Every cloud has a silver lining – a blessing in disguise, so-to-speak… even if it seems a tad bit tarnished. One positive thing to come out of the coronavirus pandemic is the recent rate cuts, especially for homebuyers and homeowners who want to refinance. “The Federal Reserve has cut short-term interest rates by 1.5 percentage points in less than two weeks and is making sure that money keeps flowing through the mortgage financing system — all to protect the economy from more damage from the COVID-19 pandemic.” Okay fine, but what do the recent rate cuts mean for homebuyers in Roseburg?
Purpose of the Rate Cuts
The Fed’s two recent rate cuts now have interest rates seriously close to zero… did you catch that? In an effort to keep the economy rolling and in light of the financial devastation happening from the response to COVID-9 pandemic (especially the real estate sector), the Fed’s dropped rates again.
According to one insightful market watcher, “the Fed was leading rather than following. ‘The effects of the coronavirus will weigh on economic activity in the near term and pose risks to the economic outlook,’ the Fed said in explaining why it had slashed the target federal funds rate to a range of 0% to 0.25%. The idea behind these rate cuts is to “stimulate the economy when the worst of the pandemic passes and people get back to work and get full paychecks again.”
How the Rate Cuts Impact Mortgage Rates
The Fed is also practicing what is known a “quantitative easing,” which shoots to inject money into the economy to keep money circulating and the economy moving. That’s what lies behind the Fed’s buying “at least $500 billion of Treasurys and at least $200 billion of mortgage-backed securities.” These purchases are meant to free up money for lenders to lend to homebuyers and people wanting to refinance.
** Note, This move might even push rates a bit lower, so watch. **
The upside of the rate cuts and quantitative easing is that rates are low enough to inspire many people to think about refinancing or buying a home. On the flip side, fears of COVID-19 and the practice of social distancing, homebuyers may still be reluctant to get out and go home shopping. However, we haven’t seen much of a slowdown in buyer activity and demand for housing in Roseburg yet. There have been reports of a drop in demand in harder-hit metropolitan areas like Seattle though.
In a nutshell, with low rates and a tad less competition, this is a great time for homebuyers. “The Fed’s March 3 and March 15 rate cuts are good news for those with or shopping for adjustable-rate mortgages . . . which are guided by Fed rate movements. ARMs will likely see lower rates at their next rest period . . . from a combination of the Fed’s half-point cut March 3 and the full-point cut March 15.”
My Prediction for Homebuyers
As a homebuyer in Roseburg, you still need to be aware that inventory remains too low to meet demand. Even though some buyers are waiting or are practicing social distancing, the rate cuts and low inventory mean that you’ll still be facing competition from other buyers. As the financial experts remind us, there’s only so much that lower mortgage rates can do to stimulate home sales. Mortgage rates and affordability aren’t the biggest challenges in today’s housing market . . . A lack of options and inventory continues to be the largest hurdle.”
The biggest hurdle we have right now is not a lack of buyers, it is a lack of homes on the mar
Still, if you want to buy a home in Roseburg to take advantage of these historic low rates, there are a few things you can do to get an edge over your competition, for example:
- Get pre-approved so you’ll know what you can borrow and in order to be perceived as a serious buyer.
- Don’t be overly demanding with respect to contingencies and concessions.
- People’s lives and schedules have been disrupted, so be flexible about closing.
Is There a Rate Cut Rush?
Not that I see, not really. It may seem counter-intuitive, but there really is no urgency to rush out and buy today while interest rates are low. I really think these rates will stick around for a while. Truth is, there are a lot of people buying and refinancing right now which is overwhelming some mortgage companies. In fact, experts point out, right now you may not find “those low rates on a prevalent basis because [mortgage companies] are marking up rates to give them a chance to work through the initial wave of demand.”
There are many things at play in the economy right now, but chances are the mortgage rates will stay low for most of 2020. Once we see lenders get caught up on the number of applicants they are dealing with, rates should normalize and that will make for an opportune time to “get in.” I’ll report on this as things change throughout the year.
Rate Cut Implications for the Housing Market
With mortgage interest rates at historic lows after the Fed’s latest rate cuts, many potential homebuyers in Roseburg may be willing to shop for that new home. But then, on the other hand, COVID-19 has a lot of people self-quarantining, and this may offset the effects the low rates are supposed to have.
Truthfully, it’s too soon to know for certain what the financial outlook and the fate of the housing market is. According to economy watchers. “Monetary policy is not a quick-acting tool… It will be some time before we know whether this action was sufficient to sustain economic growth, but it’s a large and coordinated move that will put households, the housing market, businesses, and the financial sector on better footing.”
One thing is certain, though. Right now is a great time to buy a home in Roseburg – mortgage interest rates may never be this low again. And there’s another certainty in all this: with low inventory and possible stiff competition, the services my team of real estate professionals can provide have never been more necessary.
We Can Help You Take Advantage of Rate Cuts
So do you want to take advantage of this unprecedented opportunity provided by the recent rate cuts? If you want to buy a home in {market_city}, now is the time – if you can find the home you need… possibly even shopping online to protect your health… The Sky Team agents have the experience and expertise to help you under this unique set of conditions. To discover more, contact us today at 541-643-1131.