NAR: We Can’t Rely on Low Mortgage Rates Forever
CHICAGO – Mortgage rates fell for three weeks in a row before a very slight rise this week, and the 30-year fixed-rate mortgage is now hovering near its lowest average in three years, according to Freddie Mac.
But while today’s historically low mortgage rates are helping improve home buyers’ purchasing power, the real estate industry can’t rely on the current financing trend to boost sales in the long-term, said Lawrence Yun, chief economist at the National Association of Realtors® (NAR), at NAR’s Policy Forum in Washington, D.C. “At some point, mortgage rates are going to revert back to normal,” Yun said.
In 2000, the average 30-year mortgage rate was 8.1%. Even with today’s low rates, housing affordability is lower than historical norms; if rates rise, what will the market look like?
That’s the real quagmire that needs to be solved, Yun said – the lack of available inventory that’s pushing home prices higher. “Home sales – even with record low unemployment and high job creation – are not breaking higher. We need to ensure there is an adequate [tax] incentive to bring more new homes to the market.”
Yun said the national homeownership rate has remained flat since 2007, and low mortgage rates since then haven’t moved the needle. And because the wealth gap between renters and homeowners is growing, “if homeownership isn’t rising, the wealth divide will expand between the haves and have-nots,” Yun said. If the homeownership rate continues to lag behind historical norms, “one has to wonder: Are we turning into a renter nation?”
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