Chicago Real Estate News


Aug. 4, 2020

Can rates go below 2%?


Low housing inventory continues to drive higher home prices, with the average median home price climbing to a new high in July: $349,000. That’s 8.5% higher than last July, but when you consider the drop in housing inventory during the pandemic, it makes sense. In the nation’s 50 largest metros, housing inventory decreased by more than 34% over last year, and some metros saw inventory decline by 50%.


Low rates are adding to the pent-up demand, with both UWM and Quicken advertising rates for 15-year fixed mortgages that defy gravity. What would it take to see mortgage rates go below 2% for a 30-year fixed? Logan Mohtashami, HousingWire’s lead analyst, answers that question in his latest article, filled as usual with helpful charts (and Game of Throne references). Logan thinks it’s totally possible, but that we should be careful what we wish for.


Along that line, Neal Kashkari, president of the Federal Reserve Bank of Minneapolis, said on Sunday that the only way to secure a robust economic recovery is to lock down the country again and reopen with a focus on testing and tracing. After five solid months of states forging their own path, a national strategy seems unlikely at this point. We’d love to hear what you think — is that the best way forward?


Sarah Wheeler HW EIC

July 29, 2020

Fed projected rates, pre and post Covid


Mortgage rates fell to an all-time low on Thursday, according to the daily average tracked by Optimal Blue. The direction of interest rates this week will have a lot to do with what Federal Reserve Chairman Jerome Powell says at the end of the central bank’s policymaking meeting on Wednesday.

Powell is the man who has the most power over mortgage rates at the moment. In mid-March, he restarted a bond-buying program last used during the financial crisis to stimulate demand for Treasuries and mortgage-backed securities. The primary goal was to grease the wheels of markets locked up with investor fears about the economic fallout of the coronavirus. It also resulted in cheaper rates.

“The Fed has been dominating mortgage rates since the middle of March and what they do on Wednesday is going to be a continuation of that,” said Walt Schmidt, FTN Financial’s head of mortgage strategy. “I don’t think it’s possible to contemplate we’d be anywhere near this low in mortgage rates if it weren’t for the Fed.”

The likely scenario for Wednesday is the Fed will provide forward guidance that either reiterates its pledge to buy MBS “for as long as it takes,” or becomes even more accommodating as a new surge in COVID-19 infections slams the economy, Schmidt said.

Rates have tumbled almost a percentage point since the Fed began buying Treasuries and MBS in mid-March. The initial pledge made on March 15 to buy $500 billion in Treasury bills and $200 billion of mortgage-backed securities wasn’t enough to unfreeze the markets. The daily average mortgage rate hit a two-month high of 3.84% on March 19, as measured by Optimal Blue.

It’s what happened the following Monday that did the trick: In an announcement posted on the Fed’s website at 8 a.m., before the opening of U.S. stock markets, Powell said the central bank would make “unlimited” purchases of MBS – that’s when rates began falling.

In June, the Fed pledged to keep buying Treasuries and MBS to the tune of about $120 billion a month.

There are other factors in play, including the question of whether the Senate will act to extend the beefed-up unemployment benefits set to expire on Friday. The extra $600 has helped to keep jobless Americans current on their bills, including mortgage payments.

If forbearances or delinquencies begin to rise, it will exert upward pressure on mortgage rates as lenders add a “risk premium” that will counteract the Fed’s bond-buying efforts.

“The Senate is not expected to send its version to the House of Representatives until next week,” Diane Swonk, chief economist of Grant Thorton, said in a note to clients on Monday. “Some worry that Congress will not come up with a plan before the recess scheduled for Aug. 7. This is the rare time when I actually hope election-year politics and Congressional propensity to spend dominate the agenda.”

The House passed the Heroes Act in May that extended the unemployment benefits through January, increased funds for testing, and supplied monetary relief to states and communities hard-hit by expenses related to battling the pandemic. The Senate went on a two-week vacation before the July 4 holiday without debating it or negotiating its own COVID-19 relief legislation.


July 22, 2020

Mortgage rates forecast for August 2020

Mortgage rates forecast for August 2020

Mortgage rates have hit five new all-time lows in less than three months.

But don’t expect the winning streak to continue.

Our prediction: Mortgage rates will bottom out in August, then rise in anticipation of the 2020 U.S. election.

Want to capture the lowest mortgage rates of all time? Better lock in now.

