The U.S. stock market started the week on a sour note, with the Dow Jones dropping nearly 1,900 points, or 7.3 percent in value before a halt in trading, within the first half-hour of markets opening. The 10-year and 30-year Treasury yield, which is more directly tied to mortgage rates, also saw a historic decline Monday morning, with the 10-year dropping below 0.5 percent for the first time in U.S. history.
Danielle Hale, the chief economist at realtor.com, said in a statement that more investor unease is likely ahead, but that will also mean historically low mortgage rates could dip even further.
“These developments mean that last week’s record-low mortgage rates are likely to be broken by new records this week, especially as expectations of additional Fed rate cuts at next week’s March meeting rise,” Hale said. “Whether these low mortgage rates bring out home buyers or merely create a refinancing boom remains to be seen.
“Buyers in the market today, will see monthly payments roughly $100 lower than one year ago if they plan on financing the typical home.”
The plummet followed on the heels of a more than 30 percent drop in oil futures over the weekend, as top producers Russia and Saudi Arabia negotiate over price and demand, as well as the rise in cases of coronavirus (COVID-19).
The drop was so steep, the S&P 500 Index’s nearly 7 percent decline in the morning triggered a 15-minute pause in trading at around 9:30 a.m. Trading will halt once again for 15 minutes if the index drops more than 13 percent from where it closed Friday.
Trading will be suspended for the day if the S&P 500 Index drops more than 20 percent.
While many in the industry may view the drop in the market and Treasury yields through the lens of declining mortgage rates, the reality is, the dip is wiping out a tremendous amount of value in real estate companies. As of 10 a.m., Monday, real estate stocks were taking a beating, with Zillow down 7.45 percent, Realogy down 7 percent, RE/MAX down nearly 8 percent, eXp World Holdings down 7.2 percent and Redfin down 8.5 percent.
Zillow, for example, was at a yearly high of $65 per share just three weeks ago and was down below $45 per share, this morning. Realogy’s steady rebound to more than $13 per share has almost been wiped out, with the company trading back down at around $7 per share. Redfin reached an all-time company high in value last month, trading at more than $32 per share and is back in the $23 per share range. RE/MAX was also trading at more than $40 per share last month and today, was below $25 per share.
Fears over the rapid spread of coronavirus have created chaos in the financial markets in the past couple of weeks, causing both historic drops and massive corrections on any given day.
The disease, meanwhile, continues to spread in the U.S. The death tolls reached double digits and the number of cases surpassed 500, according to the New York Times.
It’s also putting a crunch on local economies with the cancellation of major events like Austin’s South by Southwest festival.