Early September’s three-year low in mortgage rates caused home prices to heat up in October, according to Black Knight.
U.S. home prices grew at an annual pace of 4.25% in October, the biggest year-over-year gain in nine months, compared with an increase of 3.9% in September, as cheaper financing gave people the ability to bid up home prices, the company said.
Measured on a monthly basis, home prices rose 0.33%, which is almost six times the 5-year average for the month of October, Black Knight. It was the largest single-month increase for any October since 2005.
“Falling rates have significantly increased buying power throughout 2019,” the company said in a statement, “and that’s helping to reheat the housing market.”
When mortgage rates fall, borrowers typically can get bigger mortgages because the size of the loan they’re qualified for is based on their monthly payments. That means they can pay more for the home they want.
The average U.S. rate for a 30-year fixed mortgage fell to a three-year low of 3.49% during the first week of September, according to Freddie Mac. Most buyers influenced by the low rates would have had time to negotiate a deal and close on a home by the end of October.
Home sales in 2019, measuring existing and new properties, probably will increase 1% to 6.1 million, Fannie Mae said in a forecast last month. In 2020, the annual gain in sales probably will be 1.1%, the mortgage company said.
The average U.S. rate for a 30-year fixed mortgage probably be 3.9% this year, down from 4.5% in 2018, Fannie Mae said.
For the year, the median U.S. home price probably will increase 5.2%, compared with 6% in 2018, Fannie Mae said, based on the Federal Housing Finance Agency’s index measuring home purchases using Fannie Mae and Freddie Mac mortgages.