After a turbulent year, what is in store for the U.S. economy and the mortgage market in the months ahead? Generally, rates will remain low given the subdued inflation environment along with the continued support from the Federal Reserve’s asset purchase program.
It is important to follow Fed activities as they are the most powerful central bank on the planet and what they say and do can cause seismic shifts in the financial markets. The Fed will continue to purchase $120 billion in treasury and mortgage-backed securities until unemployment declines sharply lower and inflation solidly higher. This means home loan rates should remain relatively low for quite some time.
The housing sector should continue to be a bright light in the U.S. economy given low rates and with many city-dwellers looking to uproot and look for more space at affordable prices. Low housing inventories could be a hurdle for would-be homebuyers in 2021.
On the economic front, Fed Chair Jerome Powell recently said the Fed is strongly committed to doing what is necessary to help the economy until it sees substantial improvement.
Bottom line: As the U.S. economy slowly pulls out of the pandemic-induced slowdown with more and more vaccines to battle COVID-19, the economy should continue to improve given some pent-up consumer demand. Normally, that could push rates higher, but with the Fed’s backing, potential homebuyers should be able to keep borrowing costs at affordable levels.
Source: Mortgage Market Guide
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