With the coronavirus disease 2019 (COVID-19) having made its way to Europe, causing Milan to shut down its larger business activities, and recording new cases in Iran, the world is set to see the global effects of the virus that was once contained to Mainland China.
The World Health Organization (WHO) has noted that while China may have acted properly to manage the coronavirus outbreak, the rest of the world is largely unprepared for it. Calling the situation “deeply concerning,” the WHO has stirred a wave of much-needed panic that the situation calls for in order to be controlled. As expected, the spread of the infectious disease is also going beyond medical statistics. According to the latest assessments, the coronavirus real estate impact has already hit the U.S. mortgage and real estate market.
Mortgage Rates Have Never Been So Consistently Low Since 2012
As reported by CNBC, the 30-year fixed mortgage rate sank to 3.34 percent on Monday, February 24. But it could go as low as 3.25 percent. Taking its statistics from real estate publication Mortgage News Daily, the news outlet went on to mention that the rates are projected to be set to an average of 3.375 percent going forward.
The last time the mortgage rate hit 3.34 was for one day only in 2016. Before that, rates were only this consistently low 8 years ago in 2012. The recent downturn can be attributed to the Coronavirus impact on real estate
Refinancing Applications Have Gone Through the Roof
Due to these projections for lowered mortgage rates, applications for mortgage refinancing have jumped up to 165 percent their annual rate. At the same time, applications to buy a home have stayed at the same rate as they were previously. This is largely due to a shortage of affordable inventory as well as lenders’ careful approach to handing out home loans.
This goes on to show that the real estate market isn’t sitting idle. It has just shifted its focus with consumers making smarter decisions in the midst of a financially influencing epidemic.
We Might See New Inventory for Affordable Housing
This smart approach by key players in the real estate market is also seen in the construction segment. In the light of the coronavirus real estate impact, builders are seriously considering putting up more affordable housing options. This is in contrast to the larger than life real estate inventory which has become the norm over the past few years.
This means that we could see more affordable housing inventory to cater to the needs of new buyers who do not have as many funds put aside as their more affluent counterparts.
Lending Standards Might Stay the Same
While the expansion to affordable inventory may help solve the shortage of options for new buyers, it still doesn’t address the issue they have to face with what experts call “tight-lending” policies. Even while being eligible, borrowers often have to put more funds towards down-payment than what they had to pay a few years ago. This affects their loan-to-value ratio, which in turn affects their buying power.
As a result, most buyers are not able to get the home of their dreams by falling short of gathering the required down payment. In order for more potential buyers to actually purchase a home, this approach needs to be changed in the long run.
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