Morning Report: Corelogic predicts low mortgage rates for the next 3 years.

Vital Statistics:

 LastChange
S&P futures3689-8.6
Oil (WTI)45.92-0.34
10 year government bond yield 0.94%
30 year fixed rate mortgage 2.82%

Stocks are lower this morning as California institutes a strict lockdown amidst a rise in COVID-19 cases. Bonds and MBS are down.

The upcoming week should be relatively quiet with the Fed in the quiet period ahead of next week’s FOMC meeting and limited economic data. We will get inflation and productivity data this week and that is about it.

CoreLogic released its three-year economic outlook, and it predicts low mortgage rates through 2023 as well as rising home prices. They forecast that mortgage rates will average around 3.2% for 2021 through 2023. This means that the refi boom will continue.

They anticipate rates will remain below 3% for early 2021.

Second, they see the Millennial generation will be a huge tailwind for housing demand. The largest age cohort of the Millennial generation is in their late 20s and, and the median age for the first time homebuyer is age 33. The first time homebuyer has been underrepresented in the homebuying population, averaging about 30% of home purchases. Historically that number has been closer to 40%. So, as homebuilders ramp up to satisfy this demand, the purchase side of the business should remain robust for the next several years.

Finally, CoreLogic expects home price appreciation to slow as builders ramp up production and the supply / demand imbalance gets fixed. As the first time buyers become a bigger percentage of the mix, lower-priced starter homes will be act to pull the average prices down.

Overall, the report is bullish for housing and the mortgage origination industry. The Fed seems to be in no hurry to increase rates, and the global vortex of low and negative sovereign yields should keep a lid on the 10 year. Plus the Fed is thinking of increasing MBS purchases, which will keep mortgage rates low. Overall, this should be a great environment for the origination business going forward.

Author: Brent Nyitray

In the physical sciences, knowledge is cumulative. In the financial markets, it is cyclical

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