Dow Drops 1,032 Points on Coronavirus Fears
[Editor’s Note: The views expressed here are solely those of Ross Kaplan, and do not represent Edina Realty, Berkshire Hathaway (“Berkshire”), or any other entity referenced. Edina Realty is a subsidiary of Berkshire.]
No, I don’t see mortgages becoming free any time soon.
Even if long-term interest rates fell to zero — or below!** — there would still be transaction costs associated with getting a mortgage: fees for origination, underwriting, title, appraisal, and the like.
But, there’s no denying that, in the wake of today’s stock market plunge and flight to safety, there’s downward pressure on mortgage rates, at least in the short run.
30-Year Mortgage for 3%??
How low will mortgage rates go?
With 10-year Treasury notes and 30-year bonds yielding 1.377% and 1.83%, respectively, my guess is that — with no further market turmoil — mortgage rates for well-qualified Buyers could easily fall 50 basis points or more from here.
That would drop rates from around 3.6% currently to 3% (or very close) for a 30-year mortgage.
Question #2: will cheaper borrowing costs be a tonic for the housing market?
My quick answer: yes, assuming they’re not overwhelmed by a weakening economy and concomitant drop in consumer confidence . . .
**As opposed to individuals, several sovereign nations have been paying negative interest rates on their debt for years. The list includes Germany, Japan, Sweden, Denmark and Switzerland.
