November 30th, 2020 12:39 PM by Richard Sardella MLO.100007700/NMLS 233568
Homebuying this winter is going to very different
In a normal year, this is the time when home sales dip. In a normal year, this is when you can negotiate on getting the price a tad lower, and homes sit on the market longer because of the holidays. In a normal year, winter is typically a time when buyers have the advantage.
This is the winter, however, when all that flies out the window, according to Danielle Hale, Realtor's chief economist. "Normally winter is a good time for buyers," she says, but qualifies it by adding that because the coronavirus pandemic upended normal real estate patterns by keeping buyers at home last spring, it has created a pent-up demand for homes that are only now being felt and felt hard.
"It's unusual times," agrees Lawrence Yun, chief economist at the National Association of Realtors. "Normally buyers have a slight edge as homes sit on the market for a longer period. It's likely to be different this year."
What to expect? For one, fewer homes to choose from than usual. Realtor.com's Monthly Housing Market Trends Report reports that with more buyers than sellers in the market, homes aren't lingering on the market for long. In September, homes nationwide spent 12 fewer days on the market than last year, so if you are a buyer, you'll need to be prepared. That means getting your mortgage pre-approval paperwork in place so you can make an offer fast.
A low inventory market may cause another kind of shift, however. "For one, if coronavirus rates remain low in a community, sellers who've been leery about inviting buyers into their home might decide it's safe enough to give it a try," says Realtor's Erica Sweeney. She cites Hale, who says, "Even though inventory will remain low, we could see a slight improvement as sellers gain more confidence in the housing market," Hale says.
If unemployment rises, more people may be forced to sell their homes. According to the Mortgage Bankers Association, more than 3 million homeowners missed their mortgage payment in September. This means distressed properties may be hitting the market. Add low interest rates to the equation, and you might either reap the rewards in lower house payments or the ability to buy a larger home.
Rare are the times when it could be cheaper—or about the same in the long run — to buy a home rather than pay rent. According to a realtor.com report, in the first quarter of 2020, the median monthly cost to purchase a home was $1,584, compared with $1,391 to rent. That said, prices for renting or buying vary by area, so it's smart to compare those costs by checking a "rent vs. buy" calculator for your neighborhood and take into account how long you plan to stay put.
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: Neutral
Mortgage rates are trending sideways this morning. Last week the MBS market improved by +2bps. This was not enough to move rates lower last week. We saw low rate volatility through the week.
This Week's Rate Forecast: Neutral
Three Things: These are the three areas that have the greatest ability to move rates this week. 1) Central Bank, 2) Jobs, and 3) Coronavirus.
1) Central Bank: We will get the latest interest rate decision and policy statement from the Reserve Bank of Australia, but the market focus will be on speeches by the ECB President Christina Lagarde and our Fed Chair Powell, who will testify before the Senate and House on Tuesday and Wednesday. We will also get the Fed's Beige Book on Wednesday.
2) Jobs: We have a ton of jobs/wage-related data this week culminating with Big Jobs Friday, where we will get the Unemployment Rate, Non-Farm Payrolls, and most importantly, Average Hourly Earnings. We will get ADP Private Payrolls, Challenger Job Cuts, Initial Weekly Jobless Claims, and internal employment readings within the ISM releases throughout the week.
3) Coronavirus: It's yet another "Medical Monday" (used be called "Merger Monday" in another day and time) where Moderna has joined the list of a vaccine that is over 94% effective and is filing for emergency use approval with the FDA today. The key to this week is that the Senate is back in session after their holiday-recess, and markets will be very reactive to any movement in talks on a stimulus package that may - or may not- be practical before January 20th. We also have a debt ceiling and looming government shut down right around the corner.
This Week's Potential Volatility: High
The rate markets will pay very close attention to the jobs numbers throughout the week. Depending on how close the actual numbers are to the predictions, the jobs numbers could spike volatility. Once again this week, rate markets will pay close attention to coronavirus developments.
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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