|10 year government bond yield||0.87%|
|30 year fixed rate mortgage||2.80%|
Stocks are higher this morning on overseas strength. Bonds and MBS are down.
Joe Biden has nominated Janet Yellen to Treasury. Apparently Elizabeth Warren lobbied hard for the job, but lost out in the end. Yellen gets along with the banks, which is important. Needless to say, Biden wants to see a big stimulus package, and Yellen will be part of agitating for that. The fate of a stimulus package will remain in the hands of Georgia voters.
Home prices are skyrocketing as lower interest rates meet a housing shortage and increased demand. The FHFA House Price Index rose 1.7% MOM and 9.1% on a YOY basis. The Cash-Shiller index rose 1.3% MOM and 6.6% YOY, the highest rate of growth in 6 years.
The FHFA House Price Index only looks at homes with confirming loans, which means it excludes jumbo. Note that with the FHFA index rising so much, we could be looking at a conforming loan limit of around $550k next year.
The number of loans in forbearance ticked up last week, according to the MBA. 5.48% of all mortgages were in forbearance, an uptick of 1 basis point compared to a week prior. “A marked slowdown in forbearance exits, as well as a slight rise in the share of Ginnie Mae, portfolio and PLS loans in forbearance, led to an overall increase for the first time since early June,” said Mike Fratantoni, MBA Senior Vice President and Chief Economist. “The decline in exits in the prior week follows a flurry of them last month, when many borrowers reached the six-month point in their forbearance terms. The share of GSE loans in forbearance continued its downward trend and have now declined every week for six straight months.”
With mortgage rates continuing to fall, Black Knight has updated its count of high quality refinances. According to their latest report, 19.4 million borrowers can save 75 basis points on their rate by refinancing. These are only the high quality refi candidates, which have more than 20% equity and 720 FICOs. Here is an interesting stat: 7.2% of these borrowers are in the New York City area. 1.4 million borrowers * 400k a pop = $700 billion in potential refis right in our backyard.
If you remove the FICO and equity constraints, that number increases to 32 million. As long as the Fed keeps rates low, this refi boom is going to have legs. 32 million potential refis out there at 400k a pop means $12.8 trillion in potential refi activity. The MBA’s estimate of under $1 trillion in refi activity next year seems too low.
As long as mortgage rates keep falling, the number of refis is only going to increase. We are at all-time lows.