If you have been thinking about buying a home, then Fall 2020 could be your season to make the most of your money. According to Redfin, low mortgage rates are currently giving buyers $33,250 in more buying power this fall, a 6.9 percent increase over 2019. Unfortunately for buyers, rising home prices could “cancel out” these savings, Redfin researchers reported.
In the study, Redfin evaluated how and why buyers are moving this season. More than half of consumers making a move said they were doing so for “pandemic-related reasons” and cited low mortgage rates as the driving factor in their decision to start looking at homes. With many households now dealing with remote school and remote work, residents need more space and in different configurations than they may have prior to COVID-19.
“Low mortgage rates are motivating many people to purchase a home, particularly those who want more space to work from home,” said Daryl Fairweather, Redfin’s chief economist. He noted that buyers willing to consider condo living as well as detached, single-family home options would likely have better luck in getting a good deal. “Most condos are less competitive,” Fairweather said.
At present, Freddie Mac’s nationwide survey of mortgage rates indicates the average on a 30-year, fixed-rate mortgage is just under 3 percent. 15-year, fixed rate mortgages are just under 2.5 percent. “Spreads may decline even further, but the rise in Treasury rates will make it difficult for mortgage rates to fall much more over the next few weeks, Freddie Mac reported at the start of September.
Low rates have not just increased buying power; they have improved homeowners’ refinancing options as well. Applications for mortgage refinancing have risen to rates not seen since just before the housing crash in the mid-2000s. The low rates enable homeowners to cut $100 or more a month off their current mortgage payments. However, as demand continues to rise, some lenders are choosing to tighten standards for new home loans in particular. “We don’t know what the risks are going forward with the economy and unemployment and potentially delinquencies,” explained Guy Cecala, CEO and publisher of Inside Mortgage Finance. The tighter standards could mean potential buyers will ultimately pay more in coming months or be unable to qualify for a home loan despite low rates.
Do you think this “increased buying power” will be good for the market this fall?
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