Many housing markets see increased affordability after drop in mortgage rates due to COVID-19

Housing & Development

By April Bamburg | Mar 22, 2020

Housing may now be more affordable, thanks to the recent drop in mortgage rates spurred on by fears and uncertainty brought on by the spread of the novel coronavirus, according to a real estate market analysis by Redfin

The current 3.2 percent interest rate on mortgages has given home buyers a boost. This might provide a bit of good news in the sea of bad and confusion also brought on by the COVID-19 spread

Low rates have made a big difference in availability of property with a $2,500 mortgage payment. Several markets have seen housing become far more affordable, like Dallas, Portland, Ore., Richmond, and San Diego.  

For example, the analysis found that nearly 76 percent of all homes on the market have a mortgage payment that is $2,500 or lower, and this is an increase of just under 7 percent of homes over 2019. In Portland, that figure is 55.1 percent of homes on the market with a mortgage payment of $2,500 or less.  Redfin notes that the average monthly payment on a home priced at $457,000 was $2,500 in 2019 but would now be $2,250.

But there are issues as well, because not all areas have seen affordability increase.

Phoenix, Las Vegas, Orlando and other areas saw the number of homes that are considered affordable fall. In Phoenix, the number of homes that had a $2,500 or lower mortgage payment fell 3.6 percentage points; in Las Vegas, that drop was 3.4 points.   

In spite of that, Redfin’s economists see positive things in these findings.

“Potential homebuyers now have an extra incentive to buy a home despite all of the economic uncertainty from the coronavirus,” Redfin chief economist Daryl Fairweather said. “Many current homeowners now have the option to refinance their mortgages and gain some extra spending cash each month. Low interest rates won’t help with direct impacts of the coronavirus on the economy like declines in tourism and service sector spending, but they will mitigate impacts to housing.”

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