Mortgage Rates Hit Lowest Rate Since the 70’s

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According to the National Association of Home Builders This Week in Real Estate new home sales are outpacing new home starts at a historic rate. Once again, for the 10th time this year, the average mortgage interest rate for the week was the lowest rate since Freddie Mac began tracking such data 49 years ago. Below are a few newsworthy events from the second week of October that influence our business: 

Mortgage Rates Set Record Low for 10th Time. Mortgage rates fell slightly this week, setting a new record low for the 10th time this year, Freddie Mac reports. The 30-year fixed-rate mortgage averaged 2.81%, the lowest rate since Freddie Mac began tracking such data in 1971. The previous all-time low, an average of 2.86%, was set in mid-September. “With mortgage rates to remain near 3% for the next couple of years, homebuying activity is expected to stay strong for several more years,” said Nadia Evangelou, a research economist for the National Association of REALTORS®.   

U.S. Mortgage Credit Availability Dips in September. Based on new data from the Mortgage Bankers Association, U.S. mortgage credit availability decreased in September 2020. The MBA’s latest Mortgage Credit Availability Index (MCAI) fell by 1.9 percent to 118.6 in September. A decline in the MCAI indicates that lending standards are tightening, while increases in the index are indicative of loosening credit. “Mortgage credit supply decreased in September to its lowest level since February 2014, driven in part by a 9.5 percent decline in the conforming loan segment. This reduction was the result of lenders discontinuing conforming ARM loan offerings in advance of the September 30, 2020, application deadline for GSE-eligible, LIBOR-indexed ARM loans,” said Joel Kan, MBA’s Associate Vice President of Economic and Industry Forecasting. “Across all loan types, there continues to be fewer low credit score and high-LTV loan programs. The housing market overall is on strong footing, but the data show that lenders are being cautious, given the spike in mortgage delinquency rates in the second quarter, as well as the ongoing economic uncertainty.” 

Home Building: Sales Outpacing Starts by a Historic Margin. After a sharp decline in the spring, home building has staged a dramatic rebound. In fact, supported by low mortgage rates, an evolving geography of housing preferences, and favorable demographic tailwinds, housing demand has improved so quickly that the current difference between the pace of newly-built single-family home sales and for-sale single-family construction starts has reached a historic level. The fact that sales are outpacing construction starts to this degree indicates additional home building lies ahead.   

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