Mortgage rates stay low thanks to the Fed’s Forbes Advisor

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Do you remember when people were storing toilet paper – for no other reason than that other people were storing toilet paper? At the time, a global pandemic seemed like a good reason to stock up on reserves. But for some it was frightening to see how many shelves were once empty.

Does that also happen with living?

We are still ravaged by a virus that has left millions of people unemployed and the government to pass a $ 2.2 trillion stimulus bill – the Coronavirus Aid, Relief and Economic Security Act, also known as the CARES Act. Nevertheless, the housing market is picking up speed.

One reason is the record low Mortgage rates. the Average rate This week, a 30-year fixed-rate mortgage is 2.87% – one basis point above the lowest rate ever, according to Freddie Mac’s Primary Mortgage Market Survey. This gives consumers incredible purchasing power – provided they can find one House they can afford.

House prices are not low. In fact, they’re up 11% year-over-year – the 18th straight week of house price hikes, according to data from Realtor.com. Not only that, houses don’t linger in the market. They are selling an average of 11 days faster than this time last year, so buyers need to be alert, have funding in hand, and have a strong stomach to compete with other bidders.

Lots of buyers, but “no buying frenzy”

Like toilet paper in April, the supply of houses for sale today is and is getting smaller and smaller. The inventory of apartments for sale is 39% less than last yearwhich, according to Realtor.com, is driving property prices soaring. However, it does not drive buyers off the market.

Mortgage applications to purchase for the week ending September 4 increased 25% year over year, according to the National Association of Realtors. Since May, the mortgage applications for purchase have been above the level of 2019.

However, some experts say homebuyers shouldn’t feel pressure to get a home right away, citing the Fed’s recent commitment to help the credit industry and low inflation projections for years to come.

“There should be no rush to buy,” said Ralph B. McLaughlin, chief economist and senior vice president of analytics at Haus, Inc. “Prices will remain low for some time, and there is hope that inventories will go up soon next Year, which should mean more choice for home buyers with limited inventory. “

2 main benefits for buyers: inflation and interest rates will remain low

The Federal Reserve on Wednesday reiterated its commitment to keep the credit market liquid by maintaining levels of purchases of government bonds and agency mortgage-backed securities. This strategy, also known as a quantitative easing (QE), helps maintain the flow of credit between borrowers and consumers, which is critical to keeping mortgage costs down and increasing credit availability.

the Federal Reserve Open Market Committee (FOMC)As expected, the overnight money rate was also kept low – in the target corridor of 0% to 0.25% – at least until inflation exceeds the 2% mark, which, according to most experts, is still a long way off.

“Core inflation has not risen consistently above 3% in decades,” said Logan Mohtashami, a real estate analyst.

Low inflation is good news for borrowers as it keeps mortgage rates in check and, in theory, home prices as well. However, we are facing more buyers than houses, which helps time out when inflation is low.

Buyers should consider several factors before going beyond their limits

Homebuyers, especially those on a tight budget, may want to wait before spending their savings on a home now. With so much uncertainty about how the pandemic will permanently change the place where people live and work, real estate could look very different next year.

Not to mention the election could change the housing stock in this country if Joe Biden wins. As part of his Apartment plan, has proposed several tax incentives for states that are rolling back some of their tough single-family building laws. Removing the zone restrictions can expedite construction and help meet demand for housing.

In addition, the high tariffs the US imposed on Canadian lumber have stifled construction and increased the cost of new homes. That could change under a Biden presidency as well, or if President Trump decides to negotiate a better deal with Canada. In August, the National Association of Homebuilders wrote a letter to Trump asking him to renegotiate high tariffs.

The main benefit for today’s buyers is the low interest rates. However, these are not expected to change anytime soon, which means it might make sense to wait for inventories to expand and prices to fall. Of course, there is always the risk that prices will continue to rise, even if unemployment figures remain high.

“Right now, supply and demand are a big factor in home prices,” said Cameron Beane, Head of Pricing and Second Markets at TD Bank Mortgage. “The shift in where people want to live and how much they can afford to spend on housing (which is still limited given the unemployed or underemployed) is key to real estate prices in the current environment.”

For prospective buyers, this could be a good time to save on a down payment. Remember, a deposit less than 20% triggers private mortgage insurance (PMI)which could add hundreds to your housing bills per month. This could be a too a good time to increase your credit score so that you qualify for the lowest mortgage rate available.


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