Posted January 1, 2020

Rocket Mortgage releases 2020 housing market predictions

Mortgage provider looks at projected interest rates, housing availability and new home trends for the year ahead. 

Whether you’re looking to buy or sell your home in 2020, it helps to have some sense for where things are going in the housing market. While no one can see the future, we’ve done our best to uncover the available data and information from analysts to give you a better idea of what to expect. It’s certainly a better reading than you would get from tarot cards.

Let’s not belabor the preamble any longer. What’s coming in 2020?

Interest Rates Should Remain Pretty Low

There are a couple of reasons mortgage rates are expected to remain low in 2020. One of these is based on policy and the other has everything to do with market forces.

As part of its mandate to control inflation, the Federal Reserve controls short-term interest rates. These rates affect the cost for banks to borrow money overnight. Although this seems like a bit of a stretch, there’s a defined trickle-down effect between these short-term rates and longer-term rates for things like cars and even mortgages. As one goes up, so does the other and vice versa.

The Federal Reserve has shown in projections that they expect not to change short-term interest rates at all in 2020, barring significant economic changes.

If you combine these projections with some things that are going on in the geopolitical landscape, there’s a reason to believe low rates may continue. In 2019, the trade war between the U.S. and China was a rather big deal. While there is now a tentative deal between the two countries on at least phase 1 of a broader agreement, there’s still plenty of details to be worked out. Implementation hasn’t all been figured out.

Another key market mover in 2019 were the happenings around Brexit. That’s something to continue to keep an eye on this year because they still have to figure out how travel between countries will happen as well as how trade works between Britain and the member states.

Situations like those we’re seeing in China and Britain create a certain amount of uncertainty within traders on the market. When there is uncertainty, money gets pulled out of stocks and put into bonds that have a guaranteed return. They want to balance the risk associated with stocks. Even though equities have a higher theoretical upside, they also get hurt more in a market fall.

Mortgage rates have a direct relationship with bond yields. If more people are buying bonds because there’s more perceived volatility in the market, yields on bonds go down because they don’t have to provide as high a return, and mortgage rates go down. When more money is flowing into stocks, yields on bonds go up along with mortgage rates.

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