We spent the past few weeks presenting for you summaries of 2019 and predictions for 2020. Then, as we do every year, there is an event that reminds us that predicting the future is impossible. This year it is the Middle East which is getting all the attention. In previous years, the events ranged from Brexit to natural disasters. In the past decade, most of the time the markets recover quickly from "event traumas," but there is always the possibility that worries will continue to simmer or even escalate.

In the case of the issue with Iran, the initial event caused interest rates to fall, oil prices to rise and the stock market to move lower. The effects were short lived, and we expect if there were an escalation, the markets will react accordingly. Though we are not predicting an escalation or what type of reaction would happen. We just point out every year that the best of predictions can go awry quickly in the face of unforeseen events. And even when there are no events, we can't predict market turns.

Right now we still have low interest rates and an economy that continues to grow. At the end of the month we will get the first reading of economic growth for the last quarter of 2019. That should give us a clearer picture which will help our assessment of how strong the economy really is -- again, unless something else happens. For now, we can continue to enjoy the pretty good times and hope they will continue for all of 2020. It certainly is a good time for those who are thinking about purchasing or refinancing real estate.

Last year will be remembered, in the real estate world, for its home loan rates that persistently and unexpectedly declined. While rates aren’t going to plunge another percentage point – November’s average rate for a 30-year fixed loan was 3.7%, compared with 4.87% in the year-ago month, according to Freddie Mac data – they’re going to set some new lows, Fannie Mae said in a forecast. The average fixed rate probably will be 3.6% in 2020, which would be the lowest annual average ever recorded in Freddie Mac records going back to 1973. It compares with 3.9% in 2019 and 4.5% in 2018, according to Fannie Mae. The current record was set in 2016 when the annual average fell to 3.65%. Rates on home loans are set, ultimately, by bond investors who keep a steely eye on inflation as a gauge of the yields they are willing to take. Rising inflation eats into their returns and leads to higher interest rates. In a low-inflation environment, like today, they can still make money while taking low yields, which translates into low rates for borrowers. For shock therapy, consider the annual average in 1981: 16.63%.  That’s not the highest rates on home loans ever booked. Looking at weekly averages, the rate hit 18.6% in mid-1980 as the economy struggled with stubborn inflation. Source: HousingWire

Rising home values have helped homeowners gain $5,300 in equity on average in the year to the end of the third quarter. That means that the approximately 64% of homeowners whose homes are financed saw an average increase in equity of 5.1% year-over-year according to CoreLogic’s Home Equity Report for Q3 2019. For owners of 78,000 single-family homes, the quarter saw them regain equity while the number of homes that are underwater decreased by 210,000 (10%). “Ten years ago, during the depths of the Great Recession, more than 11 million homeowners had negative equity or 25% of financed homes,” said Dr. Frank Nothaft, chief economist for CoreLogic. “After more than eight years of rising home prices and employment growth, underwater owners have been slashed to just 2 million, or less than 4% of financed homes.” Source: CoreLogic