The Real Estate Market Has Been the True Winner of Market Volatility
Uncertainty in different current events has made the real estate market extremely favorable, according to CNBC.
The global pandemic and the 2020 presidential election have contributed to record volatility in different markets. Volatility can be stressful for individuals that are looking short-term but are part of a natural and expected cycle for long-term investors. For real estate investors, this volatility has been fantastic. The uncertainty has driven mortgage rates to 12 record lows this year.
According to Freddie Mac, the average rate on a 30-year fixed mortgage fell to 2.78 percent for the week ending November 5th, down from 2.81 percent the previous week and 3.69 percent a year prior.
“Interest rates dropped to another record low this week…because of uncertainty around the election results,” said George Ratiu, senior economist at realtor.com. “In a volatile economic environment, where the number of Americans filing for initial unemployment just last week totaled an elevated 751,000, and with low returns due to the Federal Reserve’s quantitative easing, bond investors sought the relative safety of mortgage-backed securities.”
Mortgage rates tend to follow the yield on the 10-year Treasury. According to the Mortgage Banks Association (MBA), the 15-year fixed mortgage, FHA loans, and jumbo mortgages also hit record lows last week. Demand for home buying and refinancing has been strong. “With a rising second wave of COVID cases, the challenge of social distancing continues to drive peoples’ quest for a housing solution,” said Ratiu.
Homes sold more quickly in October than September for the first time since 2011. Additionally, the demand has been so high that the supply cannot keep up. As a result home prices have soared. “October continued to defy seasonality as new records were broken by both buyers and sellers,” said Andrew Abrams, chair of the Denver Metro Association of Realtors’ market trends committee.
“Sellers continued to have little competition as escalation clauses, appraisal gap waivers and “as-is” offers were frequently used, while buyers had to fight hard, making concessions in all of the ways referenced above, to secure a place they could call home,” he said.