Why is the Housing Market Thriving in a Pandemic?
The deadliest pandemic in more than a century has failed to derail the housing market because of the lowest mortgage rates ever recorded coupled with a shift in how people use their homes.
Chief economist of the National Association of Realtors, Lawrence Yun posted that buyers are saturating the market now because of low interest rates and the secondary demand is coming from the work-at-home phenomenon that has people looking for bigger homes and caring less about commuting time. People now see their home not only as a place to live, but as a shelter during a national health crisis, Yun said. It’s also an office and, for families with children, often a part-time school.
Mortgage rates began tumbling in mid-March after the Federal Reserve announced it would buy mortgage bonds and Treasuries to keep credit flowing amid the pandemic. The average U.S. rate for a 30-year fixed mortgage has been under 3% since late July, as measured weekly by Freddie Mac. When Fed Chairman Jerome Powell announced in March the Fed would purchase bonds, it was 3.65%.
Existing-home sales jumped 25% to a seasonally adjusted annual pace of 5.86 million in July, NAR said in an Aug. 21 report. It was the highest sales level since 2006 and the biggest monthly increase on record. The prior record for a monthly gain was the 21% jump seen in June, according to NAR data. The supply of homes on the market was the lowest for any July since NAR started tracking the data about five decades ago according to National Association of Realtors.
NAR stated that even though the spring sales season was somewhat lackluster due to shelter-in-place orders they predict the tail end of 2020 to be rigorous as we have seen with record volume months through the summer.
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by Andrew Augustyniak, Branch Manager/Loan Officer, Peoples Mortgage