January 2021 Real Estate Report by Amir Vahdat with Berkshire Hathaway

If you’re thinking about refinancing your home at the lowest rate possible, your window may be closing. The coronavirus pandemic has made refinancing your home more attractive — and affordable — but things could change quickly in the next few months. To ensure you’re getting low rates, get started on your refinancing application today. Rates on home loans have hit historic lows, thanks to actions by the Federal Reserve in March 2020 to help strengthen the economy amid the pandemic. Given this news, it’s no surprise refinances are booming. Homeowners want to snag a better interest rate, loan term, and lower their monthly payment in the process. However, the Federal Housing Finance Agency’s new adverse market fee, which is equal to 0.5% of a total refinance loan has already made refinancing more expensive. And this could be just the tip of the iceberg. Harvard Business Review is reporting that the global economy is recovering faster than anticipated. They speculate that at least part of the reason the economy is recovering so quickly is that many fears, including the next Great Depression, never happened. Additionally, while unemployment rates did increase, it’s lower than experts anticipated. The potential of a viable coronavirus vaccine did encourage a slight increase in rates the week after Pfizer and BioNTech announced their Phase 3 trial had concluded. Now, as people in the United States are being administered the vaccine, it’s likely that consumer and investor con fidence will grow — and rates on home loans could continue to rise with it. While most financial experts agree that the Federal Reserve isn’t likely to raise baseline rates any time soon, mortgage rates could still move away from record lows over the next few weeks and months. Source: Fox Business  The Federal Housing Finance Agency reported a 1.5% month-over-month increase in the House Price Index in October 2020 and a 10.2% increase year-over-year. “U.S. house prices rose for the fifth straight month since states re-opened their local economies,” said Dr. Lynn Fisher, FHFA’s deputy director of the Division of Research and Statistics. “The 12-month gain of 10.2% in October is the highest annual appreciation observed since the 2004-2005 period. Extremely low mortgage rates and a limited supply of homes for sale continue to propel price gains. The data does not yet reflect renewals of some local and state COVID-19 restrictions.” In the nine census regions, both the Mountain and New England saw the largest year-over-year increases in house prices at 12.5%. The Pacific region followed at 10.6%, with the Middle Atlantic region coming in at 10.4%. Source: National Mortgage Professional
New analysis from Zillow predicts tha t housing demand will stay high for years to come due to low rates of household formation. Zillow found that since the Great Recession 5.7 million missing households now exist. These “missing” households are formed when people who would have historically moved into their own home, were unable or unwilling to do so. According to the report, if rates remained at pre-Great Recession levels, there would be 5.7 million more U.S. households today. Zillow also stated that whether or not household formation rates begin to recover in the coming years, the missing households from the past 15 years and the large Millennial generation aging into peak homebuying age should keep housing demand high for the foreseeable future. The report does point out that interest in wanting to form a household has not declined, rather, long-term financial and housing factors have made homeownership and household formation more difficult. “The housing crash set back millions of Americans on the path to h aving their own place to call home, whether they owned or rented it,” said Zillow senior economist Jeff Tucker. “Between a wave of foreclosures, rising rents, and under-building of new homes, the housing market became much harder to crack into from 2006 to 2017. The last two years showed that when the economy is firing on all cylinders and most Americans have access to decent jobs, more of them will be able to find a home of their own. The sooner we can put the pandemic and 2020 recession behind us, the sooner access to housing can resume its expansion.” Source: Zillow

The Markets. Rates eased slightly to hit another record low last week—the first of the year. However, this data did not reflect an increase which took place later in the week.  For the week ending January 7, Freddie Mac announced that 30-year fixed rates fell two ticks to 2.65% from 2.67% the week before. The average for 15-year loans also decreased to 2.16% and the average for five-year ARMs rose to  2.75%. A year ago, 30-year fixed rates averaged 3.44%, approximately 1.00% higher than today. Attributed to Sam Khater, Chief Economist, Freddie Mac – “A new year, a new record low mortgage rate. Despite a full percentage point decline in rates over the past year, housing affordability has decrea sed because these low rates have been offset by rising home prices. However, the forces behind the drop in rates have been shifting over the last few months and rates are poised to rise modestly this year. The combination of rising rates and increasing home prices will accelerate the decline in affordability and further squeeze potential homebuyers during the spring home sales season.” 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. 

Current Indices For Adjustable Rate Mortgages
January 8, 2021

 Daily ValueMonthly Value
 January 7December
6-month Treasury Security 0.09% 0.09%
1-year Treasury Security 0.11% 0.10%
3-year Treasury Security 0.22% 0.19%
5-year Treasury Security 0.46% 0.39%
10-year Treasury Security 1.08% 0.93%
12-month LIBOR  0.342% (Dec)
12-month MTA  0.379% (Dec)
11th District Cost of Funds  0.466% (Nov)
Prime Rate  3.25% (March)
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