Have mortgage rates hit rock bottom already?

Beginning last Wednesday, rates have been moving gradually upward. The 30-year fixed rate mortgage increased by 4 basis points to hit 2.85% while the 15-year mortgage stayed the same at 2.38%.

current outlook:

Following Friday’s lackluster jobs report, which showed an economy that’s lost its momentum, President Trump signed four Executive Orders on Saturday rather than wait for Congress to come to an agreement. These orders included an extension of eviction moratorium, deferment of student loan payments, increased federal unemployment benefits, and a payroll tax hiatus. However, it is unclear how legal and or effective these will be. In housing news, consumers get more pessimistic about home purchase, Google gives us insight into what consumers are thinking, and Americans treat their cabin fever with a string of renovations.

have mortgage rates hit rock bottom already?

Consumer Confidence is Running Dry

Fannie Mae’s Home Purchase Sentiment Index (HPSI) fell by 2.3 points to 74.2 in July. This can mainly be attributed to fewer consumers saying now is a good time to buy a home, which dipped from 61% to 53%. One of the underlying reasons is many believe housing prices will rise over the next 12 months, with 35% saying prices will go up. This is compared to 23% who believe prices will go down and 34% who believe prices won’t change. In addition, many believe that rates will not get any lower. The majority of respondents believe rates will either get higher or stay the same, while only 16% believe rates will continue to sink. 

Pro-Tip: Experts will be watching the 10-Year Treasury Yield for a clue of what rates will do. Yields recently breached the 0.57—0.58 technical ceiling on Monday, meaning rates may be shifting soon as well.

What Have You Been Googling?  

Heeding the siren call of low rates, many consumers are exploring their options, which is evident from their search histories. The top searches on Google were made by homeowners looking to take advantage of low rates. Searches for “refinance home loan calculator” increased by nearly 4,000% last week, while queries on “How low will mortgage rates go?” increased by 400%

That’s not to say home buyers haven’t also made their mark on Google. Many first-time home buyers recently entered the market, leading to a spike in searches for “process of buying a house,” which increased by 950%, and “Minimum credit score to buy a house,” which also ranked high. Eager Americans willing to stretch their budgets led to a 2,800% bump in searches for “Can you use your 401(k) to buy a house?” Lastly, giving credence to claims that people are moving away from cities, the number of searches of “suburbs” reached an all-time high not just in the U.S., but in the world, in July.

Renovation Fever

More properties are now considered equity-rich, meaning the mortgages on them constitute less than 50% of their value. Over 15 million residential properties were equity-rich in Q2 of 2020, up 1% from last quarter’s 26.5%. With so much free time on their hands and so much time spent at home, many Americans have reinvested equity back into their homes in the form of home improvement projects. A majority of them are for outside the home, including building pools, spas, saunas, and porches. Other remodeling projects include kitchen and bath, which saw a 40% increase, home extensions and additions, which grew 52%, and security and privacy, which was up 166% from last year.

"Homeowners saw their equity rise far and wide throughout the United States during the second quarter of this year in yet another sign of the housing market punching back against the Coronavirus pandemic. More property owners rose into equity-rich territory and escaped the seriously underwater lane, putting more money into the average household.”

TODD TETA, Chief Product Officer with ATTOM Data Solutions
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