Mortgage rates continued their downward slide this week, hitting their lowest point in three years. According to Freddie Mac, the average rate on 30-year, fixed-rate mortgages clocked in at 3.45%—down from 3.51% last week and 4.41% a year ago.
It’s the third week in a row that rates have dropped, largely thanks to investor concern surrounding the coronavirus outbreak.
Here’s how Joel Kan of the Mortgage Bankers Association explains it: “The 10-year Treasury yield fell around 20 basis points over the course of last week, driven mainly by growing concerns over a likely slowdown in Chinese economic growth from the spread of the coronavirus. This drove mortgage rates lower, with the 30-year fixed-rate decreasing for the fifth time in six weeks.”
The decrease has spurred a rise in refinancing applications. According to MBA’s weekly mortgage survey, refinance activity was up 15% for the week and 183% over the year. Overall, refinances made up nearly 65% of all mortgage activity last week.
There’s room for more refis, too. According to analysis from financial data firm Black Knight, this latest drop opens the door for more than 11.3 million homeowners to refinance. On average, they could shave about 0.75% off their rate and $268 on their monthly mortgage payments.
If credit scores and loan-to-value ratios aren’t factored in, there are actually 22 million homeowners who technically have a mortgage rate at least 0.75% over today’s averages.
Refinances aside, sliding rates have also caused other upticks. MBA’s data shows rising loan balances, increased jumbo loan activity and more interest in adjustable-rate loans in recent weeks. And according to Sam Khater, Freddie Mac’s chief economist, a jump in purchase activity should also follow.
“The combination of very low mortgage rates, a strong economy and more positive financial market sentiment all point to home purchase demand continuing to rise over the next few months,” Khater says.
The latest Home Purchase Sentiment Index from Fannie Mae backs that up, with 59% of respondents saying it’s a good time to buy a home. The only problem? That’d be historically low inventory.
A report released this morning from Realtor.com shows U.S. housing inventory levels at their lowest point since at least 2012. Overall inventory has dropped 13.6% over the year—the biggest drop in more than four years.
Prospective homebuyers on the West Coast face the biggest inventory struggles. Listings have dropped 37.3% in California’s San Jose, 35.4% in Phoenix, 34% in San Diego and 31.5% in Seattle.