Jun 272020
 

For more information, please contact me at (512) 261-1542 or steve@LoneStarLending.com.

We hit record low mortgage rates a week ago on headlines about a possible second wave of the coronavirus. Rates had been trending higher this month after the amazingly strong May jobs report. That positive news was reinforced by private reports of increasing economic activity. The coronavirus news was a wet blanket that thrashed the stock market and caused flight to safety bond buying.

So, Treasury rates have returned to what I call their “covid range.” We saw little movement this week as investors seem to be waiting for more definitive information about the reopening of the economy. That’s been good news for mortgage rates because, as we’ve discussed before, mortgage rates have been suffering from a “risk premium” effect. That premium is slowly evaporating, and as it does, mortgage rates fall just a bit more.

If you haven’t refinanced yet or you’re thinking about buying a home, you may wonder if this means mortgage rates are destined to hit new record lows in the weeks ahead. Unfortunately, my crystal ball is clouded, so I can’t give you a definite answer. But we can discuss the factors that could lead to new record lows.

Simply put, it’s covid headlines.  Last week’s stock market swoon was driven by fears that the covid damage wasn’t done. Headlines about spiking virus cases will stoke that fear. For now, the fear seems to be balanced against the recent positive economic data, leaving rates stuck in their current range. Should the data begin to deteriorate, or should the headlines become more dire, rates could fall further.

But keep in mind that every new record low is a little harder to achieve.  For bonds, the rate is inversely proportional to the bond’s price. Thus, when we have record low rates, we have record high prices. Each time we hit a record high price, more bond investors are likely to view it as “the one,” sell their bonds and take their profits. If there are more sellers than buyers, rates rise.

Reasons it’s a good time to buy despite virus

 Real Estate Market  Comments Off on Reasons it’s a good time to buy despite virus
Jun 122020
 

For more information, please contact me at (512) 261-1542 or steve@LoneStarLending.com.

Spring typically is the peak season for home buying, but this year’s Coronavirus scare has given us a particularly unpredictable market.  As lockdown orders hit the economy, sellers took their homes off the market – either out of concern over people entering their homes or concern they wouldn’t be able to sell for their desired price.  Buyers had their share of concerns, too, as millions lost jobs, were furloughed, or took pay cuts.

Despite all that, many economists still suggest this summer will be a good time to buy a home.  Granted, some of these economists work in the real estate industry, and saying that is self-serving.  But their reasoning contains some logic, so if you’re in the market for a new home, you may want to consider these points.

  • First, this virus-induced recession is entirely different than the last one.  The real estate industry drove the Great Recession a decade ago, and home prices declined dramatically in many markets.  In this recession, it looks like real estate will remain relatively unscathed, which is what has happened in recent recessions other than the Great Recession.
  • Second, as lockdown orders are lifted, it’s likely real estate markets will see a flurry of activity due to pent up demand, and we are starting to hear this from local realtors.  It sounds likely you’re going to face the same competitive market we had last year.  Homes that are priced correctly will sell quickly.
  • Third, interest rates are at record lows, and I don’t expect they can get much lower.  If you wait and rates rise, you may not be able to afford as much home.

If you need to buy a new home, keep in mind that sellers are just starting to come back into the market.  Home choice may remain a little lean for a couple more weeks, but analysts are predicting a surge of listings this summer.  Get a good real estate agent to help you identify homes as soon as they’re available and to help you keep from paying too much.