The bizarre impact of coronavirus on local home sales
No matter where you live, you’d have to have a pretty hard heart not to be saddened and disturbed by news of the deadly coronavirus. The human toll continues to grow in nations as far-flung as Iran and Italy. Entire cities in China have been quarantined. Tourists and other visitors to China are struggling to get home. Government and health organizations are desperately trying to stop the virus’s spread, but a medical solution may be far down the road. Here in the U.S., people are feeling apprehensive about how pervasive the disease might become and wondering if the crisis will eventually touch them so much so that some psychologists are warning about “coronavirus anxiety.”
Well, if you’re a real estate agent, it already has. If ever there were an example of how globally-interconnected the U.S. economy—and in turn, U.S. citizens—have become, it’s the coronavirus’s effect on local real estate markets. Concerns about the stability of the Chinese economy, including the staggering drop in the Chinese stock market, manufacturing slowdowns, and tourist industry losses, have prompted a distinct reaction among U.S. investors, whose financial decisions drive market trends in every industry. Most recently, their tendency during uncertain times to seek safer investment options has caused investors to turn to U.S. Treasury bonds. The U.S. Treasury bond market, and in particular the 10-year Treasury note, is closely tied to how the credit industry operates. The industry’s response to the uptick in Treasury bond sales has been to lower interest rates on many kinds of consumer loans.
That’s why this past month has seen mortgage rates drop even further from their already historic lows by an additional quarter-point. The current average interest rate on a 30-year mortgage is 3.49% and 2.99% for a 15-year ARM, according to Freddie Mac. Not surprisingly, consumers are enthused by the possibility of locking in a low mortgage rate. While they may not understand why rates are falling, they’ve been inspired to jump at the opportunity nonetheless. Mortgage applications have increased to their highest level since 2013. Refinancing applications have escalated by an even greater percentage as homeowners who purchased their homes in a less-favorable mortgage market embrace the chance to lower their monthly payments.
The Federal Reserve Bank also has its eyes on the virus. At its most recent meeting in January, the agency discussed the potential risk they perceive to global markets, should China’s economy plummet. For the time being, they are taking a cautious approach and leaving interest rates alone. Stay tuned for more news as the coronavirus crisis continues to unfold.
While in our personal lives, we would be at least reluctant to trade on another’s misfortune, smart real estate agents—including your competitors—be ready for an earlier start to the selling season. The best mortgage lenders will also use the coronavirus crisis to their advantage and partner with you to close more deals. Doing the math with your customers and demonstrating how a quarter-point interest drop can deliver five-figure savings during the first five years of homeownership, is compelling no matter what’s on the nightly news.
This story was written by Susan Doktor and contributed through money.com.