January 26, 2021 – Feel Any Different? Well, we have a new President of the United States.

Economic Commentary

Feel Any Different? Well, we have a new President of the United States. Feel any different? We still have COVID raging, a vaccine-fueled recovery in the works, a bitterly divided electorate and an impeachment trial coming up. While that may not seem vastly different from last week, we might keep our eyes open to look for changes.

One place to look would be Congress, because that is where the new agenda will land. And while the agenda itself is particularly important, the reaction of Congress to the agenda will be very telling. For the past several years, Congress has been as bitterly divided as the electorate. And while there has been a lot of noise about both houses being “controlled” by one party, the truth is that the Senate is also very divided at 50-50.

So, will the agenda be a knock-down drag-out fight, or will there be an air of dialogue and compromise? More likely, the reality will be somewhere in-between. Even that might be considered progress. We are likely to see a new agenda and it would be nice if it is shaped by more participants in a show of unity. We could use it.

Weekly Interest Rate Overview

The Markets. Rates fell back a bit after rising moderately the week before. For the week ending January 21, Freddie Mac announced that 30-year fixed rates eased to 2.77% from 2.79% the week before. The average for 15-year loans also decreased to 2.21% and the average for five-year ARMs fell sharply to 2.80%. A year ago, 30-year fixed rates averaged 3.60%, more than 0.75% higher than today. Attributed to Sam Khater, Chief Economist, Freddie Mac – “Mortgage rates have hovered near historic lows for almost a year, fueling purchase and refinance activity amid a global health crisis. We’re now seeing rates fluctuate a bit as political and economic factors drive Treasury yields higher. However, we forecast rates to remain relatively low this year as the Federal Reserve keeps interest rates anchored near zero for a longer period of time — if needed until the economy rebounds.” 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

For many middle-aged and older homeowners with several years of equity on their homes, 2021 could be a prime time to refinance from a 30-year fixed-rate mortgage into a 15-year loan. The three primary reasons homeowners refinance to shorter-term loans are to save money on interest, to pay off the loan faster, and to build equity. But the possibility of reduced future earnings is another key reason some refinance into a 15-year loan. Why head into retirement with a home loan? It has been well documented how spectacularly interests rates fell in 2020. In the final week of the year, the 15-year fixed-rate mortgage averaged a full point lower than the same period in 2019, This also means that, similar to 2020, refinance rates should remain highly competitive – allowing homeowners to potentially save a ton of money on their payments. But don’t wait too long to refinance to a 15-year if you’re planning on it. Middle-aged homeowners are refinancing in droves, real estate agents and loan officers said. A popular refinancing age is 50, when many homeowners have dipped under 20 years remaining on a 30-year loan. And others are refinancing with an eye on selling their homes and downsizing. “I reach out to old homebuyers all the time and ask them if they are interested in selling, and the ones that say yes usually get the idea to refinance to a 15-year mortgage and take advantage of the market,” said Laura Wilfong, associate broker and agent with Caldwell Banker Upchurch Realty. “But it’s also an individual question. Are you going to be staying in this home long term? Do you get transferred for your job every five years? In that case I would say to take advantage of the low rates and don’t do a 15-year.” Source: HousingWire

CoreLogic, Irvine, Calif., said its November U.S. Home Price Index saw its largest annual appreciation since March 2014. The report said nationally, home prices increased by 8.2% in November from a year ago. On a month-over-month basis, home prices increased by 1.1% from October. CoreLogic said home price growth remained consistently elevated throughout 2020. Home sales for the year are expected to register above 2019 levels. Meanwhile, the availability of for-sale homes has dwindled as demand increased and coronavirus outbreaks continued across the country, which delayed some sellers from putting their homes on the market. “The housing market performed remarkably well in 2020 despite the volatile economic state,” said Frank Martell, president and CEO of CoreLogic. “While we can expect to see lingering effects of COVID-19 resurgences and subsequent shutdowns in the early months of 2021, vaccine distributions and stimulus actions should revitalize economic activity and keep home purchase demand and home price growth strong.” CoreLogic noted while the pandemic left many in positions of financial insecurity, those who maintained employment and income stability were also incentivized to buy, given record-low mortgage rates available; this is increasing buyer demand while for-sale inventory is in short supply. Source: CoreLogic

Home flipping fell in the third quarter from both the second quarter and a year ago, but profits—and profit margins—jumped to record highs. The company’s third quarter U.S. Home Flipping Report showed 57,155 single-family homes and condominiums in the United States were flipped, representing 5.1 percent of all home sales in the third quarter, or one in 20 transactions. This was down from 6.7 percent of all home sales in the nation during the second quarter and from 5.5 percent, or one in 18 sales, a year ago. While the home-flipping rate dropped again in third quarter, both profits and profit margins increased. The gross profit on the typical home flip nationwide (the difference between the median sales price and the median paid by investors) rose in the third quarter to $73,766 – the highest amount since at least 2000. That amount was up from $69,000 in the second quarter and from $61,800 a year ago. The gain pushed profit margins up, with the typical gross flipping profit of $73,766 in the third quarter translating into a 44.4 percent return on investment compared to the original acquisition price. The gross flipping ROI was up from 42.9 percent in the second quarter of 2020 and 40.3 percent a year ago. The improvement in the typical ROI marked the second consecutive year-over-year increase following nine straight quarters of declines. Source: ATTTOM Data Solutions