EDITOR’S NOTE – The rate droped to 3.45 percent after this item was written.
Do not look for mortgage rates to be a big home sales driver this year. Even if rates increase as some experts are predicting, rates will still be well below the historical average.
The average from 1971 to 2020 is 7.29%. The latest 30-year fixed rate – as of this writing – was 3.49%. You’d have to go back to May 2019 to find the 4% plus range.
The National Association of Realtors’® (NAR), first-ever Real Estate Forecast rate consensus for this year, was an average of 3.8%, increasing to 4% in 2021.
“Real estate is on firm ground with little chance of price declines,” said NAR’s Chief Economist Lawrence Yun. “However, in order for the market to be healthier, more supply is needed to assure home prices, as well as rents, do not consistently outgrow income gains.”
The disrupter since that forecast is the Coronavirus. Dick Lepre, senior loan adviser at RPM Mortgage, told Bankrate.com, “We’re in an odd time when it is neither the fundamentals nor the technical which will drive rates, but rather the effect of COVID-19 on the world economy.” He thinks that until China can get plants operational again, businesses will be without products or the components for products, and that will drive uncertainty.
Greg McBride, senior vice-president and chief financial analyst for Bankrate.com, agrees. He was quoted in a February rate outlook report saying, “As long as Coronavirus remains in the headlines, it’ll keep the lid on mortgage rates.”
With expectations for a slowing of the national economy to the 1.8% GDP range, what does that mean for the local housing market?
The regional economy continues to see growth, but it has not been on par with the national increase. Given current conditions, it’s unlikely that will change. Housing has been and continues to have one of the strongest growth rates among local economic components, but the lack of inventory is one of the strongest headwinds and continues to exert upward pressure on home prices.
That is most evident in the decline of the market share of homes in the $200,000 and below price range and the increased sales in the $200,000 to $300,000 price range. Some of that price range transition in the $200,000 to $300,000 price range is organic, and part of it can be attributed to new residents who are cash-flush from sales of homes in other higher-priced markets moving to the Tri-Cities.
Last year home prices grew faster than wages, and this will likely continue through 2020. This difference has priced some buyers – especially those looking in the $200,000 and below price range – out of the market.
These conditions place additional pressure on local sellers to get a laser focus on their listing and selling strategies for the upcoming spring buying and selling season. The key to that strategy comes with the competitive market analysis listing agents perform for their clients and their local “street knowledge” of what the market is doing. That’s the kind of information and knowledge sellers can’t get on the Internet or from media reports. It’s also why partnering with a local expert Realtor® is the single most important thing a seller – or a buyer – can do.
NETAR is the voice for real estate in Northeast Tennessee is the largest trade association in Northeast Tennessee. It represents over 1,300 members and 100 affiliates involved in all aspects of the residential and commercial real estate industries. Pending sales, monthly Trends Reports, and the regional market analytics are available on the NETAR website at https://netar.us/voice-real-estate-northeast-tennessee.