Mortgage rates jump again, as economic worries subside

The mortgage rate surge went on for a second week with the 30-year fixed rate reaching its highest point since last summer as generally positive economic news outweighed concerns about inflation.

Average rates for the 30-year FRM rose to 2.97%, a 16 basis point increase compared with the previous week’s 2.81%, according to Freddie Mac’s Primary Mortgage Market Survey. But the rate was still significantly lower than the 3.45% posted for the same week one year ago.

This is the highest the 30-year FRM has been since the week of Aug. 20, 2020, when it was 2.99%.

“Optimism continues as the economy slowly regains its footing, thus affecting mortgage rates,” Sam Khater, Freddie Mac chief economist, said in a press release. “When combined with demand-fueled rising home prices and low inventory, these rising rates limit how competitive a potential homebuyer can be and how much house they are able to purchase.”

Mortgage rates are finally keeping pace with the recent increases in the yield on the benchmark 10-year Treasury, which on the morning of Feb. 24 reached its highest point in exactly one year.

The jump in Treasury yields comes from investors feeling both positive and negative about the U.S. economy at the same time, according Matthew Speakman, an economist at Zillow who issued comments on Wednesday night.

The markets are “bullish on falling COVID-19 case counts and encouraging improvements in vaccine distribution, yet fearful that ambitious fiscal relief and accommodative monetary policy will result in higher inflation — something that would theoretically cause the Federal Reserve to scale back on their policies that have helped keep interest rates low,” Speakman said. “Rates are still very low by historical standards, but the ultra-low rate environment that became the norm in the second half of 2020 appears to have come to an end.”

The average for the 15-year FRM also had a double digit increase, up 13 bps to 2.34% from 2.22% the week prior; one year ago it was 2.95%. The five-year Treasury-indexed hybrid adjustable-rate mortgage rose by 22 bps to an average 2.99% with a 0.1 point average, up from 2.77% week-over-week but lower than 3.2% for the same week in 2020.


Serious mortgage delinquencies remain high as overall rate declines

Mortgage delinquencies are at a 10-month low, but the number of borrowers that have not made a payment in 90 days or longer remains five times higher than before the pandemic began, Black Knight said.

For January, 5.85% of outstanding mortgages were at least 30-days or more late on their payment, down from 6.08% in December. It was the first month that the delinquency rate was under 6% since March 2020, when it was at 3.39%. The delinquency rate does not include loans in foreclosure.

But the upcoming trouble for mortgage servicers can be seen in the still relatively high share of seriously delinquent borrowers. At the end of January, payments were 30 to 89 days late on just over 1 million properties, but there were 2.1 million properties for which a payment was 90 days or more past due.

“Recent forbearance and foreclosure moratorium extensions have reduced near-term risk, but at the same time may have the effect of extending the length of the recovery period,” Black Knight said in its press release. “At the current rate of improvement, 1.8 million mortgages will still be seriously delinquent at the end of June when foreclosure moratoriums on government-backed loans are currently slated to lift.”

For comparative purposes, back in March 2020, of the 1.8 million properties that were at least 30 days late on a payment, just 406,000 were 90 days or more delinquent, a record low.

In December, there were 3.25 million properties for which the mortgage hadn’t been paid in at least 30 days, with 2.15 million past the 90-day mark.

But those moratoriums have resulted in continued declines in foreclosure starts. There were 5,900 foreclosure starts in January, down 16.9% from December and 86.2% from January 2020. The number of properties in the foreclosure pre-sale inventory slipped to 171,000 in January, down by 7,000 from December and 75,000 fewer units compared with January 2020.

As mortgage interest rates started rising in January, prepayment rates declined to 2.63%, down from 3.15% from December. But that was still more than 109% higher than January 2020’s prepayment rate of 1.26%.


Rising Rates Damp Mortgage Applications Ahead of Spring Selling Season

Mortgage rates reached their highest level since November last week, cooling off home purchase and refinance applications ahead of the all-important spring selling season.

The average rate on the 30-year fixed-rate mortgage rose to 2.81% in the week ended Feb. 18, the highest since the second week of November, according to mortgage-finance giant Freddie Mac. A measure of mortgage applications fell 11.4% over the same week, according to the Mortgage Bankers Association.

Improving Covid-19 vaccination rates in the U.S. and expectations of a large federal stimulus package in the coming weeks drove benchmark 10-year Treasury note yields, which are closely tied to mortgage rates, to their largest weekly gains in more than a month last week. Demand in safe-haven assets such as government bonds weakens when investors feel optimistic about the economy.

“Higher rates are a signal of expectations of faster growth and a stronger job market ahead,” said Mike Fratantoni, the MBA’s chief economist. “This last week, rates have turned faster than many people had anticipated.”

Rising rates sometimes prompt borrowers to put their mortgage plans on hold for a few weeks, Mr. Fratantoni said. Measures of purchase and refinance activity fell 11.6% and 11.3%, respectively, in the week ended Feb. 19, according to MBA data.

