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Low Rates Could Mitigate Some COVID Damage
Tuesday, April 7, 2020
Black Knight has done
an early analysis of the potential impacts of the COVID-19 pandemic on the
housing market. In our summary of the first part of their paper we looked at
the condition of the housing market in the early part of the year, before the
full extent of what might be coming was evident. It was a market in which
delinquencies were at near record lows, construction was picking up, home sales
were strong, homeowners were sitting on high levels of equity, and lenders were
in the midst of a refinance boom. Then as concerns and uncertainty over the
virus began to emerge, so did unusual volatility in the secondary market and
consequently in interest rates, to the point where the Federal Reserve stepped
in with a round of quantitative easing.
Black Knight then looked toward the probable effects
on other housing segments starting with home sales. As of mid-March 2020, low
interest rates had pushed home affordability to a three-year high. This drove
up demand for what was already limited inventory and home prices reaccelerated.
However, interest rate volatility in recent weeks has had a whipsaw effect on
affordability as well as overall purchase demand.
vicing. It also
reviews some of the actions that have already been taken to curb potential harm
to housing, and makes suggestions about ways technology can be of help
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