Key Highlights
Most industry observers believe rates to remain at same historically low levels in 2021
- Federal Reserve uses low rates to combat economic effects of COVID pandemic
- Many see 2021 as good time to purchase and/or refinance a home
Record home sales and price growth were “eye-poppingly strong” in 2020, said Freddie Mac’s deputy chief economist, Len Kiefer. Kiefer’s view is that even without record low rates in the second half of 2020, home sales and price growth would have been good, just not “eye-poppingly strong.”
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Kiefer believes that home sales and price growth will continue to be strong in 2021 as well. Of course, “three’s certainly a risk that rates could head higher, but our baseline forecast has them remaining near record lows.” Kiefer’s only caveat was “…with a vaccine possibly helping to contain the virus, we may see an acceleration in economic growth next year.”
Other experts referred to the possibility that political considerations could change rates as we move into 2021. Zillow economist Matthew Speakman, when interviewed by Yahoo Finance, said that the possibility of more fiscal relief and a change in the US Senate balance could fuel sharper upward movements in rates in 2021. George Raitu, senior economist with realtor.com, speculated that first-time buyers could be even more challenged in getting a decent loan deal as COVID continues to ravage the country.
Austin Niemiec, executive vice president of RocketPro TPO, said he didn’t think “…anyone would have thought that 2020, in the middle of a pandemic…” that many people would actually improve their financial situation, increase their monthly cash flows, pay off high-interest debt, improve their financial lives by refinancing their mortgages and that a massive home buying spree would be the bottom line in the housing industry. Niemiec said, “(All of this)…doesn’t seem likely to end soon.”
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Kiefer reminded everyone to take into account the state of mortgage rates over the last 40 years. 30-year mortgage rates averaged 12% in the 1980’s, 8% in the 1990’s, 6% in the 200’s and approximately 4%^ in the 2020’s. Perhaps “…there’s a chance rates could continue their secular decline…” and average 2% in the 2020’s.”
Niemic added, “Mortgage rates are impacted by the economy, so they will only rise when overall growth support an increase.”
Thanks to HousingWire.
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