Mortgage rates continue to hit record lows. On the surface, this provides affordable opportunities for homeownership across the country. However, with limited inventory, spiking prices, and jobs remaining uncertain due to COVID-19many interested buyers are struggling to take advantage of these outstanding rates.  

“Mortgage rates fell below 3 percent for the first time in 50 years, says Freddie Mac Chief Economist Sam Khater. The drop has led to increased homebuyer demand and, these low rates have been capitalized into asset prices in support of the financial markets. 

Sounds promising for future stability of the market, right? Well, it may not be enough. 

With an increase in homebuyer demand, continued fear surrounding temporary layoffs becoming permanent, and a steeper than typical decrease in inventorythe low mortgage rates aren’t sufficient for balancing the scalessuggests Chris Stuart, CEO and President of Berkshire Hathaway HomeServices in a recent interview with Mansion Global 

Let’s take a look at the recent numbers reported by Freddie Mac for 15 and 30-year fixed-rate mortgages: 

  • 30-year fixed-rate mortgage averaged 2.98 percent with an average 0.7 point for the week ending July 16, 2020, down from 3.03 percent. A year ago at this time, the 30-year FRM averaged 3.81 percent.   
  • 15-year fixed-rate mortgage averaged 2.48 percent with an average 0.7 point, down from last week when it averaged 2.51 percent. A year ago at this time, the 15-year FRM averaged 3.23 percent.   

That’s a decrease of 22% for 30-year fixed-rate mortgages and 23% for 15-year fixed-rate mortgages, all-time lows. (If you’re curious about historical mortgage rates, check out Freddie Macs Monthly Average Commitment Rate And Points On 30-Year Fixed-Rate Mortgages Since 1971) 

The low rates are tempting, but it has become difficult for buyers to take advantage of them due to rising prices. In fact, The Warren Group’s CEO, Tim Warren, recently discussed the delicate balancing act between supply and demand in Massachusetts in his monthly podcast. Buyers with a smaller budget and investors that are prioritizing value in rental properties aren’t likely to be able to compete in the bidding wars taking place. In many places, offers are thousands and tens of thousands over the asking prices, which are already inflated because of the increased demand and decreased inventory. Those inflated prices pose a whole other issue: increased rents to support the increase in price, and job instability making it difficult for renters to pay. 

That deficit in inventory is due to many factors and sellers are holding back and waiting for more stability before listing their homes. There is obvious concern about groups of strangers that may or not be COVID-19 carriers walking through homes, owners may be waiting for a better time to buy a new home themselves, and job insecurity is forcing people to wait out the storm before considering a big move. 

These rates are obviously appealing to buyers, but the drop isn’t going to be a cure-all. The scales are tipping too fast and may soon topple over under current conditions, unless we see a change soon. 

 

ABOUT THE WARREN GROUP 

Customers use The Warren Group to identify new business opportunities through access to comprehensive real estate and mortgage data, analytics, and industry news coverage. The Warren Group was established in 1872 and is now in its fourth generation of family ownership and management. It is the publisher of Banker & Tradesman, The Commercial Record, and The Registry Review. For more information visit www.thewarrengroup.com.