In this 10 minute video, Amber Kovarik and I discuss the latest in mortgage rates, unemployment, inflation, and inventory.
I would like to address a very specific headline I am seeing more and more often. It is the one that says there are 10 million mortgage borrowers behind on their payments. That is NOT the case. According to the US Census, there are about 10 million renters and borrowers behind on their payments. And according to Black Knight, who does the most thorough analysis of delinquencies and forbearances, about 3.4 million borrowers are delinquent on their payments, and that number includes borrowers in forbearance. With that being said, it is safe to assume that there are about 6.6 million renters behind on their payments. The renter data is tough to collect so I am not sure if that is just the count in large apartment complexes or if that includes single-family renters.
These numbers are important to keep in mind when we look at the future health of the housing market.
Today the CFPB proposed furthering the ban on foreclosures through the end of 2021. Under current CFPB foreclosure rules, a borrower must be 120 days delinquent before the foreclosure process can start. I am not sure what the timelines are for those who were in the foreclosure process last year when the moratoriums were put in place. The services want to start where they left off, but will they be able to? It sounds like the CFPB does not agree though. The 120 days is to protect those who exiting their forbearance plan more than 90 days late from immediate foreclosure.
Last week the CDC extended the eviction moratorium for the third time, this time through 6/30/21.
There is a lot of talk about the market shifting. It is and this is a good thing. Don’t be nervous when you hear other agents are talking about fewer showings and fewer offers. Going from 30 offers to 5 offers is still great for the seller. Demand is dropping faster than supply. Supply has leveled over the past few weeks, it is still 78% below normal while demand is 11% above normal. As long as demand is higher than supply, prices will go up. The 19-20% appreciation rate we are seeing is not healthy and as people are priced out of the market due to sky-high appreciation, demand will continue to slow. Prices will still go up, just at a slower rate.
Our local median sales price reached nearly $360,000 and the national median sales price reached an all-time high of $370,000. That is even higher than the housing bubble highs.
The stock markets have hit all-time record highs this morning after being closed all day Friday. The Friday new jobs report, which showed 916,000 new jobs created in March, the best monthly report in 7 months, and today’s better-than-expected ISM index report on the growth of the services sector of the U.S. economy, are the two top drivers of the markets this morning.
In regards to interest rates, there are two independent forces in play that could push up interest rates on 30-year fixed-rate mortgages. The first is a general force that will push up all interest rates, due to a rebounding economy which increases the demand for borrowing and drives inflation rates higher. As the U.S. economy continues to recover, this traditional force of supply-and-demand will naturally push up the rates on 30-year fixed-rate mortgages.
The second important force, which specifically applies to mortgage rates, is the Fed’s monthly mortgage-backed security purchases which are artificially holding mortgage rates 1/2 – 1% below where they would be in a normal market price. The Fed cannot continue these monthly purchases indefinitely and at some point, they will need to reduce and then stop these completely. The Fed will stop when unemployment clearly reaches 4.00-4.50% and inflation consistently exceeds 2.00%.
Second Home Loans:
The MBA and many lenders and mortgage companies have stated opposition to the recent Fannie Mae and Freddie Mac rule only allowing 7% of their portfolios for second home loans. Currently, most lenders are selling closer to 14% of their second home loan portfolio to the GSEs. What many lenders are doing is increasing the interest rates on those loans. Guild has increased refinances by about 1% hoping that satisfies the requirement and allows them to sell those loans to other investors. As more info comes out about these changes, we will be sure to share the news.
Sarah Perkins is an award winning account executive and has been in title sales since 2004. As the Director of Industry Research & Senior Account Executive, Sarah’s role is to bring real estate transactions to Navi Title. Sarah supports her clients by helping them navigate the ever-changing real estate space through thorough research and understanding of current trends impacting today’s home buyers and sellers.