January 25th, 2021 1:24 PM by Richard Sardella MLO.100007700/NMLS 233568
2021 starts with low inventory and fierce competition
As the nation fights a pandemic and everyone wants the word “normal” to return to their lips, another caveat is brewing in the real estate market: buyers beware. According to Realtor Magazine, the biggest challenge that home sellers will face in 2021 is the temptation to overprice their homes due to the hot market conditions.
The combination of the low inventory of homes for sale, low-interest rates, and the pandemic buying frenzy has placed sellers in the driver’s seat, with home prices rising by double-digit percentages annually. Redfin reports these historic bidding wars most prevalent in the Salt Lake City metro, followed by San Diego, San Francisco/San Jose, Seattle, and Denver, but those are no doubt just the tip of the iceberg for what is happening in other popular metro areas.
RealtorMag cites HomeLight’s Top Agent Insights report, conducted in the fourth quarter of 2020, 1,000 real estate professionals’ responses nationwide indicate that 52% believe the biggest challenge that home sellers will face in 2021 is the temptation to overprice their homes, with another 15% saying they were concerned that bidding wars will drive more offers above appraised values in 2021.
“The housing market is unseasonably hot—it’s behaving like it normally does in the spring, with plenty of demand from home buyers,” says Daryl Fairweather, Redfin’s chief economist. “Typically, the vast majority of homes for sale in December are homes that have been sitting on the market because they’re overpriced or there’s a problem with the property. This December, with so many Americans moving, scores of desirable homes hit the market—but not enough to satisfy insatiable demand from homebuyers. The result? Fierce bidding wars.”
As for buyers, 2021 portends a lack of housing options due to low inventories, with many buyers failing to find a home they like; more than half of agents surveyed expressed this as the chief concern among their clients. Another 19% were concerned that their buyer clients will continue to lose out on multiple homes due to bidding wars.
Source: Realtor | TBWS
How Rates Move:
Conventional and Government (FHA and VA) lenders set their rates based on the pricing of Mortgage Backed Securities (MBS) which are traded in real time, all day in the bond market. This means rates or loan fees (mortgage pricing) moves throughout the day, being affected by a variety of economic or political events. When MBS pricing goes up, mortgage rates or pricing generally goes down. When they fall, mortgage pricing goes up. Tracking these securities real-time is critical. For more information about the rate market, contact me directly. I’m among few mortgage professionals who have access to live trading screens during market hours.
Rates Currently Trending: Lower
Rates are trending slightly lower this so far today. Last week the MBS market improved by +30bps. This was enough to move rates or fees lower last week. We saw high rate volatility at the end of the week.
This Week's Rate Forecast: Lower
Three Things: These are the three areas that have the greatest ability to move rates this week. 1) Central Bank, 2) Domestic, and 3) Stimulus.
1) Central Bank: Last week, we heard from most of the world's largest central banks. This week, we hear from the largest - as our own Federal Reserve will give us their latest Interest Rate Decision and Policy Statement on Wednesday at 2:00 pm ET, followed by a live presser with Fed Chair Powell. We also get key speeches from the heads of the ECB, Bank of England, Bank of Japan, and more.
2) Domestic: We have a very big week for economic data with several reports that have the gravitas to move the needle on your pricing. PCE (the Fed's main inflation rate) will get the most attention from traders, but Durable Goods, GDP (4th QTR prelim), Chicago PMI, Consumer Confidence, and Jobless Claims will be very important to watch as well.
3) Stimulus: It's difficult to see any major movement on this during the week. House Speaker Pelosi is trying to switch gears and get a package through the reconciliation process, which would take about two weeks for her to get the almost $2T package "right sized" so that it has a chance of moving through the Senate by a simple majority. As it stands now, any stimulus proposal has very low odds of moving through the Senate any time soon.
Treasury Dump: Here is this week's auction schedule.
This Week's Potential Volatility: High
We have a lot of economic data due out this week that could move rates and increase volatility, most importantly, the personal consumption expenditures (PCE). Rate markets are also not holding out a lot of hope of stimulus anytime soon. If the sentiment changes, we could see an increase in volatility. Rate volatility will likely be a bit elevated this week.
If you are looking for the risks and benefits of locking your interest rate in today or floating your loan rate, contact your mortgage professional to discuss it with them.
Richard Sardella has been actively managing and providing services in the mortgage industry for over 27 years. Richard serves on the board of directors as President of Colorado Home Mortgages Inc.
All information furnished has been forwarded to you and is provided by thetbwsgroup only for informational purposes. Forecasting shall be considered as events which may be expected but not guaranteed. Neither the forwarding party and/or company nor thetbwsgroup assume any responsibility to any person who relies on information or forecasting contained in this report and disclaims all liability in respect to decisions or actions, or lack thereof based on any or all of the contents of this report.
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