How Coronavirus is Affecting The Mortgage Market

It’s safe to say that we’re all a little scared of how the coronavirus is going to affect the D.C. Metro economy, and the world’s economy, for that matter. Mostly, because we have nothing to compare it to. How will it affect the stock market? The housing market? Mortgage rates? All difficult questions to answer without a precedent. There’s one thing we know for sure: Fear of the unknown has greatly affected the stock markets and therefore mortgage rates.

The Unpredictability of Mortgage Rates

We’ve always understood that the best way to get an idea of how mortgage rates are moving is to observe the 10-year US treasury. In this case, however, there are factors that are causing the mortgage rates to not track the 10-year Treasury Rates. Those factors are:

  1. Mortgage Backed Securities are lagging behind the UST…a lot. The discrepancy between the two rates is the largest since the 2008 financial crisis.
  2. The Guarantee Fee. Fannie Mae has been defensive during the market rally in terms of their insurance guarantee (i.e. the Guarantee Fee).

How Interest Rates Have Changed

That makes you wonder, what were the interest rates like pre-Coronavirus madness and what are they like now?

Keep in mind that the rate varies depending on the paying points, property type, down payment amount, credit score, and loan-to-value ratio. That said, the average rate on the 30-year fixed fell to 3.13% on March 2. As of March 14th, it’s back up around 3.65%. According to Mortgage News Daily, that is the lowest mortgage rate ever recorded by Mortgage News Daily.

What DC Metro Buyers Should Know

Because mortgage rates have been up more than a full 1% from their record-lows, buyer beware — the rate you were quoted last week may be much different now. Their purchasing power may have diminished, and they may not even qualify for the same price range.

What about the Real Estate Market?

We predict that higher-priced housing markets in places like Montgomery County and Washington, DC are going to see a bigger effect than mid or low-priced markets. In terms of the actual buying and selling process, we predict that sellers may not want strangers in their homes for open houses, and vice versa (buyers may not want to be in a stranger’s home).

According to the National Association of Realtors, 16% of Realtors reported seeing a drop in buyer interest because of the coronavirus and 1 in 4 sellers are changing how they market their homes. Only 3% said they had clients remove their homes from the market.