Mortgage interest rates hit record low for week ending 5/29/2020

Mortgage interest rates for buying a home on the Palos Verdes Peninsula declined this week ending 5/22/2020 to record new lows. The following are excerpts from the newsletter on interest rates published by HSH Associates :

“Mortgage rates set new “all-time” lows again this week, and having written it several times already, the headline above or one similar to it is one we’ll likely be writing with some regularity in the coming weeks and months.

If you think about it, low rates are a blessing as a result of a curse. Low borrowing costs can help homeowners lower monthly mortgage carry costs, help ease budgetary burdens or even free up funds for new spending or trimming other debts down to manageable levels. As well, lower rates can help potential homebuyers qualify for larger mortgages on a given income, helping them to be able to participate in today’s COVID-19 distorted housing markets.

But these low rates come at a cost, and are the result of a true economic calamity around the globe and certainly here in the U.S. They are here because demand and commerce have both been crushed, already-modest price pressures are being pushed down further and due to both investor demand for safe-haven assets and monetary policy engineered by the Federal Reserve. These low rates reflect the economic misery of many millions who have seen their incomes and livelihoods interrupted, some temporarily but increasingly on a more permanent basis.

Low borrowing costs are only of value if you need or want to borrow money, and more specifically, if you can qualify to borrow that money. No matter how generous they may be or how long they may be available, unemployment insurance funds don’t count as income (in most cases) for mortgage qualifying, and there may be millions of potential borrowers who want or need to borrow money but cannot, and may not be able to do so for some time.

With lockdowns easing and mortgage rates low, the typical spring homebuying season market may yet occur, but it may be more like a summer homebuying season. Social distancing and other roadblocks may continue to bedevil the existing home market for some time, but that’s less the case with new construction, which may seems relatively better supported at the moment. Low mortgage rates will continue to help create demand for both measures, but the existing home sales market may not start to revive for a few months yet. That’s at least the takeaway from the latest housing data; the National Association of Realtors Pending Home Sales Index for April rang in a a new-low of 69, down from 88.2 in March and well below February’s pre-pandemic 111.4 mark, so the downtrend in sales of existing homes can be expected to continue. The NAR’s PHSI is a measure of contracts signed to buy existing homes, which can take 30-60 days to complete and be recorded as actually sold – so April’s pending sales may show up in May or even June sales tallies.

The following are interest rate quotes from Allen Bond of Wells Fargo: