June 15, 2021 – Wild Ride. We have had quite a wild ride across our planet during the last 15 months.

Economic Commentary

Wild Ride. We have had quite a wild ride across our planet during the last 15 months. A word-wide pandemic was followed by a sharp recession. As the pandemic wore on and wore many of us down, certain segments of the economy prospered and others remained stuck in recession. At one of our darkest hours, vaccines were approved and there was a light at the end of the tunnel.

Now, over 50% of the adult population is vaccinated. You can actually walk into an establishment without a mask on if you are vaccinated, which is a very good feeling. The cases of COVID have plummeted and if we continue to protect our citizens, there is good reason to believe that we can win the war against this scourge. And when we do win this war, what comes next? Will things turn back to normal, and if they do—what will normal look like?

Will many still wear masks as protection? Will restaurants continue to keep customers spaced from each other—or will they pack them back in? Will all sectors of the economy recover at a reasonably fast pace? There are a lot of questions still to be answered. We believe many of the technologies, such as Zoom, will stay with us even after the war is over. And recovery will not take place in a straight-line within all sectors. Again, some sectors never felt the negative effects of the pandemic, while others have a long way to go.

Weekly Interest Rate Overview

The Markets. Rates were down slightly in the past week. For the week ending June 10, Freddie Mac announced that 30-year fixed rates decreased to 2.96% from 2.99% the week before. The average for 15-year loans fell to 2.23% and the average for five-year ARMs also dropped to 2.55%. A year ago, 30-year fixed rates averaged 3.21%, almost .20% higher than today. Attributed to Sam Khater, Chief Economist, Freddie Mac – “The economy is recovering remarkably fast and as pandemic restrictions continue to lift, economic growth will remain strong over the coming months. Despite the stronger economy, the housing market is experiencing a slowdown in purchase application activity. However, it has yet to translate into a weaker home price trajectory because the shortage of inventory continues to cause pricing to remain elevated.”  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

America’s housing market has grown so overheated as demand outpaces supply that prices keep hitting record highs — and roughly half of all U.S. houses are now selling above their list price. Two years ago, before the pandemic struck, just a quarter of homes were selling above the sellers’ asking price, according to data from the real estate brokerage Redfin.  Recently, new data further illuminated the red-hot nature of the housing market: Prices rose in March at the fastest pace in more than seven years. The S&P CoreLogic Case-Shiller 20-city Home Price Index jumped 13.3% that month compared with a year earlier — the biggest such gain since December 2013. That price surge followed a 12% year-over-year jump in February. Several factors are driving the seemingly relentless rise in home prices. The pandemic has encouraged more people to seek out the additional space provided by a single-family home. Yet at the same time, COVID-19 discouraged many homeowners from selling and opening up their homes to would-be buyers, thereby shrinking the number of homes for sale. And mortgage rates remain at historically low levels, with the average rate on a 30-year fixed mortgage around 3%. Investors, including individuals buying second houses and wealthy Wall Street firms, are also buying more homes, intensifying the competition. Investors bought 17% of homes in April, up from 10% a year earlier, according to the National Association of Realtors. The large millennial generation is also increasingly turning toward home-buying. Daryl Fairweather, chief economist at Redfin, said that demand had been outstripping supply even before the pandemic as developers struggled to build enough new homes. Builders now say that shortages of workers and lumber are limiting their ability to build. New home construction fell in April after reaching a 15-year high a month earlier. Source: ABC News

A new survey, Renters On The Move by Entrata, studies renters’ behavior in the landmark year of 2020. Key findings from the report state as many as 66% of renters say that renting fits their current lifestyle more than owning a home, while 33% say that the COVID-19 pandemic motivated them to buy a home and stop renting. The top reasons Americans stated for currently renting instead of owning are mostly cost-related, with the inability to afford a down payment on a home (39%) and home ownership being too expensive (33%).  Comparatively, last year the top reasons for moving was the cost of rent (27%), followed by needing more space (24%), needing a change of pace (18%), and the COVID-19 pandemic (16%). Out of American renters, 22% moved to a larger apartment with more space in the last 12 months, possibly to accommodate pandemic-imposed work-from-home needs. However, contrary to mass migration out of urban centers, 20% of Gen Z renters moved from a rural/suburban area into a larger city, possibly taking advantage of lower prices caused by COVID. Source: National Mortgage Professional

Has the well-documented, pandemic-driven desire to migrate into the suburbs from denser urban areas hit its peak? It’s possible that April’s small decline in the share of homebuyers looking to relocate to new metropolitan areas is an early indication that the trend is waning as more Americans receive COVID-19 vaccinations and return to the office. That said, experts do not have the definitive answer, but offer insights for our consideration. “The swell in relocations may be coming down from its peak, but the share of homebuyers looking to relocate to a different area is still well above pre-pandemic levels. Redfin agents in popular destinations say the surge of out-of-towners shows no signs of slowing,” said Redfin Chief Economist Daryl Fairweather. “The small decline in April could be the start of a slowdown in the yearlong surge of people moving from one metro to another, but it could also just be a blip before things pick right back up. The dust has not settled, as there are still a lot of unknowns about what portion of workers will return to the office and how many will pick up and move because they finally have clarity from their employers about whether or how often they can work remotely. Once people know more about their future, we could see another big wave of migration …” Source: MReport