People wait to visit a house for sale in Garden City, Nassau County, New York, on Sept. 6, 2020.
Xinhua News Agency | Getty Images
Volatility surrounding the 2020 presidential election has helped push mortgage rates to their 12th record low this year, giving both homeowners and buyers a boost.
The average rate on the popular 30-year fixed mortgage fell to 2.78% for the week ending Nov. 5, down from 2.81% the previous week and 3.69% the same week one year ago, according to Freddie Mac.
“Interest rates dropped to another record low this week … because of uncertainty around the election results,” said George Ratiu, senior economist at realtor.com.
“In a volatile economic environment, where the number of Americans filing for initial unemployment just last week totaled an elevated 751,000, and with low returns due to the Federal Reserve’s quantitative easing, bond investors sought the relative safety of mortgage-backed securities.”
Mortgage rates follow loosely the yield on the 10-year U.S. Treasury.
Other mortgage products, including the 15-year fixed, FHA loans and jumbo mortgages, set new record lows for their average rates last week, according to the Mortgage Bankers Association, or MBA.
With rates now close to a full percentage point lower than they were a year ago, homeowners are rushing to refinance yet again, even as so many have already refinanced in the past year. Mortgage applications to refinance a home loan were over 80% higher last week compared with a year ago, according to the MBA.
For homebuyers, consistently low rates over the past several months, and the almost weekly prospect of rates falling even lower, have only fueled already strong demand. After a very brief pause at the start of the pandemic, buyers came rushing back, looking for a safe haven as well as larger spaces for working and schooling from home.
“With a rising second wave of COVID cases, the challenge of social distancing continues to drive peoples’ quest for a housing solution,” said Ratiu.
For the first time since 2011, homes sold faster in October than September and prices remained at their summer peak of $350,000, according to calculations by realtor.com, which included data from the National Association of Realtors.
While low interest rates have given buyers additional purchasing power, they have only added to already soaring home prices. The record-low supply of homes for sale is causing bidding wars in markets across the nation.
In Denver, for example, record low inventory of less than a one-month supply pushed prices to yet another record high.
“October continued to defy seasonality as new records were broken by both buyers and sellers,” said Andrew Abrams, chair of the Denver Metro Association of Realtors’ market trends committee.
“Sellers continued to have little competition as escalation clauses, appraisal gap waivers and “as-is” offers were frequently used, while buyers had to fight hard, making concessions in all of the ways referenced above, to secure a place they could call home,” he said.