We’ve talked a lot on the realREVEAL about the extremely high levels of demand in the residential real estate market currently. Whether through housing starts or existing home listings, homes are not entering the market quick enough to meet the unprecedented demand, leading to historically low home-inventory. There are a number of key factors contributing to this market, including massive cultural shifts brought about by the COVID-19 pandemic. Equally important are the extremely low interest rates, making taking out a mortgage on a home a much more attractive proposition. According to the latest statements by the Federal Reserve, these low interests rates are likely to continue into 2021.
In a press release on Wednesday, the Federal Reserve has signaled that it will continue its current policy of rock-bottom, 0-0.25% interest rates going into next year. While hopeful that the coming vaccine will finally bring an end to the effects of COVID-19, the next few months are likely to be very difficult still.
Until the vaccine is widely available, the economy will likely suffer from a weak job market and hampered small businesses. Federal Reserve Chair, Jerome Powell, indicated that they will continue to keep interests rates near zero going into 2021 in order to help buoy the languishing economy.
In the world of real estate, this means that mortgage rates are going to continue to be extremely low. To put things in perspective, the average interest rate on a 30-year fixed rate mortgage continued to plummet last week. Freddie Mac reports that that figure stood at 2.67%, down from 3.73% the year prior—the lowest rate they have ever seen since records began in 1971.
The national average rate on a 15-year fixed rate mortgage dropped similarly to 2.21% from 3.19% in 2019.
Such low rates are likely to continue to fuel the high demand for homes throughout the country. They have helped keep the residential real estate market very much alive even as the economy on the whole has sustained the twin shocks of pandemic and lockdown.