Predictions for August

August could hold new record-low mortgage rates that may puncture the psychologically significant 3% barrier.

We think this mortgage rate rally which started in early 2020 still has some steam.

Yet, there are no guarantees. There’s no reason to wager on lower rates. As this is written, Freddie Mac reports a 3.03% average 30-year fixed rate. It marks the fifth time in 75 days that rates have broken a new record.

At this cadence, you would think new lows are commonplace. To the contrary, we haven’t seen rates comparatively low since 2012, and before that, not once since Freddie Mac started tracking data in 1971.

Today’s mortgage rates are literally the best they’ve ever been, and potentially the best they’ll ever get.

The bottom line is that rates could go lower in August 2020 and beyond, but why would someone gamble when they could capture a best-ever rate right now?

Lock in today's rates before they rise. (Jul 22nd, 2020)

Mortgage rates next 90 days

This chart shows past mortgage rate trends, plus predictions for the next 90 days based on current events and 2020 forecasts from major housing authorities.

Mortgage Rates Forecast - Trends for mortgage rates for next 90 days. August 2020 through fall 2020 predictions.


Markets will focus on COVID-19 developments

COVID-19 has painted an unexpected picture compared to what 2020 was supposed to be.

This was going to be another year of economic expansion, and along with it, higher rates.

Yet, the economy contracted faster than any time in history. Rates fell in response, as they tend to do in highly uncertain times.

But what does the future hold for rates? It depends on only one factor: COVID-19.

Mortgage rates could skyrocket back to 2018-2019 levels in mere days if a viable vaccine were announced. That appears a long way off still, though.

In fact, containing the virus by any means seems impossible, at least in the U.S. Just when we thought we were “flattening the curve,” many states have reported a record number of cases upon re-opening.

California and Nevada have already reversed re-opening guidance to try to curb explosive outbreaks.

The inability to get the U.S. economy going again will all but ensure low rates for the foreseeable future. Maybe not all-time low rates past August, but significantly lower than most of history.

We’re in a new reality where a 30-year mortgage rate in the 2s could become the norm.

And, while we’re predicting rates for well-qualified applicants to dip into the high 2s, that’s no reason to become complacent.

Our advice: capture a once-in-a-lifetime mortgage rate now. Rates are already at 50-year lows. While we see a meaningful chance that rates will drop to fresh lows, there’s certainly no guarantee.

»RELATED: Conventional Loan Requirements: You Don't Need 20% Down Anymore

Our prediction: First-ever sub-3% average mortgage rates

The markets say mortgage rates should be about 2.4% right now.

Yes, you read that right: 2.4%.

But there are a couple reasons rates aren’t that low:

  1. Lenders can’t handle the volume
  2. Investors aren’t buying mortgages at the expected rate

For mortgage rates to be rock-bottom, there needs to be a huge demand from investors to purchase these ultra-low-interest mortgage bonds. Typically, investors buy mortgages as a safe-haven investment when the stock market is tanking.

But investors are hesitant because 1) they are afraid homeowners will refinance again, eliminating the earned interest and; 2) they are fearful of defaults and forbearance, as coronavirus threatens people’s jobs and businesses.

But in a few months, some things could happen to bring about another round of all-time-low rates.

July 22, 2020

A platform for expansion: @properties’ take on in-house development



In the big brand vs. boutique brokerage decision, most agents assume one of the main trade-offs is going to be between a relatively impressive suite of tools and support at the major companies versus a scaled-down but more nimble approach to technology at the smaller ones. But @properties is trying to have it both ways. For nearly a decade, the Chicago-based brokerage has been working to create a toolbox for agents called pl@tform. The suite includes tools to manage customer relationships, transactions, social media and marketing campaigns, among other applications.

But to Joni Meyerowitz, chief operating officer of @properties, the real benefit comes in the user experience, rather than the list of capabilities. “One of my favorite things about pl@tform is that everything is tied together and talks to each other, so it’s very easy for our agents,” she said. “For example, when an agent takes a new listing, they just start a property folder by giving the basic info, and then everything populates with an easy checklist that links to all tools to get everything done for that listing.”

At the individual agent level, having a back-end system in place can be a time- and money-saver. But pl@tform symbolizes something entirely different for @properties at large, and that appears to be an expansion plan. The company has partnerships in place with both Georgia-based Ansley Atlanta and Virginia-based Nest Realty, and access to pl@tform is included in those agreements. But Meyerowitz also noted that the system is being “scaled for use on a national stage” as a potential “separate revenue stream through licensing and other business models.”

