Welcome to Closing Thoughts, Friedman’s dedicated look at news and trends in the mortgage sector.
It's not often that the residential mortgage market takes its cues from outside the U.S., but this is one of those rare times. As noted in HousingWire, a dominant force pushing mortgage rates lower over the past two weeks is the threat of the coronavirus turning into a pandemic that could pressure the world economy, including the U.S.
Some observers note that the outbreak is reminiscent of the 2003 SARS epidemic, which hurt Chinese economic growth. Back then, according to Money, China represented only about 4% of the global economy. Today it’s 16%.
China’s economic growth is expected to slip this year to 5.6%, down from 6.1% last year, according to a conservative forecast from Oxford Economics that is based on the impact of the virus thus far. That would, the NY Times reports, reduce global economic growth for the year by 0.2%, to an annual rate of 2.3% — the slowest pace since the global financial crisis a decade ago.
Last week, interest rates averaged about 3.51% for a conforming 30-year mortgage, almost a full point lower than this time a year ago, when they were 4.46%. While rates are sinking over fears of an economic contraction, homebuyers and those looking to refinance are showing no such concern. Yahoo Finance notes that demand for mortgages rose 2% and applications for refinance loans were up 8%. CNBC.com reports nine million borrowers could save an average $272 per month if they were to refinance to a lower rate.
Mortgage rates typically follow the direction of the Treasury note, which is highly correlated to economic growth. As a result, mortgage rates could go even lower if the coronavirus proves to be a major damper on markets. On the other hand, any news that the virus is being contained could reverse sentiment and put the world economy - and the US economy - back on track, sending mortgage rates higher.
Very recent corporate news has caused markets to stabilize for now, but experts say news on the spread and impact of the coronavirus will continue to be the major factor affecting the direction of rates. With that in mind, it’s always important to plan for a range of scenarios in the year ahead - and be prepared to act when the unforeseen (like an outbreak) hits.
Here are some other mortgage-related stories that we’ve been reading:
Wall Street Journal: Home Loan banks may soon channel funds to more mortgage players
While Fannie and Freddie buy mortgage loans and package them into securities, the Federal Home Loan Banks play a different role in housing finance: channeling money from global bond markets to thousands of institutions across the U.S.
Yahoo Finance: Super-low mortgage rates are the best ever for midwinter
Today's rock-bottom rates are the lowest ever reported during late January in the 49-year history of Freddie Mac’s Primary Mortgage Market Survey, according to a MoneyWise.com finding that Freddie Mac confirmed.
The Economist: A decade on from the housing crash, new risks are emerging
Shadow banks originate around half America’s mortgages.
MReport: Examining the ways technology is changing the mortgage landscape
Where will technology take mortgage next? Will we ever reach a point where buying a home is as easy as buying Christmas gifts on Amazon?
American Banker: Big banks outlast city of Miami in long legal battle
The nation’s four largest banks have prevailed in a grinding court fight with the city of Miami over allegations of discriminatory mortgage lending during the housing bubble leading up to the financial crisis.
NPR: Single women are shortchanged in the housing market
A new study from Yale School of Management found a gender bias in the housing market means single women often lose out, whether they're buying a home or selling one.
Wall Street Journal: New cloud over global growth: synchronized housing slowdowns
Even though homes aren’t tradable, like soybeans or car parts, home prices across the world have become increasingly synchronized. This reflects a variety of factors, according to the IMF, including the increasing tendency for economic growth and interest rates to move in parallel across nations.
HousingWire: Housing market challenged by dearth of construction workers
The ratio of job vacancies to unemployment in the construction industry – a measure of labor market strength – shot up to historic highs at the end of 2018, and it has remained near those levels.
ABA Banking Journal: Fed Governor Bowman concerned about community banks’ exit from mortgage markets
Home mortgage lending has traditionally been a significant business for smaller banks, and the decline in this business threatens a part of the banking industry that plays a crucial role in communities.
Business Insider: For years banks have asked for 20% down on a mortgage, but cash-strapped Americans are buying homes with less
These days, the practice of putting down less than 20% to secure a mortgage is becoming more common, and real-estate agents say it's a practical way to get into the market.