Just Snap Your Fingers. If you listened to Chairman Powell of the Federal Reserve speak recently, you will extract a lot of optimism about where the economy is headed. The government has provided plenty of stimulus — not only helping individuals and businesses to survive this national crisis, but also giving us a foundation to bounce back.
As the nation gets vaccinated, this optimism will continue to grow as it should. But there was another message from Powell. There are still dangers lurking which could delay or derail the recovery. In other words, we will not get vaccinated, snap our fingers and then go back to normal. Though the crisis hit us like a brick wall, stopping the economy in its tracks, we will not recover in a straight line.
Just look at the recovery of jobs. We added back millions of jobs in the early stages of the recovery, but the winter COVID surge caused a pause. Now things seem to be picking up again as we added almost one million jobs last month. Do we think there will be another pause? We hope not, but his caution is that we have a long way to go. We will not snap our fingers and get back to normal. With COVID, we are trying to figure out what normal will look like.
Weekly Interest Rate Overview
The Markets. Rates moved below the 3.0% level last week for the first time in seven weeks. For the week ending April 22, Freddie Mac announced that 30-year fixed rates decreased to 2.97% from 3.04% the week before. The average for 15-year loans fell to 2.29% and the average for five-year ARMs rose to 2.83%. A year ago, 30-year fixed rates averaged 3.33%, 0.36% higher than today. Attributed to Sam Khater, Chief Economist, Freddie Mac – “The drop in mortgage rates is good news for homeowners who are still looking to take advantage of the very low rate environment. Freddie Mac research suggests that lower income and minority homeowners have been less likely to engage in the refinance market. Low and declining rates provide these homeowners the opportunity to reduce their monthly payment and improve their financial position.” Note: Rates indicated do not include fees and points and are provided for evidence of trends only. They should not be used for comparison purposes.
Real Estate News
The saying —“the home is where the heart is” — is a timeless one, and one further backed by Unison’s recent “State of the American Homeowner” survey. The analysis found that homeowners are using their homes as offices, gyms, schools, and much more due to the pandemic, and as a result, nearly two-thirds (64%) of those polled say living through the pandemic has made their home more important to them now than ever before. Unison found that homeownership brings positive feelings, with 91% of homeowners saying they feel secure, stable, or successful owning a home. Seven in 10 (70%) homeowners felt emotionally attached to the homes that have kept them safe over the past year—with 51% calling it a “key part of their life”—a significant increase compared to before the pandemic when 58% of homeowners had an emotional attachment to their home. Millennials were more likely than older generations to have an emotional connection to their home and were more likely to put their future saving and retirement plans at risk to keep it. Of those polled, 78% of millennials felt emotionally attached to their home, as opposed to 70% of Generation Xer’s, and 69% of Baby Boomers. “The American Dream of homeownership has taken on increased importance as the home has become the center of our daily lives, bringing our work, shopping, schools, and gyms into where we live,” said Unison CEO Thomas Sponholtz. Source: MReport
CoreLogic, Irvine, Calif., said supply constraints and buyer demand pushed its monthly Home Price Index to a 15-year high in February. The HPI recorded highest annual growth since 2006 in February at 10.4%, as demand continued to clash with historically low supply. These factors have created increased affordability challenges, especially as mortgage rates also begin to rise. The report also noted homebuyers have steadily moved away from densely populated, high-cost coastal areas in favor of more affordable suburban locales. The number of homebuyers in the top 10 metros with the largest net out-migration who chose to move to another metro increased by 3 percentage points in 2020 to 21% from 2019. “Homebuyers are experiencing the most competitive housing market we’ve seen since the Great Recession,” said Frank Martell, president and CEO of CoreLogic. “Rising mortgage rates and severe supply constraints are pushing already-overheated home prices out of reach for some prospective buyers, especially in more expensive metro areas. As affordability challenges persist, we may see more potential homebuyers priced out of the market and a possible slowing of price growth on the horizon.” Source: CoreLogic
It is well-established that the back half of 2020 and, so far, 2021 have been periods of increased activity in the housing market. With a pandemic forcing folks to work from home and households seeking more space, not to mention all-time low mortgage rates, many homeowners are opting to relocate—but what factors are really driving them and where are they going? Recent data from CoreLogic found that affordability, job opportunity, and outdoor amenities are major driving factors of relocation these days. CoreLogic’s data, collected April through December 2020 showed most migrating homebuyers choosing metros that are either adjacent to their current location, had a lower cost of living, or both. In ranking the metros with the most outbound migration, CoreLogic found that large coastal areas were losing the most homeowning residents. How unusual is this reported shift of migration away from high-cost, large metro areas? In a separate migration report, the Federal Reserve Bank of Cleveland showed an increased net migration out of high-cost, large metro areas during the pandemic was not a repeat of something that happened during the Great Recession but, according to Policy Economist Stephen Whitaker, “rather a rapid acceleration of a trend emerging during the previous expansion.” Backing up CoreLogic’s data, Whitaker writes, “it is not surprising then that the big ‘winners’ from the changes in net migration during the pandemic are smaller metro areas near the high-cost, large metro areas.” Source: MReport