With the Fed’s ultra-low interest rate easing environment, the 30-year fixed interest rate on mortgages in the United States has reached its 16th low this year. According to Freddie Mac’s announcement this week, the average mortgage interest rate was 2.66%, the lowest in nearly 50 years.

It is generally believed that lower long-term mortgage interest rates mean that the threshold for buying a house is lower and the housing market may continue to flourish. However, the November housing market sales data revealed a trend contrary to the aforementioned expectation.

According to the National Housing Agency (NAR) statistics, existing home sales in the US fell 2.5% in November, reaching an annual rate of 6.69 million. The median transaction price fell from US$313,100 the previous month to US$310,800, the lowest in six months. In addition, new home sales also fell by 11%, the worst performance in five months, indicating that the overall housing market is showing signs of cooling.

Nancy Vanden Houten, an American economist at Oxford Economics, believes that historically low mortgage interest rates should support a certain degree of housing market buying. In 2020, it will set the fastest pace of housing market growth in five years, but in 2021 annual existing house sales may only be flat.

Freddie Mac’s chief economist, Sam Khater, said that with the reducing mortgage interest rates and stimulating demand for house purchases, the housing market tended to be strong at the end of this year. But he expected that buying gas would be flat in 2021, with a short-term interference factor being the development of the epidemic and the vaccination.

After the outbreak of the epidemic in March this year, the 30-year mortgage interest rate began to plummet. In July, it fell below the 3% threshold for the first time. Since then, a large amount of demand for home purchase has been detonated. Many homeowners have also used refinancing for house decoration.

Experts worry that with the previous lack of inventory and low interest rates igniting demand for buying, this year’s median house price has climbed 14.6% over the same period last year, marking a double-digit growth for four consecutive months. Higher housing prices would hinder further housing purchases, which was the main reason for the decline in both new home and existing home sales in November. In addition, when mortgage interest rates are too low to be lower, there may be a turning point in the future, which will reverse the purchase of the housing market.

However, some experts are still optimistic about parts of the US housing market in 2021. The reason they hold is that even if the epidemic eases next year, remote work has become a trend. Many white-collar Americans will stay away from metropolitan areas and go to the suburbs to find cheaper items. Some wealthy people are interested in houses in resort towns, which will lead to continued prosperity in many rural or suburban housing markets.

The US NAHB/Wells Fargo Housing Market Index fell to a trough of 30 points in April this year, and then quickly climbed, reaching a historical peak of 90 points in November. But it has dropped to 86 points in December, which was still much higher than the 72 points in February before the outbreak, showing that builders were still optimistic about the housing market.

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