Last Sunday, the Federal Reserve cut interest rates for the second time in as many weeks. This aggressive slashing of rates to 0%-.25% is the largest emergency rate cut in the Fed’s 100-year history, intended to mitigate potential economic disruptions caused by the outbreak of COVID-19.
With these historically-low rates, American consumers may wonder whether it’s time to refinance their debt and buy homes to take advantage of lower credit and mortgage interest rates. There are several things, however, to consider when buying that new home.
Do I need to get that new mortgage today?
As CNN business analyst Anna Bahney explains, there is currently a “traffic jam” in both the mortgage refinance and realty market. With consumers looking to take advantage of lower rates and many people working and house hunting from home, realtors are having difficulty keeping up with the demand.
However, these new, low Fed rates aren’t going up anytime soon. These will likely last until the end of 2020—and likely much longer. According to finance expert Jacob Passey, mortgage interest rates may actually go even lower in the upcoming months.
Typically, as Passey explains, “mortgage rates in the U.S. track in the direction of the yield of 10-year Treasury notes.” And, as with any economic downturn (or expected economic downturn), the yield on Treasury notes has fallen precipitously in the past weeks as investors flee from unpredictable equities into the safer bond market, thus inducing mortgage rates to fall.
Realtors, potential homebuyers, and sellers have every reason to be bullish about both the long and near-term future of the real-estate market.
While it may be unnecessary to buy that dream house today, we recommend that prospective homeowners start planning for the near-future. Given that rates could very well dip even lower in the coming weeks and months, contacting your local real-estate broker is an excellent way to kick-start the purchase of your dream home.
Wait…Didn’t the Mortgage Rate Just Rise Last Week?
Indeed, the mortgage rate rose last week to 3.65% (up from 3.07% just a week prior). Why? First, it’s important to bear in mind the big picture on real estate and home purchases: last year at this time, the mortgage rate was 4.28%. Additionally, the volume of home sales in comparison to last year has increased by a whopping 402%.
The mortgage interest rate rose slightly last week for a simple reason: the same institutional investors who rushed to Treasury bonds initially, began to cash out to meet margin calls—short-term loans owed to other investors. We should expect interest rates on mortgages to go down again soon as these same institutional investors return to buying Treasury bonds in coming weeks and months.
Despite the volatility in the stock market and gloom-and-doom predictions of market analysts, it still remains a better time than ever to buy a home.
What about home sales in Greenville, South Carolina?
Home sales in Greenville, SC remain strong for one principle reason: upstate South Carolina is growing at a rapid clip. Have you noticed all the new home construction lately? This is perhaps the most important sign that the market for real estate in Greenville is strong and will remain so in the future.
Realtors in Greenville, South Carolina have been fielding more calls than ever in the past weeks, but, in truth, it has been a bull market for years. Deciding to buy a home is a big decision, but the greater Greenville area is in the midst of a decade-long population boom. A long-term investment in housing is perhaps the best financial decision you can make right now.