Moves such as these seem to be part of a larger strategy to compete with big real estate brands while still maintaining a scrappy culture that pursues innovation. “Even though @properties is now 20 years old, we still feel like a startup and act with that same sense of urgency and agility,” Meyerowitz said. “We all constantly want to do better, innovate and improve, and when you have a team like that in place, exciting things happen.”

Understanding the company’s place in the market and seeking out other companies that adopt a similar mentality helped @properties choose these partners. “We love the culture at both Nest and Ansley, believe in their management team, and know they will continue to grow,” Meyerowitz said. “We like to align ourselves with other market leaders so we can all collaborate and continue to grow and improve.”

One element that sets @properties apart from many brokerages creating tech tools is the fact that their development team is on staff. Many nontech companies rely on contractors to put together software to save on costs and staffing, but Meyerowitz noted, “Our team is made up of 100% in-house, W-2 employees who, prior to COVID-19, worked full-time in our Streeterville office.”

As much as @properties might like to compete directly with Realogy and other international real estate brands, though, the fact is that they are still regional in scope. That’s why it’s important for the company to be strategic about what it chooses to develop on its own, and what can be adopted or integrated from existing technology. The main question to answer in that process, according to Meyerowitz, is whether or not the tool needs to integrate with and be branded as part of the pl@tform. “Anytime we build a new tool, we ask ourselves if it’s critical to tie into pl@tform seamlessly. If the answer is yes, we build it in-house. If not, we look for someone else who can do it better,” she said, adding that they’ve developed some 95% of the tools they use.

Another critical factor is getting end users — most typically, agents — involved in beta testing. “We are so fortunate to get constant feedback on our tools through agent advisory boards, feedback tools on pl@tform, and through our training and management teams,” Meyerowitz said.

So what’s next for pl@tform? Meyerowitz said they’re working on making transactions more transparent for clients, tying @properties’ mortgage and title companies into the deal management system, and creating a post-closing tool that will add value for buyers.

July 15, 2020

What Drives Mortgage Rates/Trends

Keep up with current mortgage rates at HousingWire’s Mortgage Rates Center. Rates are updated daily and include data from Freddie Mac and Optimal Blue.

Optimal Blue data is based on actual rate lock transactions and therefore includes borrowers across the credit spectrum. The Freddie Mac Primary Mortgage Market Survey (PMMS) provides the rates available to the best borrowers.

Freddie Mac PMMS 7/9/2020

Rates for a 30-year and 15-year fixed mortgage fell to all-time lows this week as a resurgence in the pandemic caused investors to buy more bonds, including mortgage-backed securities.

The average rate for a 30-year fixed mortgage was 3.03%, down from 3.07% last week. That marks the lowest in a data series that goes back to 1971. The average 15-year rate fell to 2.51%, the lowest in almost 30 years of data.

Mortgage rates fell as investors reacted to news of a record-setting COVID-19 resurgence in some of the nation’s biggest states. The surges erased optimism from last month’s economic reports showing the jobs market recovering quickly from the virus-induced recession.

The low mortgage rates will boost demand for housing, but it’s a delicate balance, said Sam Khater, chief economist of Freddie Mac. Bad economic news pushes mortgage rates down. However, if states are forced to close businesses again and job losses mount, it will eat into the reservoir of people eligible to purchase properties.

“The summer is heating up as record low mortgage rates continue to spur homebuyer demand,” Khater said. “However, it remains to be seen whether the demand will continue if COVID cases rise to the point that it hinders economic growth.”

The resurgence in the pandemic has “already been much worse than we anticipated, and further restrictions will likely be required in some states to bring the virus under control,” the economists led by Goldman Sachs Chief Economist Jan Hatzius said in a report issued on Saturday.

Mortgage rates have fallen as bond investors’ concerns about a surge in forbearances in April and May has subsided. If layoffs spike, those numbers will mount again, said Joel Naroff, president of Naroff Economics.

The beefed-up unemployment provision in the CARES Act, which adds $600 a week to state payouts in an effort to fully replace salaries, is set to expire on July 31.

