December 22, 2020 – The Stimulus Factor. It seems like the next step of government stimulus has been debated forever.


Economic Commentary

The Stimulus Factor. It seems like the next step of government stimulus has been debated forever. When you are out of work or your business is hanging on, time moves very slowly. As a matter of fact, we have been considering the next level of stimulus for such an extended period that some are thinking the delivery of vaccines could negate the need for spending more on government programs to stimulate the economy. But while vaccines will hopefully end the pandemic, there is still a long-way for the economy to go.

We have lost ten million jobs from the start of the pandemic and these numbers do not count the natural job growth we would have picked up over the last nine months. Shutdowns over spikes in cases continue, and the distribution of the vaccine will likely not hit the general public until the spring. This point was brought home by Chairman of the Federal Reserve when he testified before Congress a few weeks ago — Jerome H. Powell pointed to ongoing uncertainty over vaccine speed and distribution, the economic dangers of a surge in virus cases and the grim reality that many remain out of work while testifying before the Senate Banking Committee — according to the New York Times.

The Fed echoed this point after their meeting last week. They feel strongly that this stimulus is needed to help the economy continue to recover, while we recover medically from the pandemic. The Fed is doing their part by committing to keep rates low for as long as it will take. The bottom line? Vaccines will hopefully make 2021 a better year and a comprehensive stimulus package can ease some pain while we wait for the vaccines to do their work.

Weekly Interest Rate Overview

The Markets. Rates hit still another record low last week. For the week ending December 17, Freddie Mac announced that 30-year fixed rates fell to 2.67% from 2.71% the week before. The average for 15-year loans also decreased to 2.21% and the average for five-year ARMs remained at 2.79%. A year ago, 30-year fixed rates averaged 3.73%, more than 1.00% higher than today. Attributed to Sam Khater, Chief Economist, Freddie Mac – “The housing market continues to surge higher and support an otherwise stagnant economy that has lost momentum in the last couple of months. Rates on home loans are at record lows and pushing many prospective homebuyers off the sidelines and into the market. Homebuyer sentiment is sanguine and purchase demand shows no real signs of waning at all heading into next year.” 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

Record-low mortgage rates have led to a refinancing boom unlike any other in American history, but according to new Bankrate data, a surprising number of homeowners are missing out on the opportunity to save. More than a quarter of current owners (27 percent) don’t even know their current rate, putting themselves in a poor position to determine if it’s worth it to refinance. “Millions of homeowners could be missing out on tens of thousands of dollars in savings by not refinancing their home loans at this year’s record low rates,” says Greg McBride, Bankrate chief financial analyst. “Roughly 8 in 10 homeowners with a home loan have not refinanced and more than 1-in-4 doesn’t even know what rate they’re paying.” The nationwide survey showed that 17 percent of borrowers say they have refinanced this year, an additional 27 percent have considered refinancing but haven’t done so, and 52 percent have not considered refinancing. This means that despite the ongoing record low interest rates, 80 percent of owners have not refinanced. To be sure, some of these homeowners aren’t eligible for refinancing or have other compelling reasons not to refinance. Source: Bankrate

The latest analysis from Zillow revealed that the share of homes that sold above list continues to rise with persistent buyer demand moving deeper into the year. Sellers are reaping the benefits of record-low interest rates and continuously tightening inventory. According to Zillow, 22.4% of homes purchased in the U.S. were sold for more than their initial list price in September, up from 20.2% in August and up significantly from the 15% of homes that sold above their listing prices in September 2018 and 2019. The market was off to a later start than usual due to the COVID-19 pandemic and folks are now scrambling to purchase their home before another possible shutdown, as numbers continue to rise once again. “The housing market is taking us all back to Economics 101 and teaching lessons about supply and demand,” said Zillow senior economist Chris Glynn. “A persistent interest in buying and moving is creating an imbalance that is driving prices higher than we typically see at this time of year. In many cases, buyers in this market should be realistic about the chance of bidding wars and leave themselves financial flexibility by looking at homes listed for less than their maximum price point. With tight inventory, low-interest rates, and robust demand from households re-evaluating their housing needs, a strong, competitive market with many transactions is likely here to stay into 2021.” Source: Zillow

With remote work becoming almost mandatory for many workers across the U.S. during the COVID-19 pandemic, many looked to move into more rural areas. However, new statistics from Redfin report that there has been a resurgence in interest for homes in urban areas. This could continue to fuel home sales and mortgage activity, which has been predicted to hold strong through 2021. According to the report, October 2020 saw the first sign of renewed interest in urban areas. Redfin reported that pageviews of homes in large metro areas which includes cities and their surrounding suburbs, increased 200% year-over-year. Pageviews for these large metro areas are now closing in on those of homes in rural areas, which increased 235% year-over-year in October. “Rural areas and small towns remain desirable—especially for families who need space to accommodate remote work as the pandemic persists—but record-low mortgage rates are motivating people to search in cities, too,” said Redfin chief economist Daryl Fairweather. “Many buyers are crossing their fingers that restaurants, bars and shops may be bustling again in the next year or so, and they’re looking to invest in the eventual resurgence of cities.” According to Redfin, the median home sale prices increased more than 18% year-over-year for rural areas and nearly 16% in urban areas. “While life in the city has changed during the pandemic, with empty sidewalks and boarded-up storefronts becoming the norm, some buyers are looking long-term and realizing it’s possible to buy a condo for a 2017 price without competition,” said Jessie Culbert Boucher, a Redfin real estate agent in Seattle. “If they hold onto it for five years, they’ll likely ride out the current downturn, make money and enjoy the return of vibrant city life.” Source: RedFin –

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