January 19, 2021 – Wild and Crazy Year? We were hoping that 2021 would not be as wild and crazy as 2020.

Economic Commentary

Wild and Crazy Year? Apologies to Steve Martin. We were hoping that 2021 would not be as wild and crazy as 2020. Yet the first few days of January was anything but calm. We started with spikes of COVID-19 as holiday gatherings and the cold weather provided ideal conditions for spreading the virus.

The first trading day of the year, the Dow Jones stock average fell almost 400 points after being down 500 points earlier in the day. We then moved into two hotly contested Georgia Senate races in which control of the Senate lay in the balance. The result we thought was a split Congress which could cause more of the gridlock we witnessed at the end of 2020, but the surprise of the Georgia Senate elections placed us at least somewhat in another direction.

The very next day, in what is usually a perfunctory function of Congress — the tabulation of electoral votes turned into total chaos — with the storming of the Capitol, objections and other forms of challenges. Starting the new year with the National Guard being called out in DC, sounded a lot like 2020. The good news in all this chaos? Interest rates have remained near historic lows which will translate into more opportunities to purchase or refinance real estate this winter. Hopefully, rates will hold close to where they are—but again, thus far it has been a wild and crazy year.

Weekly Interest Rate Overview

The Markets. Rates rose moderately for the first time in a long-while. For the week ending January 14, Freddie Mac announced that 30-year fixed rates rose to 2.79% from 2.66% the week before. The average for 15-year loans also increased to 2.23% and the average for five-year ARMs rose sharply to 3.12%. A year ago, 30-year fixed rates averaged 3.65%, more than 0.75% higher than today. Attributed to Sam Khater, Chief Economist, Freddie Mac – “As Treasury yields have risen, it is putting pressure on mortgage rates to move up. While rates on home loans are expected to increase modestly in 2021, they will remain inarguably low, supporting homebuyer demand and leading to continued refinance activity. Borrowers are smart to take advantage of these low rates now and will certainly benefit as a result.” 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

CoreLogic released its final three-year housing and mortgage outlook report for the year, and if numbers hold up, the data company predicts 2021 will maintain its unprecedented home sales and record low rates on home loans as the economy continues to recover. CoreLogic chief economist Frank Nothaft said that the term “unprecedented” best describes 2020. More importantly, he said the current environment may even holdup into 2023. “We may actually see rates below 3%, perhaps for the entire year of 2021,” Nothaft said. “And I wouldn’t be surprised if this low-rate environment continues even beyond 2021, not necessarily at 2.7% or 2.8% once we get out to 2022, but we are expecting rates over the next three years to be far less than they’ve been in the last decade.” On average, CoreLogic predicts mortgage rates to sit closer to 3.2% over the next three years – nearly a percentage point lower than the average of the 2010-2019 decade. For families with good credit, these low rates will provide ample opportunity to buy or refinance a home. However, Nothaft expects that loans originated today, with a contract rate of 3% or lower, are more likely to have a relatively long life and lenders will not see them coming into refinance anytime soon. Source: HousingWire

Many homeowners have spruced up their homes during the pandemic. But major remodeling upgrades could result in homeowners needing to update their insurance, too. Otherwise, the home may be under-insured if a disaster ever strikes. “Remodeling your home can lead to higher insurance rates, since a home remodel often increases the rebuild cost of a home,” a new report from QuoteWizard.com states. “Your dwelling coverage limit should match the rebuild cost of your home.” In general, expect to pay about an extra $36 for every additional $10,000 of added rebuild cost after a remodel, QuoteWizard.com’s report notes. Broken down by project, insurance rates likely will increase by an average of $54 after a $15,000 upper-grade bathroom renovation. After a $50,000 kitchen upgrade, insurance rates could increase by $180. Further, a home addition of about $48,000 for, say, a 20-by-20 family room (or 400 square feet) could increase rates by $173. A deck upgrade of about $10,000 could increase insurance rates by an average of $36 a year, the report notes. The quality of the updates could also have an impact on premiums. For example, an updated roof that uses low fire resistance or window update with weak window panes could also result in an increase in home insurance premiums, the report notes. Homeowners may want to talk to insurers before they start a major remodeling job so they can brace themselves for any added premium costs. Insurance companies factor in several variables when setting premiums, such as your claims history, home’s value, the home’s age and material, safety features, climate, and local property crime rates, and more, QuoteWizard.com notes. Source: QuoteWizard

The work-from-home trend may be translating into a need-a-new-home trend. The COVID-19 pandemic has prompted more people to work remotely, and as more people hunker down at home, they’re looking at real estate for a move. Forty-five percent of consumers recently surveyed by Homes.com say they would move if given the chance to continue working remotely. Twenty percent of respondents also indicated that remote work was the reason why they moved within the last year. Homes.com surveyed more than 1,000 consumers and 600 real estate professionals to learn about moving patterns fueled by the pandemic. “The surge in the work-from-home population has rewritten the playbook for many homebuying and rental decisions, from when and where to relocate, to what people are looking for in their next residence,” says David Mele, Homes.com president. “That, in turn, is prompting changes for real estate professionals, many of whom are expanding their market area to better serve clients who are moving farther than before. If working from home becomes standard operating procedure for many companies, as predicted, these changes will be with us for years to come.” More Americans are no longer bound to lengthy commutes to city centers as remote work grows. That is freeing them to choose new locations to live, as well. Thirty-two percent of real estate professionals surveyed reported an uptick in city-to-suburb moves, and 23% said they were fielding fewer requests for housing near public transportation or highways. Source: Homes.com