Coronavirus and Mortgage Rates: What’s the Connection?

Coronavirus and Mortgage Rates: What’s the Connection?

rednano 5th March 2020
How Corona Virus Will Affect Your Property

As the coronavirus dominates the news, fit is not just the general public that have concerns. Financial markets are shaking and investors are getting scared. With 89 cases confirmed in the U.S, the health concern makes sense. But, how does this new virus affect the housing market?

It turns out that in the short time that the coronavirus has had attention, mortgage rates have dropped. In addition to this, investors are pulling out of stocks. Instead they are putting their money into more secure and steady U.S. Treasury bonds. In general, as bonds perform strongly, mortgage rates drop. This trend is becoming clear since the announcement of the coronavirus being in the U.S..

These changes will definitely dampen home sales in a few markets. The low mortgage rates however, will look attractive to buyers and sellers. Despite the growing concerns, buyers will want to lock in these lower rates. There will be fewer international buyers though, as a result of the travel concerns associated with the virus.

Buying property may have benefits, but the free fall in the stock market that is created is not a good sign. When there are vacuums in the market like this, people are more hesitant. Big decisions are put on hold and that includes buying houses. People look to the status of the stock market as a sign of how the economy is doing. If this is flashing a warning sign, home sales may slow down in response.

Of all the housing markets, the luxury market will be affected the most. Wealthier buyers are more likely to have money invested in stocks. With the stock market looking vulnerable after the coronavirus appeared, these investors likely feel uneasy. When you feel less wealthy, even if only temporarily, you are not likely to make any big purchases.

The majority of foreign purchases in the U.S. over the past few years have been conducted by Chinese buyers. They have comprised the single largest segment of foreign purchases. They are purchasing fewer properties recently, indicating the global effect this pandemic is having.

On the other hand, the lower mortgage rates can entice people to buy. It was reported by NAR that contract signings have jumped 5.2% from last month and are also up from last year by 5.7%. Buyers at this time, foreign and domestic, are trying to decide whether to take advantage of these low mortgage rates or not. It is not an easy choice to make.

The economy seems unsettled but it has in previous years too. One must weigh the benefits of acting now against potential losses if they do not. The economy can recover at any time, so people need to evaluate if they want to take risks or regret not taking advantage of the situation.

Low mortgage rates could cause a boost in home sales for now, but ultimately nobody knows how far the coronavirus will spread. It will likely cause some people to put their sales on hold, while others will just dive in. The coronavirus is global and will impact more than just health sectors.Although, numbers are low in the U.S. at this time, the situation can change at any time. It pays to keep an eye on how the economy responds.

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