Housing Market Rates Drop


There are winners and losers in every financial crisis. When the stock market dips, there are individuals that benefit from the fall. That was certainly the case when the Coronavirus became a global threat. In this case, real estate received a boost. Mortgage rates have fallen to their lowest levels in nearly four years at 3.45%. This is a result of a strong correlation between stock market volatility and investors responding by pushing money into bonds. 

A report from Freddie Mac indicated that with the decreased rates, combined with the strong financial economy, home buying will be in high demand over the course of 2020. Aside from the 30 year fixed-rate mortgage, the 15 year fixed-rate also decreased to 2.97%. Since February 2019, rates have fallen nearly one full percentage point across the board. The only obstacle that would get in the way of these low rates is if investors flood the market when the Coronavirus is contained. More cities across the country are reporting new cases from the virus as some countries are evacuating their citizens who are in infected areas. 

Some reports have suggested that the economy is due for a downturn into recession, citing the Coronavirus as the beginning of the end. In spite of those projections, the economy is on its longest successful run, showing positive growth for a decade. Recession alarms were raised all throughout 2019 to no avail. Recognizing this, recession alarmists no longer try to pinpoint when a recession is likely, instead they simply state that something will stall the economy. In contrast, the economy has thrived under an unpredictable president, two tense, but mitigated military interventions, a very contentious political environment, and a deadly global virus – so far. 

Despite the rhetoric, the same analysts have indicated that if a recession were to happen, the housing market would be an anchor for the economy, ultimately giving it strength in a time of overall economic weakness. This is a stark contrast from the housing market’s role in the 2007-2008 financial crisis, when the housing bubble burst and the economy fell into the Great Recession. Their claim is that homeowners and buyers today operate much differently than those in the mid-to-late 2000’s. Certain regulations have impacted the way that individuals buy and own homes and unlike the housing crisis, fewer individuals are getting into contracts that they can not afford. 

For now, investors and analysts feel safe in predicting that the housing market will sustain significant success throughout 2020 and an increase in home buying overall with rates at their current levels. Similar reports have also shown that during the strong economic expansion the United States has seen over the last decade, housing market values have strengthened. Therefore, individuals who were not displaced during the Great Recession have seen the values in their homes increase over that period of time. This expansion has also led to an increase in home prices for buyers, decreasing the demand during that same period. If the economy were to dip into another recession, economists argue that the housing market will serve as a buffer for the economy. 

Overall, current mortgage rates are making it more attractive for potential homeowners to invest in the housing market. Since the economy and housing markets have fared well during the last decade of economic expansion, even a slight downturn in the market would not adversely affect homeowners such as it did during the 2008 financial crisis. As long as the supply and demand for housing remains near equivalence, the housing market should act as a buffer in the event of a recession.