“If you’re a middle-income household with a job loss, that $600 a week could mean the ability to pay your mortgage and if it goes away it could put pressure on the housing market in terms of either mortgages or rents,” Naroff said.

The Federal Reserve, which rescued the bond markets in March and April by restarting a fixed-asset-buying program used during the 2008 financial crisis, is still purchasing about $4.5 billion of mortgage-backed securities a day, said Walt Schmidt, FTN Financial’s head of mortgage strategy.

“If it weren’t for the Fed, mortgage rates would be a lot higher,” Schmidt said. “The Fed buying MBS is keeping rates low. The Fed can’t control Fannie Mae and Freddie Mac, but it’s controlling what it can.”

PMMS 7/2/2020

Mortgage rates dropped to a new all-time low in the U.S. this week as a resurgence of COVID-19 infections caused investors to pile into the bond markets. The average rate for a 30-year fixed mortgage was 3.07%, the lowest in a data series that goes back to 1971. The average 15-year rate fell to a seven-year low of 2.56%.

Bond yields, used as a benchmark by mortgage investors, have fallen to near-record lows over the last week on news of a resurgence in COVID-19 infections, erasing hopes for a V-shaped recovery that would have the economy rebounding quickly from the virus-induced recession. States including Texas, California and New York have either paused reopening plans or reversed course to stem the spread of COVID-19.

“The spread of the virus is worsening in almost every state,” Goldman Sachs economists said on Tuesday. “Over half of the US has now reversed or placed reopening on hold.”

PMMS 6/25/2020

The average U.S. rate for a 30-year fixed mortgage this week is 3.13%, matching last week’s rate that was the lowest on record.

Mortgage rates remained at the record low as the three most populous U.S. states – California, Texas and Florida – hit new highs for COVID-19 infections, driving money managers to seek fixed-income investments like mortgage bonds in a “flight to safety,” said Keith Gumbinger, vice president of mortgage-data firm HSH Inc.

“With the rising incidents of COVID-19 in some states, there’s definitely a little bit of a shift to safety, a shift into bonds as investors wait to see how the story unfolds,” Gumbinger said.

PMMS 6/18/2020

Mortgage rates in the U.S. tumbled to another all-time low this week as bond investors reacted to reports showing the economy is struggling amid the COVID-19 pandemic.

The average rate for a 30-year fixed mortgage was down to 3.13%, the second time in two weeks the rate set a new low in a data series that goes back to 1971. The average 15-year rate fell to 2.58%, the lowest in seven years.

Bond yields, used as a benchmark for mortgage investors, fell sharply last week as investors reacted to news that COVID-19 infections reached record highs in more than half a dozen U.S. states, erasing optimism from the prior week that the nation would recover quickly from the economic contraction the virus caused.

In addition, testimony from Federal Reserve Chairman Jerome Powell to Congress on Tuesday and Wednesday gave a bleak outlook for the economy, adding to the statements he made last week after the Federal Open Market Committee kept its rate near zero.

PMMS 6/11/2020

The average U.S. rate for a 30-year fixed mortgage rose three basis points to 3.21% this week, not far from the 3.15% all-time low set at the end of May.

Cheap financing has boosted demand for homes as Americans emerge from lockdowns ordered by states in mid-March to combat the spread of COVID-19. A seasonally adjusted index measuring mortgage applications to fund home purchases last week rose to its highest level since January, the Mortgage Bankers Association said in a Wednesday report.

The index measuring purchase applications increased for the eighth straight week, MBA said in its report. On an unadjusted basis, it was 13% higher than a year ago.

“The rebound in homebuyer demand continued this week, driven by mortgage rates that hover near record lows,” said Sam Khater, Freddie Mac’s chief economist. “This turnaround in demand, particularly by those who have higher incomes than the typical household, also reflects deferred sales from the spring.”

PMMS 6/4/2020

The average U.S. rate for a 30-year fixed mortgage rose three basis points to 3.18% this week.

Home financing costs ticked up as the yield on the 10-year U.S. Treasury note, a benchmark for mortgage investors, rose to 0.761% Wednesday, its highest level since early April. Home-loan rates track so-called “long bonds,” as the longer-maturity Treasuries are known, because mortgage-backed securities compete for the same investors.

PMMS 5/28/2020

The average U.S. rate for a 30-year fixed mortgage fell to 3.15% this week, the lowest ever recorded in a Freddie Mac data series that goes back almost five decades.

