The average U.S. rate for a 30-year fixed mortgage fell to 2.99% this week, the second-lowest on record, as investors worried about the economic fallout of the COVID-19 pandemic piled into the bond markets.
The rate fell from 3.01% last week, Freddie Mac said on Thursday. The 15-year fixed-rate averaged 2.51%, also the second-lowest on record, down from last week when it was 2.54%, according to the mortgage financier.
The cheap financing costs likely will boost home sales at a time when the U.S. economy sorely needs a shot in the arm, said Freddie Mac Chief Economist Sam Khater. GDP plunged a record 32.9% in the second quarter as states grappled with the COVID-19 pandemic, the Commerce Department said in a Thursday report.
“Real estate is one of the bright spots in the economy, with strong demand and modest slowdown in home prices heading into the late summer,” Khater said. “Home sales should remain strong the next few months into the early fall.”
U.S. pending home sales increased 17% in June, the second consecutive month of double-digit gains, as the low mortgage rates spurred demand for homes, the National Association of Realtors said in a report on Wednesday.
A seasonally adjusted index measuring signed contracts was 6.3% above the year-ago level after state lockdowns caused by the COVID-19 pandemic pushed transactions into summer months, said Lawrence Yun, NAR’s chief economist.
The future of the U.S. economy depends on how well the coronavirus pandemic is controlled, the Federal Reserve’s rate-setting committee said on Wednesday. That’s not good news for a nation that leads the world in COVID-19 infections and deaths.
“The coronavirus outbreak is causing tremendous human and economic hardship,” the Fed statement said. “The path of the economy will depend significantly on the course of the virus.”
The statement came shortly after the U.S. broke the 150,000 threshold for deaths from COVID-19, as measured by Johns Hopkins University. The U.S. has about 4.2% of the world’s population and has recorded 23% of COVID-19 fatalities. The No. 2 nation for pandemic deaths is Brazil at 88,539, according to the Johns Hopkins data.
The way forward for a U.S. recovery is “extraordinarily uncertain,” Fed Chairman Jerome Powell said in a video-call press conference with reporters after the release of the statement.