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Daily Rate Update: March 15th-19th

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Friday – March 19, 2021

Fannie Mae released its March 2021 Commentary revealing that the housing market will remain resilient this year, despite mortgage rates creeping higher. Economic growth expected to speed up through spring as many more states lift COVID-19 lock down restrictions. Economic growth (GDP) is forecasted to rise by 6.6% for 2021. Fannie Mae doesn’t a major concern with the recent rise in rates but if inflation rises, it could pose a risk to economic growth, housing and originations.

Looking further into Fannie Mae’s report in 2021, refinancing applications are expected to decline to 54% of total originations, down from 64% in 2020. By 2022, the refinance share is expected to hit 39% as rates edge higher and the pool of outstanding mortgages with incentive to refinance continues to decline. Purchase demand is expected at $1.82 trillion in 2021, above the $1.61 trillion in 2020 with $1.80 trillion expected in 2022.

Courtesy of Mortgage Market Guide 

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Thursday – March 18, 2021

Home borrowing costs continued to rise this week but remain at historically low levels. Freddie Mac reports that the 30-year fixed-rate mortgage rose to 3.09% from 3.05% with 0.7 in points and fees. A year ago at this time, the rate was not much higher at 3.36%. It is up from 2.65% on January 7 of this year. Sam Khater, Freddie Mac’s Chief Economist said, “Residential construction has declined for two consecutive months and given the very low inventory environment, competition among potential homebuyers is a challenging reality, especially for first-time homebuyers.”

First-time unemployment claims remain stubbornly high but fell in the latest week while millions of Americans are still without a job. Weekly Initial Jobless Claims rose to 770,000 from 725,0000 for the week ended March 13, 2021. Continuing claims, or those receiving benefits for at least two weeks straight, fell to 4,124,000 from 4,142,000. With more and more states reopening their economies, many unemployed Americans should be able to go back to work.

Manufacturing in the Philadelphia region soared this month with new orders, shipments and employment indexes all rising. The Philadelphia Fed Index jumped to 51.8 from 23.1 in February. Almost 59% of firms surveyed reported an uptick in current activity. The 51.8 reading was the highest point in nearly 50 years. The survey’s future indexes indicate more optimism about continued growth over the next six months.

Courtesy of Mortgage Market Guide 

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Wednesday – March 17, 2021

Harsh February weather sent a chill over the new residential home construction market while higher material costs, such as lumber, also added to the decline. Housing Starts fell 10% from January to an annual rate of 1,421,000 versus the 1,550,000 million expected. Starts were down 9.3% from a year ago. Single-family starts fell 8.5% monthly and were up marginally by 0.6% annually. Multi-dwelling units were down 14.5% monthly, down 27.6% annually. Building Permits, a sign of future construction, also fell 10% to 1,682,000 units.

Federal Reserve members will release the monetary policy statement at 2:00 p.m. ET today along with a Summary of Economic Projections followed by Fed Chair Powell’s press conference at 2:30. There is a zero percent chance of a hike to the short-term Fed Funds Rate which is currently at .125%. The markets will look for signs of other tools in the Fed’s arsenal to aid the economy such as Operation Twist 3.0 or more Quantitative Easing.

Mortgage rates inched higher in the latest survey but remain at historically low levels. The MBA reports that the 30-year fixed-rate mortgage rose two basis points to 3.28% with 0.41 in points for the week ended March 12, 2021. The Market Composite Index, a measure of total mortgage loan application volume, fell 2.2% while the Purchase Index increased 2%. The Refinance Index declined by 4% and is down 39% from a year ago. Spokesperson Joel Kan said, “Rates have jumped 36 basis points since the end of January, and last week refinance activity fell across all loan types.”

Courtesy of Mortgage Market Guide 

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Tuesday – March 16, 2021

Harsh February weather across the nation weighed on consumer spending but March could see a big rebound now that stimulus checks have begun to hit the accounts of many Americans. February Retail Sales fell by 3% versus the decline of 0.6% expected while January was revised higher to a gain of 7.6% from 5.3%. On a year over year basis, Retail Sales were up a solid 6.3%. Consumer spending comprises 70% of U.S. GDP and is vital to economic growth.

Home builder sentiment slipped in March from February as builders cited rising material costs as one of the factors for the decline. The NAHB Housing Market Index fell to 82 this month from 84 last month. The index was 72 in March 2020 and hit 90 in November 2020. Any number over 50 indicates that more builders view conditions as good than poor. Lumber prices have gone from $300 in March 2020 to $1,000 in mid-February to the current level of $861. That meteoric rise has slapped $24,000 to the price of a new home.

The MBA reports that its Builder Application Survey showed that mortgage applications to purchase new homes fell 9% in February from January and is of the same theme from home builders. The rising cost of materials and a low inventory of lots to build on stunted new home purchase applications last month. Annually, applications were up 9.2%. The average loan size rose to a record of just over $370,000.

Courtesy of Mortgage Market Guide 

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Monday – March 15, 2021

The White House signed the massive $1.9T stimulus bill last week and checks are already hitting bank accounts this morning for those Americans that qualify for the $1,400 direct payments. Many states have already fully opened their respective economies with more on the way. Over the weekend, the U.S. vaccinated nearly 3 million people, a single-day record.

The Fed kicks off its two-day Fed meeting on Tuesday and ends Wednesday at 2:00 p.m. ET with the release of the monetary policy statement. There is a zero percent chance of a hike to the Fed Funds Rate currently at .125%. There will be a Summary of Economic Projections released followed by Fed Chair Powell’s press conference at 2:30.

Gas prices continue to increase as motorists are now paying 14% more for gas in March than in February. The national average price for a regular gallon of gasoline has risen to $2.86 this week, up from $2.50 a month ago. Last year this time the price was $2.26. The decrease in gasoline stocks along with rising demand could continue to push gas prices higher. However, after the recent rise, oil prices seem to be leveling off at the $64 – $67/barrel level and if this can be sustained, the increase in gas prices may not be as substantial.

Courtesy of Mortgage Market Guide 

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