Rates have fallen after the Federal Reserve began buying mortgage-backed securities to stimulate demand, said Chris Low, chief economist of FHN Financial in New York. The Fed has purchased more than half a trillion dollars of MBS after restarting in March a bond-buying program it used during the financial crisis more than a decade ago.

“The Fed is by far the biggest player in the mortgage markets right now, the biggest buyer of mortgages, and because of that, they have almost complete control over the interest rate,” Low said.

HW ~ July 2020

The Driving Force Behind Mortgage Rates
State of the Economy




lume 90%

July 8, 2020

Is now a good time to buy?

Over 60% of surveyed Americans say yes

That's a 9-point climb in Fannie Mae’s HPSI measurement



Fannie Mae’s Home Purchase Sentiment Index, a composite index designed to track consumers’ housing-related attitudes, intentions and perceptions, increased nine points in June to 76.5. Although the HPSI is down 15 points year-over-year, June’s gain marked the second rise in HPSI since April’s almost record low.

According to the report, 61% of Americans now believe it is a good time to buy a home – an increase of 9 percentage points from May’s 52%. The share of respondents who say it is a good time to sell also increased to 41% from 32% the month prior.

“The share of renters who say it’s a good time to buy a home is now at its highest level in five years, suggesting favorable conditions for first-time home buying, consistent with the recent rebound in home purchase activity,” said Doug Duncan, senior vice president and chief economist of Fannie Mae.

Despite predictions by CoreLogic that home prices will decline 6.6% by May 2021, the number of HPSI respondents who say home prices will go up in the next 12 months increased in June from 26% to 34%, whereas the percentage who said home prices will go down decreased from 35% to 25%.

HPSI respondents who say mortgage rates will go down in the next 12 months decreased in June from 25% to 17%, while the number who expect mortgage rates to go up increased from 25% to 32%. Last week, Freddie Mac reported the average rate for a 30-year fixed mortgage was 3.07% – the lowest in the series history

While initial jobless claims sat at 1.43 million at the end of June according to the Labor Department, the percentage of respondents who say they are not concerned about losing their job in the next 12 months fell from 75% to 74%. Those who are concerned increased from 24% to 26%.

“Survey respondents’ persistent, substantially elevated concerns about job security in the face of record unemployment remains a key takeaway, particularly among renters and homeowners with a mortgage,” Duncan said. “We believe the continuing uncertainty regarding the coronavirus’ containment suggests an uneven and potentially volatile course toward economic recovery.”

In April of 2020, the HPSI sat at 63 points, the survey’s lowest record since November of 2011. However, June’s 76.5 point sentiment continued to climb towards March’s 80.8 points, which occurred at the beginning of COVID-19. 

Depending on the extent to which it can be attributed to consumers having chosen to delay or to accelerate home-buying plans due to the pandemic, Duncan predicts this activity may cool again in the coming months. 


July 1, 2020

As the Fed's Powell sounds alarms, mortgage rates tank below 3%


More gloomy talk from Federal Reserve Chairman Jerome Powell has been greeted by another historic drop in mortgage rates, which have returned to an all-time low under 3% in a daily survey.

In two days of testimony to Congress this week — including an appearance on Tuesday in which he wore a mask and had a pump-bottle of hand sanitizer nearby — the leader of America's central bank said the economy faces an "extraordinarily uncertain" recovery from the coronavirus pandemic.

Infections have been rising rapidly, and many states have halted their reopening plans.

But while Powell rings his alarm bells, the Fed's policies that have pushed mortgage rates deep into the bargain bin appear to be working some magic on the economy. The housing market is rebounding and could lead the U.S. out of its COVID-19 recession, experts say.

How low have mortgage rates gone?

Mortgage rates dipped on Tuesday to an average 2.94% for a 30-year fixed-rate mortgage, and that ties an all-time low reached in mid-June, says Mortgage News Daily.

For rates these days, it's "all about the coronavirus," says Matthew Graham, chief operating officer of MND.

"If it looks like the economy can slowly lurch back to business, rates will feel pressure to move higher," he writes. "If it looks like coronavirus retains the upper hand, rates could continue inching toward more all-time lows."

Today's dirt-cheap mortgage rates have helped light a fire under the housing market. Pending home sales — that is, the number of houses under contract — shot up by a record 44.3% from April to May, following two months of declines related to the pandemic.

