Mortgage rates have hit a new record low for the 13th time this year as a resurgence in coronavirus cases weakens the economic outlook.
A new report from mortgage buyer Freddie Mac shows that the average for a 30-year, fixed loan dipped to 2.72% from 2.84% last week.
A fresh wave of concern towards economic recovery has investors hedging against the risk, sending mortgage rates down.
“Mortgage rates fall when the economic outlook worries investors, and there’s a lot to worry about” home and mortgage expert at NerdWallet Holden Lewis told FOX Business. “These concerns are going to stick around for a while, and mortgage rates are likely to stay low for a long time. The glum economic outlook is driving investors to safe assets, such as mortgage-backed securities, and the result is a lower mortgage rate.”
The reemergence of coronavirus is bringing back memories of the spring’s economically damaging stay-at-home orders, according to Lewis. On top of that, disappointing retail sales in October spells bad news for what should be a spending surge ahead of the holidays. Retail sales in the U.S., which represent about a third of consumer spending, moved up only 0.3% during the month, which comes even as retailers lure in shoppers with early holiday sales and discounts both online and in stores.
And after the number of Americans seeking unemployment aid jumped for the first time in five weeks, with 742,000 claims reported from the Labor Department, another round of layoffs looms as more businesses shut down or impose restrictions. Federal and state unemployment benefits are set to expire on Dec. 26, putting around 12 million workers on one of the two main CARES Act programs at stake.
In addition to the slow growth economic outlook over the next several years, low inflation and low interest rates are helping to keep a lid on long-term bond yields and by extension, mortgage rates, according to Bankrate.com’s chief financial analyst Greg McBride. The consecutive record-low rates has boosted demand in the housing market.
The National Association of Realtors reported that home sales have been surging,up 4.3% from September to October at a seasonally adjusted rate. Freddie Mac’s deputy chief economist Len Kiefer, has seen a construction also surge. Deputy Chief Economist, Len Kiefer.
While the broader economy still faces significant challenges, payroll employment is down 10 million from February, the housing market has been a bright spot,” Kiefer said. “The housing market is still making up for a lost spring, but total transactions volume in 2020 is on pace to increase relative to last year.”
However, many hurdles still stand in the way for would-be homebuyers.
“Low mortgage rates aid homebuyer affordability but the limited number of homes available for sale and the steadily escalating prices are making life difficult for first-time homebuyers in particular,” Bankrate’s Greg McBride told FOX Business. “Because demand is outpacing supply, this can also lead to bidding wars that further push up prices.”
The recession has also hurt many prospective homeowners who have suffered from income loss.
Homebuyers dependent on mortgage financing are also being squeezed out by large investing companies that buy houses with cash to rent them out.