From San Jose Mercury News, January 9, 2021
CTW FEATURES
The past year will undoubtedly go down in history as one of the most challenging, controversial, eventful and unpredictable years ever. After struggling with the coronavirus, economic downturn, social unrest and political friction, many are eager to see what 2021 is going to offer. But one bright note over the past year that many hope will continue this year is historically low mortgage interest rates, which have dipped below 3 percent during the past few months and made it much more affordable for many buyers to purchase a home.
With a fresh year ahead of us, many are wondering: Will rates remain enticingly low, possibly dropping even further? Or are rates due to trend upward over 2021?
In their most recent reports, several prominent housing/real estate organizations predict that attractive rates are here to stay in the near term. For example, Fannie Mae prognosticates that rates for the benchmark 30-year fixed-rate mortgage will average 2.7 percent this year; Freddie Mac, meanwhile, forecasts 3.0 percent, and the National Association of Realtors expects these rates to average 3.2 percent.
That's good news for prospective borrowers seeking to buy a home or refinance their existing loan in the coming months. Lower mortgage interest rates can decrease monthly mortgage payments and increase purchasing power for home shoppers.
But remember: These are predictions. A lot can happen between now and the end of 2021 to affect interest rates and your ability to afford a home or refinance your mortgage.
"Fortunately, the Federal Reserve has made it clear they aren't going to move the federal funds rate anytime soon, which points to mortgage rates hovering about where they've been lately well into (2021)," says Grant Moon, CEO of Denverbased Home Captain, who anticipates the rate for the 30-year fixed-rate mortgage to average 3.25 percent across 2021. "I believe the deepening impacts of the pandemic and political instability will likely continue adding stress to our economy, and this will reinforce the Federal Reserve's decision to keep rates low." Matthew Wright, CFO of Murfreesboro, Tennessee-based First Community Mortgage, foresees rates in the 2.75 to 3.25 percent range throughout the coming year.
"The impact from COVID-19 has been felt throughout the U.S. economy, and the timeline for recovery remains uncertain at best. Given this downward pressure and its anticipated lasting effect, I expect rates to remain at recent lows for an extended period," he says. "Look to the data surrounding vaccines, case counts, death counts, consumer confidence and the feeling of safety among the general population as good bellwethers for a rebound in the economy." Preetam Purohit, head of hedging and analytics for Middletown, Rhode Islandbased Embrace Home Loans, believes rates will sink as low as 2.625 percent in 2021 before closing out the year higher at 3.5 percent.
"We should see unemployment come down and the economy back on track, eventually leading to a rapid increase in Treasury yields, which will make mortgage rates rise. Of course, a lot of this will depend on the election results, fiscal stimulus and coronavirus control," Purohit explains.
Ethan Taub, CEO of Loanry in Southern California's Newport Beach, agrees with Purohit.
"I expect the 30year mortgage to go back up to around 3.5 percent by the end of 2021. That's because the economy will be in a better position and businesses will start helping the markets get back on their feet," he says. "But in the first six months of 2021, I can see rates a bit lower, at around 3 percent." While the aforementioned rate predictions aren't unanimous, there isn't a great numerical disparity between the lowest and highest estimates. In other words, we should probably expect mortgage interest rates to remain at or near historic lows for the foreseeable future.
"The first half of 2021, in particular, will continue to provide a great opportunity to purchase or refinance a loan due to continued attractive rates," Purohit says.
However, until home inventory levels rebound, some fear that 2021 will be challenging for prospective buyers.
"Many homes are already too expensive right now. I would think about waiting to purchase until later in the year in the hopes that the housing supply increases," Moon recommends.
https://enewspaper.mercurynews.com/?selDate=20210109&goTo=30&artid=1