MoneyWiseJanuary 20, 2020
Home buyers can rest assured they’ll still get a great deal on a mortgage this year, even if they’re paying a high price for the actual home. In a new economic outlook, mortgage titan Fannie Mae says it expects mortgage rates to remain low and stable throughout 2020. The company’s brother firm, Freddie Mac, recently revealed 30-year fixed mortgages averaged just 3.9% throughout 2019, making it the fourth-lowest year on record. In its forecast, Fannie Mae says it expects this year’s rates to be even lower at just 3.7%, while five-year adjustable rate mortgages are likely to hold at 3.3%. Match that with “strong labor markets, rising wages and improved household balance sheets,” and conditions look perfect for prospective home buyers. Yet the usual hitch remains: There’s never enough homes on the market.
“It’s still a seller’s market because the growth in supply, while it’s accelerating, still hasn’t caught up to the growth in demand,” Doug Duncan, Fannie Mae senior vice-president and chief economist, tells MoneyWise. He adds that the near-record number of adult children living at home will eventually try to get their own places, meaning demand will only continue to surge. “Boomers are not moving, so the existing home supply is still at very low levels,” he says.
In its outlook released Jan. 21, Fannie Mae notes that the number of homes for sale was down 5.7% in November compared to the year before, making it the scantest November in at least 20 years. With such a tight supply smothering the demand, the company expects 2020 to be “comparatively muted” for sales of new homes after a brisk 2019.
So if you're shopping for a home this year, there’s a good chance you may encounter a bidding war. And if you’re putting your house on the market, congratulations: You might see the same. Despite the dearth of available homes, the Mortgage Bankers Association recently reported that home buyer demand for mortgages hit its highest level in more than a decade. And while the number of purchases remains flat, Fannie Mae says all of those factors — meager supply coupled with a strong job market spurring demand — are sending prices skyward and shattering loan limits.
Keep in mind interest rates differ for every individual, so and it is important to consult with a loan officer to determine your mortgage qualifications.