With mortgage rates falling to record lows, thousands of Americans are buying houses or refinancing their existing homes.
This recent surge in housing activity has been a standout as the U.S. economy struggles against the COVID-19 pandemic.
The top economist for mortgage giant Fannie Mae thinks the home market’s bull run will continue, boosted by even lower home loan rates.
“We actually see 30-year rates falling down to about 2.75 and for sterling credit you might get something lower than that,” said Fannie Mae’s Doug Duncan.
Earlier this month, nationwide home mortgage rates for a long-term, fixed-rate loan averaged just under 3%.
That’s added money to the economy as thousands of homeowners have refinanced to lower their monthly mortgage payments.
“There is still a huge volume of demand out there to work through the system in refinancing,” Duncan said. “We have added $100 billion from this month to last month in our forecast for refis.”
Fannie Mae foresees about $1.9 trillion in nationwide home loan refinancing volume this year and another $1.2 trillion in 2021.
Another $1.24 trillion in home purchase loans will be made, Duncan said.
“Why is that in a presence of a market having 32 million people receiving unemployment insurance?” he said.
Duncan said much of the nationwide job loss so far has been with workers who were not planning to buy a house.
“The workers who lost the jobs are typically hourly wage earners — typically renters,” he said.
Workers who feel secure in their employment are still buying.
“On the demand side, people said I have a salary job that looks safe and interest rates look historically good — I’m going to go out and buy,” Duncan said.
But the longer the economy is depressed and a second wave of pandemic that could cause increased business closings could hurt home buying down the line, Duncan said.
“That would raise some risks on the housing front,” he said.
Some forecasters have warned of a decline in home prices, but not Duncan.
“At the outside of the crises you saw all these stories that house prices are going to crash,” he said. “We think house prices are going to rise.
“We expect prices to be up this year a little north of 4%,” Duncan said. “I know that goes against what people were thinking three or four months ago.”
A lack of homes on the market is keeping prices higher than early forecasts. Many sellers who would traditionally put their houses on the market in the spring decided not to in 2020.
“The people who would potentially sell a home — their attitude declined dramatically,” he said. “They are saying I don’t want anybody with COVID walking through my house.”