddie Mac rate is the lowest on record, dating back to 1971. The 15-year rate now stands at a very low 2.62%. Although for the inexperienced buyer, these fractional declines in mortgage rates may not seem very meaningful, the differences in your monthly mortgage payments will be significantly lower.
There are signs that an economic recovery is underway. Unemployment numbers have been falling (the 11th straight week of declines), and retail sales have picked up. Additionally, the various stock market indexes have risen significantly from their lows. The Nasdaq, for example has hit a record high last week. And since the housing market depends heavily on the larger macro economy, these are good signs. As the economy continues to improve, expect mortgage/interest rates to rise.
But both the economic metrics and the housing market will be affected by the prospects for a vaccine for Covid-19. With literally dozens of pharmaceutical companies around the world currently testing vaccines in clinical trials, there is reason for cautious optimism. As a matter of fact, as I’m writing this article (June 23rd), a report came across the news wires that Dr. Anthony Fauci, the director of the National Institute of Allergy and Infectious Diseases, has just told a congressional hearing that he is confident that a Covid-19 vaccine will be ready by the end of 2020 or early next year.
Other factors which could help the overall economy in general, and the housing market in particular is the Federal Reserve’s decision las week to not raise interest rates till at least 2022. The Fed expects the gross domestic product (GDP) to expand by an impressive 5% by 2022. And the unemployment rate to fall from its current 13.3% to 9.3%.
In other good news, new home sales rose in May to 676,000, exceeding the median opinion of experts as tracked by Market Watch. Economists had predicted new home sales would rise to 650,000. Additionally, home prices nationwide were up 0.5% year-over-year in May.
Of course, there are no guarantees that things will continue to improve, but with the historically low mortgage rates and an economy that seems to be healing, now might just be the time to begin a new home search.