This BLOG On Why Are Mortgage Rates Still Low When Housing Demand Is High Was UPDATED On March 12th, 2019.

Mortgage Rates Are Still Low When Housing Demand Is High. The economy is in full gear. Mortgage Rates still at historical lows and many wonder when mortgage rates will be going up.

• The real estate market crash of 2008 hit everyone in the United States from left field
• Never in history has real estate values dropped throughout the country as it has
• The 2008 real estate and credit collapse affected every American household
• Whether they were upper class, upper middle class, middle class, lower class, white collar workers, blue collar workers, retired folks, and self-employed workers, the Great Recession devastated many American Families financially
• Bankruptcy and foreclosures rates have skyrocketed
• Never have bankruptcy and foreclosure rates have been as high as in 2008 and even to this day
• The economy has yet not recovered fully
• Even though job numbers have improved, many economists are questioning those numbers
• Many have dropped out of the workforce altogether and have given up looking for jobs
• Entire industries such as the real estate industry, construction industries, and mortgage industries have lost hundreds of thousands of workers and had to go through a major overhaul

Rebound Of The American Economy

Since President Donald Trump took office in January 2017, the American Economy has been at work in a great way. The Dow Jones Industrial Average has hit historical highs five times.

• There does not seem to have any signs of a market correction
• Housing prices have escalated and are appreciating in all parts of the country
• Both the FHFA and FHA have increased loan limits due to rising home prices
• There is more demand for housing than there are homes
• Home Builders are having historical revenues and selling homes like hotcakes
• This is has been a long journey to recovery since the Great Recession of 2008
• Many economists believe was the longest recession in the history of the United States and possibly the world
• Many believe that Barack Obama did more damage than good
• Obama will probably go down in history as the worst American President 

Where Are Mortgage Rates Headed In 2019?

Due to the slow economic recovery, mortgage rates have been at historical lows since 2008 with no major increases

• Half of the mortgage companies have closed their doors and the whole sub prime mortgage market have become extinct
• Due to the lack of economic recovery, mortgage rates have been at record lows since 2009
• But as everyone knows, mortgage rates cannot remain this low forever
• The Federal Reserve Board has announced that they are planning on raising mortgage rates the second half of this year
• Many real estate and mortgage industry experts agree that 2018 will be the year where mortgage rates will finally start spiking up
• Talks of mortgage rates increasing have been around for the past couple of years but still remained low.

Mortgage Rates May Be Headed Higher

Mortgage rates have been extremely volatile in the past several weeks.

• The stock market does not know which direction to go with triple-digit market swings
• There are still millions of homeowners who can benefit from today’s mortgage rates before mortgage rates start to spike up in the second half of 2018
• Mortgage rates are still at a two year low and millions of homeowners who are sitting in the sidelines should consider shopping for a refinance mortgage loan

Comparison Of Rates On May 2018 And Rates Now

Homeowners who were trying to refinance prior to May 2018 but could not due to mortgage rates skyrocketing have a second chance this year.

• Nobody has a crystal ball on whether or not mortgage rates will go up starting the second half of 2019
• But all market indicators point to that direction, especially the Federal Reserve Board announcing that they are planning on increasing rates
• The Federal Reserve Board can always change their minds
• Back in May 2018, mortgage rates jumped over 1.0% literally overnight where millions of homeowners lost their chance of refinancing their home loans because they did not lock the rates
• Many just waited month after month for mortgage rate corrections but it never got low enough for them to get a net tangible benefit

With Mortgage Rates Still At Historical Lows, Great Time To Purchase Home

The home buyers market is still expected to remain strong even with higher mortgage rates in 2019.

• FHA reduced the annual FHA mortgage insurance premium from 1.35% to 0.85% a few years back which significantly spiked home sales
• The reincarnation of the 3% down payment conventional loan program, the home purchase market is not to be affected by mortgage rates increasing in 2019

The Dow Jones Industrial Average dropped more than 3,500 points last week. That was a 13% drop in the Dow.