"This has been a spectacular recovery for contract signings, and goes to show the resiliency of American consumers and their evergreen desire for homeownership," says Lawrence Yun, chief economist for the National Association of Realtors.

"This bounce back also speaks to how the housing sector could lead the way for a broader economic recovery," Yun adds.

Fed chief Powell welcomes the signs of recovery, but he says the economy is still fragile.

"We have entered an important new phase and have done so sooner than expected," he told lawmakers in remarks prepared for hearings Monday and Tuesday. "While this bounce back in economic activity is welcome, it also presents new challenges — notably, the need to keep the virus in check."

Can you get a mortgage rate under 3%?

Worrisome news about the coronavirus is keeping investors anxious and is contributing to the latest declines in interest rates. The government's top infectious diseases expert, Dr. Anthony Fauci, warned Congress on Tuesday that new cases of the virus could hit a stunning 100,000 per day.

Mortgage rates tend to follow the interest, on yields, on Treasury bonds. The yields have been sinking as money has flowed out of stocks and into bonds as a safer investment amid all of the uncertainty over the COVID-19 outbreak.

So that's how mortgage rates have fallen back to record territory in the Mortgage News Daily survey. But lenders aren't uniformly offering super-low rates, Graham warns.

"Different borrowers will see different pricing," he says. "This sort of goes without saying, but it's much more pronounced than it has been before coronavirus."

The rate you get depends on your own circumstances, like your credit score. Plus, rates can vary widely between lenders, by up to 1 percentage point or more, a recent LendingTree study found. In other words, one lender might offer you a 30-year loan at 2.95%, another might offer you a similar mortgage at a much stiffer 4%.

To find the lowest rate available to you, you have to shop around. Gather rate offers from several lenders and compare them side by side to find the best deal.

Don't forget to use the same approach when you buy or renew your homeowners insurance. You can easily go online and get a bunch of home insurance quotes to compare rates — and find your perfect policy.

Written by: Doug Whiteman, MoneyWise

June 24, 2020

Chicagoland contract activity and our recovery



A year-over-year comparison of new contracts is an encouraging sign for the Chicagoland real estate market. After bottoming out in mid-April, contract activity in the entire Chicagoland region is on the upswing based on @properties data. In fact, by Memorial Day, sales activity was exceeding 2019 levels.


The data suggests the local housing market is likely to experience more of a v-shaped recovery after activity fell significantly in the early days of Stay At Home. Meanwhile, the nation’s homebuilders are increasingly optimistic. An uptick in mortgage applications and online home-search activity also indicate more buyers have re-entered the market at a time when mortgage interest rates remain near record lows.

While we’re not back to the transaction levels we saw at the start of the 2020 spring market, the general consensus is that housing is expected to make a strong recovery and even be a driver of economic growth. And a steady increase in contract activity in recent weeks signals that recovery is already underway.

For more information about local market activity and what’s ahead, watch this video or click here to get in touch with an agent.

Written by: @properties

June 17, 2020

Housing inventory and Mortgage rates


Demand for houses continues to skyrocket, according to a report from Redfin CEO Glenn Kelman. Seasonally adjusted demand for houses during the week of June 1 through June 7 was 25% above pre-pandemic levels.

Kelman said that bidding wars have caused listings to move quickly, and sales prices are up 3.1% year over year. The percentage of newly listed homes to accept an offer within 14 days increased from 42% in May to 47% in June.

“Our abiding concern in May was about the number of homes for sale, but that’s improving too,” Kelman said. “After falling to 21% below last year’s level the week of May 25-31, new listings last week continued their recovery; last week’s new listings were 15% below last year’s level.”

One thing to come out of pandemic purchases is 3D tours and video-chat tours, as states placed restrictions on real estate practices while shelter-in-place order are in effect. According to the report, 15% of home tours are happening via video chat, which is 30 times higher than pre-pandemic.

Views of 3D scans skyrocketed on Redfin’s website, up 42% from April to May. According to the report, 25% of new listings in markets like Seattle and Orange County, California include a scan.                                                                                                   By: Julia Falcon


Fannie Mae sees record low mortgage rates through 2021

The cheapest mortgage rates on record are heading lower, Fannie Mae said in a forecast on Monday.

