It’s been a strange year for the housing market. Rates on 30-year fixed-rate home loans started off 2020 at an average 3.72% — but rates steadily plunged amid the economic chaos caused by the coronavirus and the Federal Reserve’s decision to kick its key rate to near-zero. At the same time, strong demand and a severe shortage of properties fueled the nation’s housing market, causing prices to spike by around 10% year over year. With history offering no other year quite like this one, it’s tough to say what else 2020 has in store, though signs point to low rates and strong homebuying. Here’s a look at what housing industry experts predict for the final quarter of the year.
Traditionally, home sales slow in the fall and winter — but those rules may not apply this year. A combination of low rates and general confidence in the housing market “outweighs the seasonal slowdown we typically see in the fourth quarter of the year,” says Corey Burr, senior vice president at TTR Sotheby's International Realty. “I expect the market to stay very active.” The 30-year fixed-rate home loan stood at an average 2.87% on the eve of the fall season, according to Freddie Mac's weekly survey, and the Realtors predict rates will end the year just a smidgen higher at 2.9%. An increase can be blamed in part on a new "adverse market fee" on refinance loans taking effect this fall. The fee is raising rates by one-eighth to one-quarter of 1 percentage point (0.125 to 0.25), says Matthew Graham, chief operating officer of Mortgage News Daily. A few signs point to rates potentially falling during the fourth quarter of 2020.
Fannie Mae predicts the average rate on 30-year fixed home loans will settle at 2.8% by year’s end. The central bank is committed to buying up more Treasury bonds and mortgage-backed securities to support the economy, and those purchases are helping to drive rates lower. Finally, a resurgence of the coronavirus during the fourth quarter could pound rates on home loans down. "If the virus sweeps across the country or if the timing of a vaccine gets pushed back, this might result in the closing down of cities, regions or all of the country," says Burr, of TTR Sotheby's International Realty.
Source: Yahoo Finance