Mortgage rates hit another all-time low, suggesting that a further drop below 3 percent could be recorded before the year ends, as pending home sales make a comeback in May.
The week ending July 2, saw the 30-year fixed-rate mortgage average dipping six basis points from one week ago to 3.07 percent, according to Freddie Mac. Compared to the same period last year, the 30-year fixed-rate mortgage average was 3.75 percent.
The latest drop is the lowest level that the 30-year FRM has been since the survey began nearly 50 years ago. Meanwhile, the 15-year fixed-rate mortgage also dropped slightly from last week from 2.59 percent to 2.56 percent. One year ago at this time, the average 15-year fixed-rate mortgage rate was 3.18 percent.
The last time the 30-year FRM set a record low was for the week ending June 18 when it went down eight basis points from the previous week to 3.13 percent, as the reduction in inflationary pressures encouraged home buying activity, according to Sam Khater, Freddie Mac chief economist.
The decline this week is attributed to investors' reaction to the rising COVID-19 cases and Fed's concerns on how the new wave of coronavirus infections could stall the economic recovery, Realtor.com's senior economist, George Ratiu said.
On Thursday, July 3, 2020, the number single-day total of new COVID-19 cases in the United States reached a new record with 55,220 new cases reported, surpassing Wednesday's record of 52,789, the Washington Post reported.
Florida recorded a new single-day recorded with 10,109 reported new cases. Georgia, also recorded a new single-day reported new cases with 3,472 from Wednesday's 2,976.
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Pending homes sales also set a new record in May, according to the National Association of Realtors report, as it rose 44.3 percent, marking a comeback of contract activity after two previous months of declines.
The Pending Home Sales Index is a home sales forward-looking indicator which is based on contract signings. In May, PHSI rose to 99.6, the biggest month-to-month gain since the series began in January 2001.
While this is a good indicator of U.S. housing market resiliency, an increase in home construction activity is needed to offset the underproduction of home in the past decade, NAR's chief economist, Lawrence Yun said.
However, many first-time homebuyers still need to hurdle challenges in getting a loan approved, Ratiu said, as lenders raise their underwriting standards, which could dampen the effects of interest rates on the housing market.
Mortgage applications declined for the week ending June 26, 2020, by 1.8 percent, according to the Mortgage Bankers Association's data, despite falling mortgage rates. Purchase applications declined for the second consecutive week, MBA's Associate Vice President of Economic and Industry Forecasting, Joel Kan said.
The decline in activity could be an indicator that the pent-up demand may be starting to wane, which is also aggravated by the low supply that limits prospective buyers' options, Kan explained.
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