According to Fannie Mae, the annual average rate for 2020 will be 3.2%, down from 2019’s 3.9%. This would beat the record of 3.65% set in 2016, according to Freddie Mac data. Fannie Mae expects rates to drop to 2.9% in 2021.

The mortgage-rate forecast bodes well for housing demand and for refinancing volume, said Doug Duncan, Fannie Mae’s chief economist.

“While housing took a big hit this quarter, we believe the further reduction of mortgage rates, persistently low levels of supply, and strong buyer sentiment compared to seller sentiment should continue to provide support to home prices and new construction,” Duncan said.

The low rates probably will boost refi volume to $1.78 trillion this year, according to the forecast, which would be the highest level since 2003, when it was $2.5 trillion.

“We also expect the extremely low mortgage rate environment to contribute to historically high levels of refinancing activity as household balance sheets and incomes improve,” Duncan said.

Refinancings will support the U.S. economy because lower monthly mortgage bills will put more money in the pockets of consumers. At the end of May, almost 14 million mortgage holders had a “refi incentive,” meaning a difference of at least 0.75% between their existing mortgage and current rates, according to Black Knight.

That represents savings of about $3.95 billion per month, money that likely would go into supporting the consumer spending that accounts for about 70% of the U.S. economy.

A 3.2% annual average rate in 2020 would be about one-fifth the highest rate on record: 16.63% in 1981, according to Freddie Mac data.

The rate first broke into double-digit territory in 1979 because of an inflationary cycle set in motion by President Richard Nixon strong-arming the Federal Reserve. Nixon wanted to tailor monetary policy to boost his re-election bid.

It worked – Nixon won in a landslide. But consumers got stuck with the bill as inflation surged out of control for the next decade.

By: Kathleen Howley

June 10, 2020

Here's evidence of a V-shaped recovery

Today had some promising data for the housing market

Purchase applications were up 18% compared to the same time last year and up 6% from a week ago, according to the Mortgage Bankers Association‘s Weekly Mortgage Applications Survey. This gives us two back-to-back weeks of positive year-over-year prints for purchase applications in the final weeks of the typical housing market heat months.

It’s not a coincidence that the “V-shaped” recovery in purchase applications (first graph, data sourced from MBA) is mimicked by the inverted “V-shaped” recovery of the St. Louis Stress Index (second graph). This indicates a return to a much more calm financial market.

64 Stress Index

The St. Louis Financial Stress Index, in case you are not familiar, is calculated from the weekly averages of seven interest rates, six yield spreads and five other bond and stock indices. The goal is to provide an overall financial stress metric for the stock and bond markets.

This index going to zero or below is one of the five metrics that I identified as reliable indicators that the American economy was emerging from the AD stage (after the disease) to AB stage (America is back).

The stress index is designed so that under normal financial conditions it is zero. It goes positive when the markets are contracting and negative when the markets are acting much better.

On Friday, May 29, the stress index went negative for the first time since Feb 21, 2020. The latter date was just days before the U.S. reported the first COVID-19 related death. As we can see below, this index had a massive spike during the Great Recession as well and then came back to below zero.

64 Stress Index MAX

When the stress index goes below zero and stays there for some time, we will know that the economy is in recovery mode and we can expect other indicators to improve like jobless claims in time.

Today’s job’s report showed a gain of 2.5 million jobs, and the 10-year yield jumped to 0.94% on that data. 

Both the increase in purchase applications and the fall of stress index are good for the housing market. But, if the economy reopens successfully without any virus rebound news, we may have already seen the lowest lows in mortgage rates. 

One of the other five things we need to see en route to recovery is the 10-year yield go above 1%. This means the economy is doing better and we really want to create a new range between 1.33%-1.6%.

Currently, at 0.9% we are still far from those levels. But recently, the 10-year yield has shown some signs of life of wanting to go higher.

We still have a lot of high-risk variables, such as an increase in new cases that might put our hospitals at risk, unnecessary lack of financial support by the U.S. government, more bad China trade war or retaliation headlines and even a pullback in the stock market can drive money into bonds. So we still have many pitfalls.

But if I am right, and we are going into the recovery stage, the next two things we should see over the next six months is the 10-year yield going above 1% and jobless claims stopping its horrific rise.

Here’s the 10-year yield as of the close on June 4:


All in all, the good news is that purchase application data is positive year over year, the St. Louis Financial Stress Index is below zero and today’s positive print in the jobs report.  

HW - Logan Mohtashami