US Home Mortgage Rates: 30-Yr Loans at 2.86% a Record-Low

#mortgage #recordlows

Mortgage rates in the US dropped to another record low, adding fuel to a housing market that’s been a Key source of strength for the virus chaos economy.

The average for a 30-yr, fixed loan was 2.86%, down from 2.93% last week and the lowest in almost 50 yrs of data-keeping by Freddie Mac. It was the 9th time since The China Virus started attacking financial markets that rates fell to a new low. The prior record, 2.88%, was reached in early August.

Low cost mortgages have ignited a housing rebound, driving sales of both new and existing homes and putting money back into the pockets of borrowers who have been able to refinance.

Based on the yield for the benchmark 10-yr Treasuries, which typically guides mortgage rates, borrowing costs could continue sliding.

If the spread narrows to where it was before Covid-19, it can go as low as 2.3%/

The lower borrowing costs have led to a tsunami of applications for refinancing and new purchase loans, particularly as Americans look for more space for home offices and remote learning.

Nearly 18-M homeowners with good credit and at least 20% equity stand to cut at least 0.75% off their current rate by refinancing.

There was pent-up demand for housing when the medical emergency hit, with millennials aging into homeownership. But with some sellers reluctant to homes on the market, inventory is tight.

That has helped prop up homebuilders, which saw their shares hammered when the shut down collapsed the US economy. An index that tracks the industry has gained nearly 150% since the stock market hit a bottom on 23 March and is trading close to a record highs.

“As we all know, Housing is a huge chunk of the U.S. economy. Look to Kiplinger’s Economic Outlooks for forecasts on existing home sales, new home sales and housing starts are all on the rise. What is interesting to note is that Residential construction surged in July amid strong demand for new housing

Housing starts rose 22.6% to 1.496 million annualized units in July, following a double-digit increase in June. Total starts are about 23.4% above a year ago. Single-family starts rose 8.2%, while multi-family starts surged 58.4% in July. Single-family starts are now 10% below their pre-COVID level in the first quarter of 2020. Unseasonably warm weather had led starts to unusually high levels at the beginning of the year, so residential construction is closer to normalizing than the data suggest.

A gain of 18.8% in building permits indicates that residential construction will pick up in coming months. Builders, however, are facing challenges in growing costs, particularly the prices of lumber. After hitting an eight-month low in April, builder confidence is at all-time highs, according to the NAHB/Wells Fargo Housing Market Index.Lower interest rates have caused new-home sales to now be above their pre-recession level. 

They rose 13.9% to seasonally adjusted rate of 901,000 — the highest since 2006. July’s gain follows a revised 15.1% gain in June and a similar double-digit increase in May. Sales surged in the Midwest, but fell in the Northeast. The inventory of new homes for sale in July declined for the fourth month in a row. There were 299,000 new homes for sale in July — a four months’ supply at the current sales pace. The share of new homes sold priced below $300,000 rose to 41% in July, from 40% the previous month.

The construction backlog also jumped. Sales of homes for which construction had not yet started accounted for 29% of total sales over the month, up from 25% in June,” says real estate economist Bruce WD Barren, Chairman of The EMCO/ Hanover Group.

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