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.
“The buyers are coming in because of the low interest rates – that’s the No. 1 reason,” said Lawrence Yun, chief economist of the National Association of Realtors said in an interview with HousingWire. “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. It was similar to a fixed-asset program it created during the financial crisis a dozen years ago.
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, Yun said.
In the first months of the pandemic, Yun projected home sales in 2020 would see a 15% decline. After the Fed’s actions began driving down mortgage rates, he changed the estimate to a 7% decline.
Last week, Yun issued his latest monthly forecast that said existing home sales in 2020 likely will total 5.4 million, a gain of 1.1% from last year. Sales of new houses probably will rise 17% to 800,000, Yun said.
“We missed the spring buying season because of the pandemic, but the second half of the year looks quite dazzling,” Yun said.