Mortgage rates fell to a three-year low
Mortgage rates fell to a three-year low in August 2019, meaning that 8.2 million Americans could now refinance their 30-year mortgages at as much as 0.75% off their current rate, as well as increased their buying power by 15%. Kentuckians have certainly heeded the call and taken advantage of the decrease, with home sales continuing to grow into the fall season.
The latest figures indicate that September 2019 saw a 5.4% increase, making it the second-highest sales number on record for the month.
The rest of the states haven’t seen a similar uptick in home sales, however, despite the fact that the current housing situation is arguably a buyer’s market. While there has been a 3-point percentage increase in the “Good Time to Buy” component of Fannie Mae’s September 2019 Home Purchase Sentiment Index, only a little over 10% of offers written by Redfin in August faced a bidding war.
Some experts attribute this lackluster housing market to a general lack of options. Prior to the Great Recession of 2007-08, the number of new housing units being built per month had increased steadily since the late 90s, reaching a peak in December 2006. Once the housing bubble burst thanks to the subprime mortgage crisis, new housing plummeted to a low of just 35,000 new units in January 2011. Though this downward trend has reversed somewhat, it hasn’t yet reached pre-recession heights.
To further compound the issue nationwide, a high percentage of homeowners are simply not interested in selling their properties, whether because they’re waiting on a better price or because they’re aging in place. Starter homes, the ones that are most in-demand, represent the smallest overall percentage of the market, which skews towards the midrange and higher-end. The National Association of Realtor’s chief economist, Lawrence Yun, has called for more construction of new homes. Still, the Pending Home Sales Index has gone up slightly across the South and Midwest, despite the fact that construction spending has been steadily declining since November 2018.
And millennials, the population segment that would generationally be the most interested and ready to purchase, have a host of other issues to contend with — homes prices have largely recovered and made it hard for debt-ridden millennials to buy; there’s an overall lack of inventory; and though they’re making more money than ever, according to a Pew Research Center analysis of Census data, purchasing power has remained static over the last 40 years.
Add to this grim picture the fact that the growing level of domestic and global economic uncertainty has slowed down the US’s real GDP growth, and it’s no wonder that there’s been an 8-point percentage drop in the “Confidence About Not Losing Job” component of Fannie Mae’s aforementioned Home Purchase Sentiment Index.
In any case, even though rates are currently favorable for both home refinance and purchase loans, it’s nevertheless important that consumers do their research and shop around for the best rate. And according to a Fannie Mae study, a full one-third of them still aren’t, finding it too daunting and hard to understand. Instead, many consumers rely on word-of-mouth from friends and family, or simply go to the same lender they’ve used for other banking needs.
Bio: Marcela Otero is a Senior Editor at ConsumersAdvocate.org, with over a decade of professional experience in research and writing across a wide variety of topics. She is an unrepentant cat lady and is currently living between San Juan, Puerto Rico and Mexico City (with her four cats).