• All other equity markets followed the Dow and entered market correction territory
• A market correction happens when the financial markets drop 10% or more
• The market enters Bear Market territory when it tanks 20% or more
• The reason for the volatility and market selloff is due to the coronavirus scare and uncertainty
• There is no cure and/or vaccine for the coronavirus
• More cases of the coronavirus are being reported as time passes
• Over the weekend, the first death from the coronavirus was reported in Washington State triggering the governor to declare a state of emergency
• More deaths followed in Washington
• More cases of the coronavirus were reported in Rhode Island, Illinois, and New York
• The financial markets do not react well to uncertainty and fear
• Panic is what is causing the major stock market selloff
• The Federal Reserve Board cut interest rates by 50 basis points yesterday in an emergency interest rate cut
• The interest rate cut by the Central Bank tanked the stock market by almost 800 points yesterday
• The drop was caused due to the Feds cutting rates due to uncertainty
• What does all this mean for the housing and mortgage rates?
• In general, when the stock markets drop and the 10-year yield tanks as it has under 1.0% yield, mortgage rates drop also
• Mortgage rates hit historic lows due to the coronavirus market scare
• Mortgage applications are up substantially since last week

In this article, we will discuss and cover the breaking news on Mortgage Rates Hit Near Lows Due To Coronavirus Market Selloff.

Mortgage Rates Hit Near Lows After Stock Market Correction And Selloff

Mortgage Rates Hit Near Lows after the stock market correction and selloff.

• While stock investors are in a panic mode and selling their stocks, mortgage borrowers are benefiting from low mortgage rates
• Mortgage loan applications were up almost 30% last week
• Some mortgage companies are reporting an increase of 40% or more in mortgage applications
• In general, mortgage rates drop when the stock market and 10-year yield on treasuries drop
• The 2020 housing market forecast was strong
• Now, the 2020 housing market forecast became much stronger with mortgage rates hit near lows due to the coronavirus scare

Refinance Boom

Mortgage rates peaked at 4.9% back in 2018. This was the par rate for borrowers.

• Par rates mean a prime borrower with over 740 credit scores, 80% equity, and low-risk borrowers
• However, most borrowers had much higher rates than the par rate of 4.9%
• Lenders assess mortgage rates to borrowers depending on risk factors
• Loan Level Pricing Adjustments (LLPA) are pricing hits on mortgage rates for risk levels
• For example, a lower credit score borrower will get higher mortgage rates than the par rate due to their risk level. Same with higher debt to income ratio borrowers
• There are countless of pricing hits
• Due to LLPAs, many borrowers who closed on their home loans back in 2018 had mortgage rates higher than 5.0%
• Rates have been dropping most of last year
• However, mortgage rates have rebounded in the fourth quarter of 2019
• However, mortgage rates have never tanked as they did in recent weeks

Will Mortgage Rates Head Lower In 2020?

Mortgage Rates Hit Near Lows but will it head lower? This is the million-dollar question. Nobody has a crystal ball and cannot predict the future. Mortgage rates will fluctuate this year. Back in 2013, mortgage rates hit a historic low of 3.25% Many homeowners who were in the refinance process and did not lock their rates lost the opportunity to refinance. Mortgage rates shot up over 4.0% literally overnight with no rebound back to the 3.25% rate. This can easily happen during the stock market volatility and the coronavirus scare.

It is up to the borrower whether they want to refinance today or take a gamble for mortgage rates to drop further. 50% of the experts are betting rates will drop further and the other 50% are claiming mortgage rates are at a bottom. Further rate drops would put rates in uncharted territory. It is highly recommended not to gamble with bottom fishing and pull the trigger in refinancing if you have rates over 5%.

Will Rates Continue To Drop?

Mortgage rates on 30-year fixed-rate mortgages are in the 2% range. The Central Bank lowering rates to zero had a big impact on rates. How much lower can mortgage rates go? Will the Federal Reserve Board lower rates below zero?

