December 28, 2021 – Happy New Year! Not only has the year flown by — the holiday season is also almost over.


Economic Commentary

Happy New Year. Not only has the year flown by — the holiday season is also almost over. This season was certainly different from last season when everyone was hunkered down at home due to the pandemic. Not completely different, because today, the world is also watching the new Omicron variant spread. All the while, experts are assessing how much protection vaccines are providing against this new variant.

The last two years almost seem unreal, as no one thought we would be living out a science fiction movie. And the real question on everyone’s mind is — what is 2022 going to look like? We can guess that the threat will not just die out. We can also surmise that vaccines will prevent many deaths. Some experts are saying that this could be the last hurrah for the pandemic and as warm weather approaches in the Spring, we might not only have more of us vaccinated, but additional treatments will be available as well.

If the nation does get back to business, the next question on everyone’s mind is – will inflation die down? If the Federal Reserve is forced to raise rates more aggressively to cool inflation, that could also hold back our recovery. We are not predicting “stagflation” by any means, but a strong economy is important so we can get the economy producing effectively to eliminate supply shortages. This balance will be an important consideration in 2022.

Weekly Interest Rate Overview

The Markets. Mortgage rates fell this past week, as concerns intensified regarding the Omicron variant. For the week ending December 23, 30-year rates moved down to 3.05% from 3.12% the week before. In addition, 15-year loans fell to 2.30% and the average for five-year ARMs decreased to 2.37%. A year ago, 30-year fixed rates averaged 2.66%, more than .33% lower than today. Attributed to Sam Khater, Chief Economist, Freddie Mac, “The market volatility resulting from the COVID-19 Omicron variant is causing mortgage rates to decrease. As the year comes to a close, the housing market is proceeding steadily. However, rates are expected to increase in 2022 which will impact homebuyer demand as well as refinance activity.”   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 median net worth of U.S. households increased from $103,000 in 2016 to $127,000 in 2019 – a gain of 17.6% and the highest amount since 2007, according to The Distribution of Wealth in America Since 2016, a new report released by the Mortgage Bankers Association’s Research Institute for Housing America. “After nearly a decade of rising inequality during the Great Recession and its aftermath, the distribution of wealth in the United States became somewhat more equal between 2016 and 2019. Americans became richer, with middle-class households on the receiving end of a bigger slice of the wealth gains,” said John C. Weicher, author of the report and Director for the Center for Housing and Financial Markets with the Hudson Institute. The study reported growth in homeownership and the steady rise in home values and the stock market drove the increase in middle-class wealth. It said the median net worth of every racial and ethnic category also increased, with the largest increases coming from Black and Hispanic households. “Thankfully, the quick rebound in the labor market and the unprecedented policy response have mostly kept households afloat during the COVID-19 pandemic, and the strong housing market and stock market have boosted overall wealth,” Weicher said. “Homeownership is the primary source of wealth accumulation for most middle-class households, and the final years of the 2010s saw an increase in the homeownership rate at a time of steady-rising home values,” said Edward Seiler, RIHA Executive Director and MBA Associate Vice President of Housing Economics. “Fast-forward to 2021, and the significant demand for homebuying amidst low inventory levels has further fueled gains in home prices and most homeowners’ equity. However, there are still wealth disparities by race. Among middle-wealth households, white households have higher homeownership rates and have more home equity.” Source: The MBA

Covid relief programs allowed millions of struggling Americans to pause mortgage payments, and many of those bailouts are now expiring, putting cash-strapped borrowers at risk. “The maximum forbearance term was 18 months for most programs, and many borrowers are reaching that point now,” said Michael Fratantoni, chief economist of the Mortgage Bankers Association. While many are leaving forbearance programs by tacking those postponed payments onto the end of their loan repayment schedule, borrowers must resume payment to qualify, he said. However, if homeowners still can’t make payments, they may have other options. “You should definitely talk it over with your servicer,” said Mark McArdle, assistant director of mortgage markets at the Consumer Financial Protection Bureau. “They’re supposed to reach out 30 days before your forbearance ends, and there’s a range of options.”

  • Loan modification. If borrowers have income but can’t afford their old payment amount, they may qualify for a loan modification, which adjusts the mortgage to lower monthly payments. “If you expect to have difficulty making a payment, reach out to your servicer immediately,” Fratantoni said. “The sooner you get in contact with your mortgage lender, the more options you will have.” For example, servicers may extend the loan term or reduce interest rates to lower payments, depending on the type of loan and borrower’s situation.
  • Sell your home. With home prices up by almost 20% compared to the previous year, borrowers with long-term job loss or a shuttered business may consider selling their property. Some 87% of borrowers in foreclosure have positive equity, according to RealtyTrac, a foreclosure database, meaning their property is worth more than their mortgage balance. In many cases, sellers may offload their homes quickly due to high market demand and walk away with cash, Fratantoni said.
  • Homeowner Assistance Fund. If a loan modification doesn’t work, borrowers may explore the Homeowner Assistance Fund, a nearly $10 billion program created by the American Rescue Plan. The U.S. Department of Treasury is currently reviewing each state’s plan, McArdle said, and programs may be running by the end of the first quarter in 2022. Borrowers can find their state’s program through a map from the National Council of State Housing Agencies. Source: CNBC

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