By Nicole Friedman, Wall Street JournalUpdated June 22, 2021 4:11 pm ETU.S. home prices in May experienced their biggest annual increase in more than two decades, as a shortage of properties
Low Interest Rates Not Enough To Boost Inventory, Home Sales
Dated: January 25 2021
Posted by ft Editorial Staff / May 29, 2020
30-year fixed rate mortgage (FRM) rates hit historic low. The 30-year FRM rate hit an historic low in May 2020, averaging 3.23%. This is down from a year earlier when it averaged 4.0%. FRM rates have descended to historic lows and are likely to go lower due to monetary policy to stimulate lending to ride out today’s trendless economic times. Beginning in March, the Federal Reserve (the Fed) dropped their benchmark interest rate to zero and began purchasing most issues of mortgage-backed securities, fulfilling their role as the lender of last resort to ensure mortgage originations continue. In turn, interest rates will remain near and below today’s record-low levels for several months to a year.
For-sale inventory drops As we make our way through a chaotic spring 2020, inventory is emerging as a key component in pricing California’s housing market. Inventory for sale is near a record low, with just 74,100 homes for sale in March 2020. This is down 23% from 96,700 homes on the market a year earlier. Buyers of higher priced homes are taking a step back from the housing market this spring as they take the wait and see approach to the economic disarray wrought by the coronavirus (COVID-19). While listings are pulled as buyers and sellers get cold feet, the actual for-sale inventory may rise in the coming months. Many mid- and high-tier homebuyers will remain on the sidelines, able but unwilling to purchase in what is becoming 2020’s “new depression” economy. Headlights will be on lower housing.
Home sales volume set to fall. 34,100 new and resale home transactions closed escrow statewide during March 2020. The number of homes sold was 2% lower than a year earlier. Expect to see a sharper decrease when April 2020 reports come in, the result of an economic collapse and pandemic driven shelter-in-place orders. Today’s low interest rates are giving buyer purchasing power and home prices a boost. Still, home sales volume won’t recover until the pandemic response has ended, likely with a vaccine. Home sales volume will continue the year-over-year decrease in 2020, significantly slowing the flow of agent fees. Then, California’s housing market will need to emerge from the pandemic-distorted underlying recession and under-reported financial market crash, a recovery not likely to begin until 2022-2023.
For Jon, real estate is literally in his blood. His father has been in the industry for over 37 years. During college Jon tried something different, working in the sales and marketing industry. After ....
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