Low Mortgage Rates
Historically low interest rates are incentivizing Americans to purchase a new home---whether it's their first house or an upgrade to their current residence. The opportunity to lock in a 30-year fixed rate mortgage in the 3% range is a deal most of us know we might not encounter again in our lifetimes. As families spend more time at home and desire additional space for school, work, or hobbies, these lower rates are helping make the monthly mortgage on a larger house more affordable.
During the second quarter of 2020, the U.S. economy contracted by 32.9% annualized -- the largest decline we've seen since World War II. However, in the third quarter, there was a substantial rebound, with GDP growth forecasted to come in at 27.2% annualized. While ESR had previously forecasted the real GDP to contract by 4.2% for the full year, they've lowered their estimate to 3.1%. This more optimistic projection is in part due to the falling coronavirus case rate, supportive fiscal and monetary policy, and an elevated level of household savings that can fuel future consumer spending.
Pent Up Demand
The supply of homes hasn't been able to keep up with extremely strong demand, thanks in part to low interest rates and an influx of interested buyers. Potential buyers who sat out of the market in the spring due to uncertainty about the pandemic and economy are now ready to pull the trigger, and that's driving up home prices. A shift is also being observed on where buyers want to live---with more interest in lower density areas which have grown in popularity ever since the term "social distancing" entered our lives.
Source: Fannie MaeShare:
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