While the mortgage rates have never come down as low since Freddie Mac started in 1971 with its Primary Mortgage Market Survey, there is a good chance we haven’t seen the bottom yet.
Freddie Mac’s Chief Economist, Sam Khater, feels that in the final few months, the 30-year fixed-rate mortgage could come down in a deficit of 3%. For the week ending June 25, the average for ‘30-year’ was 3.13%. It fell to 3.07, a week later. On the year-over-year chart, the 30-year fixed-rate mortgage has seen a 16% decline.
The fall in week-to-week rates can be put down to investor fear caused by a hike in Covid-19 cases in California, Texas, and Florida. There is data to believe that consumer spending and buying activity has come down in these states after picking up in a Corona-rebound.
To paraphrase Matthew Speakman, Economist from Zillow, investors are wary of the novel Coronavirus. The fear which was palpable in the beginning had reduced to an extent but fresh cases have made buyers/investors uncertain about the market response. In the event of a further rise in daily cases, businesses might be forced to close down again and this idea is driving them beyond their comfort zones. As a natural consequence, rates are coming down.
This said, Speakman feels that if the investors can keep a calm nerve and allow the economy to go back to its normal zone, the rates may start to pick up from here. “June’s jobs report will be the first referendum on the economy’s resilience to the recent outbreak, and it’s likely that rates will react to the news one way or another”, believes Speakman.