Low interest rates are giving the housing market a boost

House Sales

The housing market is getting a much-needed lift from falling long-term interest rates. But low rates may only be a temporary and artificial power to the housing market. As recession concerns loom, interest rates have fallen to a level that’s now stimulative for the U.S. housing sector. The average 30-year mortgage rate is around 3.6%, according to Freddie Mac data. This is the lowest level since November 2016.

“We do expect lower rates to positively affect housing activity in the quarters ahead. Some leading indicators for housing, such as builder and consumer sentiment, have improved recently,” Credit Suisse wrote in a recent research note. ”We expect an forthcoming return to moderate but positive growth in the housing market. A recovery in housing is likely to provide a welcome boost to growth amid a global manufacturing slump.”

Since 2018, the 30-year mortgage rate has fallen more than 100 basis points. Credit Suisse estimates the recent move in rates would increase home sales by at least 5.0% in the next few months, pushing sales to 5.5 million — the highest since the first quarter of 2018.

Mortgage rates have been coming down ever since the Fed put rate hikes on hold.

“We expect the second half of year will be notably better than the first half in terms of home sales, mainly because of lower mortgage rates,” said Lawrence Yun, chief economist at the National Association of Realtors (NAR), in an email.

On Wednesday, the NAR reported that existing home sales rose 2.5% and 0.6% in July from a month earlier and same time a year ago, respectively. A reversal from a month earlier when sales declined. The positive results followed a barrier in pending home sales, also a proxy for the future health of the housing market, which was up 1.6% in June, reversing a 17-month track of annual decreases, according to the NAR. Pending home sales rose 2.8% in June from a month earlier, the second consecutive month of growth. The latest figures mark “the start of a positive trend for home sales,” the NAR said.

On top of that, the Fannie Mae Home Purchase Sentiment Index reached a new survey high in July, increasing 2.2 points to 93.7. According to that survey, folks are feeling more confident in buying and believe mortgage rates will continue to fall. Even homebuilders are feeling a little bit better about things. The National Association of Home Builders/Wells Fargo Housing Market recent measures of current sales and buyer traffic hit its highest levels since October.


Terry McKinney

Terry McKinney is the writer who is in charge of the Business news section at Instanews247. He is a business grad, who has a knack for trend analysis and change forecasting. His unique skills set him apart from any other business writers in the business, and solidify him as an asset to our team. Business news makes a deep impact on transmitting all the Wall Street action going down at top business houses, by making the details which would otherwise be unavailable, available to readers – and at Instanews247, we have Terry to thank for it!