Coronavirus Economic Turmoil A Silver Lining For Home Buyers, Builders

Frequent handwashing, buying extra groceries, refraining from touching your face.

These items are on most people's list of coronavirus preparations. 

But what about talking to a broker about a new home purchase or mortgage refinancing? 

The COVID-19 outbreak and resulting economic turbulence may have a silver lining for home buyers and builders, sellers and others who stand to benefit from lower interest rates.

Mortgage Rates Lowest In Years

Unease that has roiled the markets since the outbreak began had already begun to push some investors away from stocks and into treasury bonds, a move that pushed mortgage rates lower.

Last week, refinance application volume jumped about 15% over the previous week, according to the Mortgage Bankers Association’s seasonally adjusted index.

The average contract interest rate fell from 3.73% to 3.57% last week — before the Federal Reserve made its emergency rate cut. 

See Also: Desperate Measures? Here's What Experts Think About The Fed's Interest Rate Cut

Tuesday's emergency rate cut solidifies the expectation for lower home borrowing rates, giving a boost to anyone looking for a mortgage or to refinance.

"When the coronavirus hit, I guess you could say bad economic news is good news for interest rates," Bill Banfield, executive vice president of capital markets for Quicken Loans, told the Detroit Free Press.

"Interest rates fell and really escalated the interest in refinancing even further."

Rates on a 30-year fixed-rate mortgage had already dropped about a percentage point since last year, and Banfield said rates are the lowest since about 2012.

Homebuilders Love It

Homebuilder stocks have risen as the market has reacted to the virus outbreak, and several were up again after Tuesday's Fed rate cut.

Among the homebuilder stocks on the rise Wednesday were Lennar Corporation LEN, PulteGroup, Inc. PHM, D.R. Horton Inc. DHI, KB Home KBH and Taylor Morrison Home Corp. TMHC. 

Fortune Brands Home & Security Inc FBHS, which makes home fixtures and hardware, was up more than 3% on Wednesday.