NEW YORK CITY- The Coronavirus has sparked fear that the housing market could face long term impacts, which has caused uncertainty among homebuyers. Due to mounting concerns about the coronavirus, the Federal Reserve has slashed interest rates, which in turn can lead a flurry of homebuyers to the market to secure investments. However, that sugar high isn’t expected to last long.
Concerns about the housing market coming to a halt have grown in tandem with worries about the spread of the coronavirus. Buyers will stay home rather than out shopping, Jeffrey Taylor, co-founder and managing director of Digital Risk, tells GlobeSt.com.
“If this creates a long-term economic problem, it could be dangerous for housing if people lose jobs and income. However, I would say the likelihood of all that is still extremely low,” Taylor said.
Interest rates were already low, however, with the new cuts, it could boost the market up even more as home buyers rush to refinance or process a loan to get ahead of the viral crisis.
“Today’s Fed’s rate cut – not just intra-meeting, but also twice the normal increment of 50bp vs. 25bp is more symbolic of vigilance than anything else,” Peter C. Earle, a research fellow at the American Institute for Economic Research, tells GlobeSt.com.
Home-buyer refinancings were already up 165 percent compared to last year, so now it could become a frenzy, according to Taylor. “Lenders will be working 24/7 to process these loans, which could mean delays. Homeowners may want to lock in their rate quickly in case of delays,” he said.
In addition, mortgage rates are likely to drop even lower in the short term. However, there’s some concern that they will bounce back up higher when this crisis is over. Conventional and jumbo loans are pretty close together right now – slightly lower jumbo rates on 30-year fixed and on 7/1 ARMs, slightly higher on 15-year fixed, according to Taylor. “That spread isn’t likely to change much, but jumbo borrowers are likely to be even more in a hurry to take advantage of low rates because the impact of the rate is larger on larger loans.”