• The average 30 year fixed rate mortgage rates have been plummeting for the third wee in a row as the yield on bonds consistently continued to drop
• Mortgage rates have been dropping even with very strong economic and employment news
• The average 30-year fixed conforming mortgage rate is at 2.96%, which has been the lowest since April 2013 where the average mortgage rate was at 3.25%
• 15 year fixed mortgage rates on conforming mortgage loans are now below 3.0%

15 year fixed rate mortgages did not trade below 3.0% since June of 2013.

Other Statistics On Mortgage Rates Hit All-Time Low

The Mortgage Bankers Association, also referred to as MBA, also announced that refinance mortgage applications were up over 65% and purchase mortgage loan applications are up 25% since May of 2013.

• This is a huge increase
• The low mortgage rates are not the only reason for the sudden boost in the purchase and refinance mortgage applications
• Since the real estate market crash and the credit collapse of 2008, many home buyers who got in after the economic collapse have been experiencing double-digit appreciation in their home values
• Homeowners who had underwater mortgage loans, where their balances were higher than the market value of their homes, now has seen the light at the end of the tunnel
• Homeowners who had upside mortgage loans never imagined that they will recover from the loss of their home equity
• Homeowners with underwater mortgages thought that they would be stuck in their homes for the rest of their lives

Fortunately, many homeowners with upside mortgage loans now have the option to sell their homes and purchase a different home or can now refinance their homes or even get a cash-out refinance mortgage loan.

Victims Of 2008 Economic, Real Estate, And Credit Collapse

Never in history have real estate values collapsed as it did back in 2008.

• The real estate market disaster has not just affected the real estate market but has created the worst economic depression since the Great Depression
• Some analysts believe that the financial collapse of 2008 was worse than the Great Depression
• The real estate disaster has wiped out whole industries and had many other industries, like the mortgage industry, go through a total overhaul of their system and how they do business
• Over half of the mortgage companies have shut their doors overnight

Subprime mortgage loans and stated income mortgage loans instantly became dinosaurs and are no longer in existence.

The Real Estate Meltdown And How It Affected Americans

The value of homes has tanked more than 50% in some areas of the country and unemployment rates have soared to double digits.

• Mom and pop shops have closed their doors after decades in the business and you can notice on every neighborhood that strip malls were vacant
• Bankruptcy rates have skyrocketed and foreclosure rates have hit historical highs
• A large percentage of businesses have closed their doors
• Homeowners who have owned their homes for years and had equity in their homes where they were going to rely on their retirements have witnessed their equity evaporate

Again, tens of millions of hard-working Americans have filed bankruptcy, had a foreclosure, had a deed in lieu of foreclosure, or had to do a short sale.

Recovery From The Great Recession Of 2008

Those folks who had a bankruptcy, foreclosure, deed in lieu of foreclosure, or short sale have since recovered and have met the mandatory waiting period to qualify for a mortgage loan.

• These folks can now qualify for a residential mortgage loan and make up a large portion of home buyers
• The demand for homes throughout the country has created a demand for homes which in turn have skyrocketed values of homes
• The housing crisis seems like it is now over and has stabilized
• Areas of Florida, California, Illinois have seen double-digit returns on home values year after year since 2010
• Even with this type of appreciation, we are far away from the real estate values that were peaked in 2008 and there is room for much more appreciation
• First time home buyers should definitely think about pulling the trigger in buying a home and becoming a homeowner instead of sitting on the sidelines to see a real estate market correction

With mortgage rates being at a 2 year low and FHA just lowering the annual mortgage insurance premium form 1.35% to 0.85%, right now could not be a better time for homebuyers to get qualified to purchase a home.

Mortgage Rates Hit All-Time Low With Lower FHA MIP

More great news for homebuyers besides mortgage rates being at a two year low.  HUD, the parent of FHA, has announced that they will be lowering the annual FHA mortgage insurance premium from 1.35% to 0.85% effective January 26, 2015.  This is a huge saving for FHA loan borrowers on a 30 year fixed rate FHA mortgage loan.

Home Buyers who need to qualify for a mortgage with a direct lender with no overlays on government and conventional loans can contact us at any time at Gustan Cho Associates at 800-900-8569 or text us for faster response. Or email us at gcho@gustancho.com. We are available 7 days a week, evenings, weekends, and holidays.