Rates Plummet, Making Now a Good Time to Buy a Home

Key highlights from this report:

  • Mortgage rates just fell to their lowest level in nearly 50 years!
  • For many buyers, now is a good time to buy a house.
  • House prices, meanwhile, continue to climb in most parts of the U.S.
  • The spring home-buying “season” might get a boost from low rates.

Heads up, home buyers. Mortgage rates just plummeted to their lowest level in recorded history.

Yes, you heard that right. On March 5, 2020, the research team at Freddie Mac reported that the average rate for a 30-year fixed mortgage dropped to an astoundingly low 3.29%. That’s the lowest it has been in the nearly 50-year history of that particular rate survey.

So, from a borrowing standpoint, now is a great time to buy a house. Home buyers who make their purchases in the near future will be able to take advantage of the lowest rates in history.

Mortgage Rates Hit All-Time Low in March 2020

Each week, the team at Freddie Mac publishes the results of their latest mortgage rate survey. That survey (the Primary Mortgage Market Survey®, or PMMS®) was launched in 1971 and has been going strong ever since. It gives us a snapshot of where mortgage rates are from one week to the next.

On March 5, 2020, the company reported:

“The average 30-year fixed-rate mortgage hit a record 3.29 percent this week, the lowest level in its nearly 50-year history … Given these strong indicators in rates and sales, as well as recent increases in new construction, it’s clear the housing market continues to be a positive force for the broader economy.”

If a picture is worth a thousand words, the following charts speak volumes. They are based on the weekly PMMS survey mentioned above.

The first chart shows the average rate for a 30-year mortgage loan over the past year or so. It ranges from March 2019 on the left side, to March 2020 on the right. You can see how much lower rates are today, as we approach spring 2020, than they were a year ago.

Mortgage rates through March 2020
Chart: Average 30-year mortgage rates over the past 12 months. Source: PMMS.

In the second chart below, I’ve zoomed out to give you a much broader picture. It shows the average rate for a 30-year fixed home loan going all the way back to 1971.

Chart showing rates since 1971
Chart: Average 30-year mortgage rates since 1971. Source: PMMS.

A couple of things should stand out in the above chart:

  1. You can see the all-time high reached in 1981, during the Reagan administration. Rates were averaging around 18% in those days.
  2. You can also see the all-time low (to date), which occurred just this week.

So from an interest rate standpoint, it’s clearly a good time to buy a home with a mortgage loan.

Of course, rates alone shouldn’t drive your decision-making. There are other considerations as well, including your income stability and long-term plans. But the money-saving potential offered by today’s current low-rate environment is undeniable and significant.

Coronavirus Concerns Haven’t Slowed the Housing Market

Some have speculated that concerns over the coronavirus could slow the housing market. But so far, that hasn’t happened. Freddie Mac reported that home loan applications increased by 10% last week, compared to a year earlier, and “show no signs of slowing down.”

We might see a slowdown in the U.S. housing market over the coming weeks or months, due to the economic uncertainties fueled by the coronavirus outbreak. But as of now, most local real estate markets across the country are still very active. And they’ll likely get even more competitive in the weeks ahead, as we move into the spring home-buying “season.”

So, is now a good time to buy a home in the U.S.? Will spring 2020 be a good time to make a purchase?

From a borrowing standpoint, the answer is yes. Mortgage rates have never been as low as they are right now, as of the first week of March. Not once in the 39-year history of Freddie Mac’s survey have we seen 30-year mortgage rates average 3.29%.

This latest development gives home buyers a chance to lock in at a historically low rate, and to keep that rate for as long as they keep the mortgage loan. (At least, if they opt for a fixed-rate loan.)

We don’t know how interest rates will behave from one month to the next. There are many variables that affect their up-or-down movements. They include Federal Reserve policies, bond prices and yields, economic growth or contraction, and other factors.

But with mortgage rates hitting an all-time low, it’s a safe bet they’ll start to rise again later in 2020. So a sense of urgency might be warranted, among those considering a home purchase.

Home Price Rising in Most U.S. Cities

Steady home-price growth is another reason why now could be a good time to buy a house. Buyers who delay their purchases until later this year could end up paying more for a house, as prices continue to climb.

According to a March 3rd report from the property data company CoreLogic, home prices in the U.S. rose 4% from January 2019 to January 2020. Looking forward, the company has predicted that U.S. house values could continue to climb.

“Home prices continue to increase on an annual basis with the CoreLogic HPI Forecast indicating annual price growth will be 5.4% from January 2020 to January 2021,” the report stated.

Sure, we could see a decline of home-price appreciation in the months ahead, if the economy slows. That scenario is most likely in the nation’s priciest housing markets. But such a cooling trend would likely be short-lived, it it occurs at all.

The housing research and analysis team at Zillow has also issued a positive forecast for U.S. home prices, extending into 2021. In early March, their website stated:

“The median home value in the United States is $245,193 … values have gone up 3.8% over the past year and Zillow predicts they will rise 4.1% within the next year.”

Let me be clear: I’m not trying to be a cheerleader for the housing market. The Home Buying Institute has a long history of providing objective reporting. We tell it like it is, warts and all. I just want home buyers to realize that now might be a good time to buy a house, from an interest rate perspective.

For most people, a home is a long-term purchase. According to the U.S. Census Bureau’s “American Community Survey,” homeowners in this country stay in the same home for an average duration of 13 years. That’s long enough to weather any short-term instability.

This is the kind of long-range thinking home buyers should engage in. You can’t always predict what will happen a year from now. But house values tend to hold steady or rise over time, historically speaking. And with mortgage rates currently settling into an all-time low, home buyers have a strong incentive to take the plunge.

Is Now a Good Time to Buy, as of Spring 2020?

So, is now the right time for you to buy a home? That will depend on a number of factors:

  • Start by researching your local housing market. Are prices rising or falling in your area? Or have they leveled off? If prices appears to be stable or rising, now might be a good time to buy a house in your area.
  • Next, consider your income situation. Is it safe to assume you’ll have steady and stable income for the foreseeable future? Are you “employable” in the current economy, given your skills and experience? Could you find another job in a relatively short period, if you lost your current one?
  • Lastly, consider your financing situation. Can you afford to buy a home? Will you need a mortgage loan, and if so can you meet the lender’s basic requirements for income, documentation, etc. Can you afford homeowners insurance and property taxes as well?

If all of these questions have favorable answers, then now might be a great time to buy a house.

Disclaimer: This article contains forecasts and predictions relating to the housing market, economy, and buying a home. Such forward-looking statements are the equivalent of an educated guess and should be treated as such. The Home Buying Institute makes no claims or assertions about future real estate trends.