The fee to finance a house buy has fallen to close the bottom ranges ever, which is nice information for homebuyers.
However the inventory market is seeing brutal declines, and darkish clouds are gathering over the U.S. economic system.
There’s a tug of struggle within the housing market between low cost house financing and rising financial dread brought on by the coronavirus outbreak.
Economists are cut up over which means potential homebuyers might be pulled.
“There may be a number of uncertainty over how the coronavirus will evolve, which makes it difficult to venture subsequent week, not to mention the spring shopping for season,” stated Frank Nothaft, chief economist at CoreLogic. “However my intestine is that report low mortgage charges and an economic system with a 50-year low in unemployment fee will carry the day.”
Jim Gaines, chief economist for the Actual Property Heart at Texas A&M College, isn’t so certain that traditionally low mortgage charges will outshine financial fears with customers.
“Proper now, we aren’t 100% certain housing will win,” Gaines stated. “We’re somewhat bit doubtful concerning the housing market.”
The first two months of the year have been strong for the Texas home market, and home mortgage rates plunged to unheard of lows last week.
In Dallas-Fort Worth alone, home sales are up 14% from a year ago. And February saw the largest number of home sales ever handled for that month by North Texas real estate agents.
“The February statistics were really good — absolutely great,” Gaines said. “ But it was pre-virus.
“We think the second quarter of this year — April, May, June — will be the down time,” he said. “That’s usually the best time in the housing market, but this is not a usual year.”
In Texas, the steep slide in oil prices will negatively affect metro areas including Houston and Midland-Odessa, which have large oil and gas sector workforces, Gaines said.
“The D-FW area really shouldn’t feel much of that,” Gaines said. “The housing sector will probably win out in your market.
“Dallas’ main concern is what the national economy does,” he said. “It’s going to slow down — no doubt about that — but nobody knows how long or how deep it will be.”
Dallas-Fort Worth leads the country in homebuilding. And North Texas had a record number of home sales last year by real estate agents.
“Mindful that the outlook is cloudy as we wait for data on the virus impact and its effect on consumer confidence, a market like D-FW would be in a better position to benefit from today’s lower rates, to the benefit of home sales and home construction,” said Robert Dietz, chief economist for the National Association of Home Builders. “The impact of lower oil prices, however, is an additional concern for states like Texas, Oklahoma and North Dakota.”
Nationwide mortgage rates for 30-year loans were at an all-time low of 3.29% last week, according to mortgage giant Freddie Mac.
And they’ve gone even lower since then.
“Rates are going to be lower,” Dietz said. “Current Treasury rates imply 30-year fixed mortgages with rates below 3%.
“However, it is important to note, low rates only benefit buyers that have a down payment and job security,” he said. “The macro uncertainty and higher recession risk in today’s environment will reduce consumer confidence in the weeks ahead. So to the question of which will win out?”
More than a third of home sellers just surveyed by the National Association of Realtors said they believe the appeal of lower mortgage costs will override pandemic fears.
And about eight out of 10 sellers surveyed claimed that there has been no change in buyer interest due to the coronavirus.
Even so, a quarter of sellers said they were making marketing changes to reduce their infection risks, including canceling open houses.
George Ratiu, senior economist for realtor.com, said some housing markets are already beginning to see a slowdown in buyer traffic because of fears about the virus spreading.
“With COVID-19 cases reported in most states, foot traffic at open houses is down as home buyers avoid public places,” Ratiu said. “As we are headed into the traditional spring buying season, the incubation and quarantine periods will keep many Americans on the sidelines for at least the next two to four weeks, resulting in a decline in sales.
“The medium-term outlook for real estate depends on how widespread coronavirus cases will be in the U.S. and how businesses and consumers continue reacting,” he said. “If companies — pressured by revenue losses — resort to laying-off workers, we’ll see a sharper drop in consumer confidence and an accompanying cut in spending, which will push the economy into a downward spiral, leading to a recession.“
Nothaft is more optimistic about where housing is headed.
“I have spoken to a number of builders and mortgage lenders who have said that home sales and purchase loan applications remain strong and up significantly from a year ago,” he said. “I expect that momentum to continue. We expect both existing and new home sales to be up this spring.
“While some potential buyers may choose to avoid traditional open houses due to the viral fear, the growing use of online home shopping and virtual home tours still provides the opportunity to shop,” Nothaft said. “I expect that we will see an expansion of virtual tours this spring.”
He’s still hoping the country will dodge an outright recession, even if the economy slows.
“So far consumer confidence has held up,” Nothaft said. “However, if we begin to see widespread job loss and consumer confidence falls, consumption spending may contract; that would increase the likelihood of a recession.
“For now, based on what we know, I do expect economic growth to be slower than we expected just two months ago, but the U.S. economy will avoid a recession this year.”