The coronavirus has officially made its mark in the United States with the Centers for Disease Control reporting its first case of human-to-human transmission. So what does that have to do with your mortgage rates?
That news from the CDC caused the Dow to drop by about 200 points as investors got a little shaky about stability. When investors retreat to the relative safety of purchasing government bonds, mortgage rates tend to fall. We are seeing the 10-year Treasury note yield drop back to levels similar to August and September of last year, when rates dropped dramatically. Just a week ago the yield was trading at 1.762% at its high, and was trading early Friday morning at 1.553%.
The Federal Reserve Open Market Committee again decided to maintain the current overnight lending rate of 1.5%-1.75%. The main concern held by FOMC members is that if they don’t push for inflation, there will be little room to cut should the economy experience a downturn moving forward.
Housing competition breeding higher prices
Have we mentioned inventory before? Because it’s still an important thing in housing. And right now, inventory is a big enough issue that home prices could start to catch fire again.
Lawrence Yun, the chief economist for the NAR, said “Due to the shortage of affordable homes, home sales growth will only rise by around 3%. Still, national median home price growth is in no danger of falling due to inventory shortages and will rise by 4%.”
The latest S&P CoreLogic Case-Shiller Home Price Index out this week supports Yun’s assumption, showing prices increased by 3.5% annually in November up from 3.2% in October. Overall, that means home prices are up 59% from the low point we saw in February 2012.
Essentially, says Yun, “The state of housing in 2020 will depend on whether home builders bring more affordable homes to the market.”
The Mortgage Bankers Association weekly report on mortgage applications has already seen activity tick upwards quickly, with January’s data hitting an 11-year mid-month high. Mortgage rates dropped again this week as the Treasury note yields dropped. The Freddie Mac 30-year fixed-rate mortgage average went down to 3.51% this week, the second-lowest in three years.