Mortgage News Weekly 1/4/21

In This Issue…

A Look Into the Markets

Mortgage Market Guide Candlestick Chart

Economic Calendar for the Week of January 4 – January 9

A Look Into the Markets

After a record housing and mortgage year in 2020, many are asking what is next?

2021 is set up to be another banner year for housing and mortgage originations. There are many reasons to be optimistic, and below are three reasons:

1.  Don’t Fight the Fed: The Federal Reserve played a critical role in stabilizing the mortgage market and helped fuel the incredible housing environment in 2020. They did so by purchasing upwards of $120B in Treasuries and mortgage-backed securities (MBS) per month to help pin down long-term rates.

Looking ahead, the Fed recently shared they will purchase “at least” $120B in Treasuries and MBS monthly until “substantial” improvement is seen in their dual mandate, which is maximum employment and price stability. With unemployment too high and inflation too low, expect the Fed to continue purchasing Bonds and keeping home loan rates low well into 2021, thereby fueling home purchase activity.

2.  Jobs Buy Homes: 2020 was a banner year for housing despite the unemployment rate swelling north of 14%. We enter 2021 with the unemployment rate at 6.7%. Along with a widespread vaccine distribution and new therapeutics coming to market, there is reason to believe the unemployment rate will come down even further. Low rates are great, but you need a job to purchase a home. Millions more Americans will be back to work and will have an opportunity to take advantage of the opportunity in housing.

3. Work at Home a New Trend: COVID forced many to work from home in 2020. Many companies both big and small have come to the realization they can be very productive with employees working from home. So in addition to providing shelter and long-term wealth, would-be homeowners are now attracted to the idea of buying a home where they can work.

Bottom line: We enter 2021 with home loan rates right at historical lows. For the reasons mentioned above and many others not listed, there is a purpose to be optimistic about the housing and mortgage markets this year. If you or someone you know would like to talk about the incredible opportunity, please contact me.

Looking Ahead

We discussed how jobs buy homes above. How fitting we are to see multiple labor market readings, including the December Jobs Report, which will provide the final unemployment rate for 2020. A larger story than the jobs report may be the Georgia runoff on Tuesday, Jan 5th. Financial markets embrace a “mixed” government with a balance of control. If we wind up with something different, we could see some turbulence.

Mortgage Market Guide Candlestick Chart

Mortgage-backed security prices are what determine home loan rates. The chart below is the Fannie Mae 30-year 2% coupon, where currently closed loans are being packaged. The right side of the chart shows the “candles” just below the Red Horizontal line, which represents the best pricing ever. Follow the vaccine progress and potential for more stimulus and let us see how prices react near this ceiling. A move above would introduce the lowest rates ever in 2021.

Economic Calendar