November 23rd, 2020 3:13 PM by Richard Sardella MLO.100007700/NMLS 233568
Vacation homes increasingly in demand because of remote work trends
It's not something you'd expect during a pandemic and recession, but numbers don't lie. According to a PRNewswire report, sales of vacation homes are soaring. According to Redfin's report, October saw demand for second homes skyrocket 100% from a year earlier—the fourth triple-digit increase in the last five months. That outpaces the demand for primary homes.
Home sales are on the rise across the board due to record-low mortgage rates but also because of a wave of relocations during the pandemic. Demand for second homes rises to the top among more affluent Americans who work remotely, no longer need to send their kids to school in person, and are limited by travel restrictions, according to Redfin's lead economist Taylor Marr.
"With mortgage rates at all-time lows and offices shut down across the country, the dream of having a second home outside of the city is becoming a reality for many wealthy Americans," Marr said. "Unfortunately, at the same time, millions of less-fortunate families are behind on their mortgage or rent payments due to financial hardship brought on by the coronavirus pandemic."
Some of these second homes may eventually turn into primary homes, as it's not uncommon for a buyer to close a deal on a second home before putting their current house on the market. It seems resort towns across the U.S. have attracted more homebuyers. Hotspots include Lake Tahoe, Cape Cod, Palm Springs, the Jersey Shore, and Bend, OR.
Marr adds," Even when offices reopen, folks will be able to spend more time than ever before in their second homes because many employers will continue to offer flexible remote-work policies. With workers still commuting in one or two days a week, resort towns that are near major cities will likely continue to heat up."
Source:PRNewswire, Redfin, 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: Neutral
Mortgage rates are trending sideways to slightly higher so far today. Last week the MBS market improved by +40bps. This was enough to move rates lower last week. We saw moderate to low rate volatility through most of week.
This Week's Rate Forecast: Neutral
Three Things: These are the three areas that have the greatest ability to impact rates this week. 1) Coronavirus, 2) Domestic 3) thanksgiving.
1) Coronavirus: The increase or decrease in hospitalizations, cases, and closings will continue to be the major driving force in bond prices as traders digest the magnitude of the economic headwinds. We are seeing some major banks now estimating a negative GDP for the first quarter.
2) Domestic: We have a big week for economic data with major releases that have the gravitas to move rates: GDP (revised), PCE (the fed's inflation "trigger" rate), Weekly Jobless Claims, Durable Goods Orders, and more.
3) Thanksgiving: The bond market is officially closed on Thursday in observance of Thanksgiving but will reopen on Friday only to close early at 2:00 pm ET. But most traders will stop working Wednesday at 2:05 (right after the Fed's Minutes hit) and will not come back until Monday. This means very "thin" volumes on Wednesday afternoon and Friday, which can skew pricing.
This Week's Potential Volatility: High
Rate volatility could spike this week with the influx of important economic reports denoted above. Of course, the coronavirus continues to be a major factor in the movement of markets and interest rates. The bond market is closed on Thursday and will reopen on Friday for an abbreviated trading day.
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.
MLO of record MLO.100007700 / NMLS#233568 / CHM NMLS#127716.