If mortgage rates begin to increase at a faster pace, some borrowers could be discouraged from attempting to buy a home during the crucial home-selling months of March through June. In a typical year, more than 40% of annual home sales are made during this period, according to the National Association of Realtors.

Still, rates remain historically low, and more people are applying for purchase mortgages and refinances than at the same time in 2020. Last year was a banner one for the housing market, thanks in large part to mortgage rates, which fell below 3% for the first time last summer.

Mortgage lenders originated a record $3.6 trillion worth of mortgages last year, according to the Mortgage Bankers Association, an increase of more than 50% from 2019. Refinances accounted for about 59% of that volume. With the 30-year rate near 2.81%, between 16.7 million and 18.1 million Americans could lower their monthly mortgage payments through a refinance, according to mortgage-data firm Black Knight Inc.

Lissette Gomez will close this week on a new loan that lowers the mortgage rate on her Cleveland-area condo to 2.75% from 4.125%. Ms. Gomez, a special-education teacher, said she decided to refinance after she watched her boyfriend get a much lower rate on his mortgage.

“Everybody was getting the word, especially in the second half of 2020, that the rates were super low,” Ms. Gomez said. “I wanted to refinance when people were jumping on it, and the numbers were as low as they’ve ever been.”


Texas freeze, rate jump drive a week of stalled mortgage app activity

As interest rates hit the highest levels since September, mortgage application activity dropped for the third week in a row, according to the Mortgage Bankers Association.

Overall loan application volume fell 11.4% for the week ending Feb. 19 on a seasonally-adjusted basis and 10% unadjusted from the week prior. The refinance share of loan activity continues to tumble in contrast with growing mortgage rates, falling to 68.5% from 69.3% week-over-week.

The refi index dropped 11.3% weekly but sat 50% higher than the same time a year ago. The purchase share increased to 31.5% from 30.7% and the index declined 7.8% from last week while rising 7% annually. The average purchase loan size climbed to yet another new record high of $418,000 from $412,200 the previous week.

Brutal weather also contributed to a regional drop in activity. “The severe winter weather in Texas affected many households and lenders, causing more than a 40% drop in both purchase and refinance applications in the state last week,” Joel Kan, MBA’s associate vice president of economic and industry forecasting, said in a press release.

The total application share of loans guaranteed by the Federal Housing Administration jumped to 11.2% from 9% from the week before, the Department of Veterans Affairs loans dipped to 11.9% from 13.2% and U.S. Department of Agriculture loans edged down to 0.3% from 0.4%. The share of adjustable-rate mortgages rose to 2.56% from 2.47%.


There’s no 2-minute warning for rate shocks, even with Fed at the zero bound

The mortgage industry is notorious for its use of acronyms and even acronyms inside acronyms (TRID, anyone?). However, there is an acronym that is highly relevant to the current rate environment: ZIRP, which stands for “Zero Interest Rate Policy.” As its definition implies, this term describes the Federal Reserve’ s current policy of holding the Fed funds rate at near 0% for the foreseeable future due to the economic challenges presented by the COVID-19 pandemic.

It may be easy for some to assume a locked-down Fed Funds rate means mortgage rates will remain at the historically ultra-low levels the industry has seen throughout the pandemic. Not only does history tells us this is not the case, but the recent uptick in interest rates due to the rise in the Treasury yield and increased economic spending provides even more current proof that rate swings are possible, if not inevitable during ZIRP. As such, lenders and their capital markets executives must be prepared for interest rate swings in either direction despite the current ZIRP.

The last time the Fed instituted ZIRP was following the Global Financial Crisis, which lasted for a span of seven years, from December 2008 to December 2015. In December 2008, the average note rate for 30-year mortgages was 5.14%, when ZIRP ended in December 2015 the par note rate was 3.31%. However, that lengthy seven-year span was not a gentle expressway ramp; it was riddled with both bull and bear markets for mortgage rates despite the continued Fed pledge of “lower for longer.” Despite a Federal Open Markets Committee (FOMC) target on short-term rates of 0.00% – 0.25%, mortgage rates experienced several violent swings.

During what was known as the taper tantrum (remember hearing that talk again earlier this month?), the market was afraid the Fed was going to taper off its purchases of Treasuries and mortgage-backed securities so mortgage rates went up over 100 basis points over 3 short months. During another span of only 9 weeks prices on the lowest-coupon mortgage-backed security declined by a whopping 800 basis points, from 101 all the way down to a 93 handle. All of this activity occurred more than two years before the Fed actually instituted the very tiniest bit of liftoff in their Fed funds rate policy.

Looking at the current environment, the Fed has indicated that it will not raise the Fed funds rate until at least 2023. However, as the industry has observed before, this does not mean that mortgage rates are going to languish around the same range they’ve been in for the last 10 months. In fact, it would not be unusual to see changes of even an entire whole percentage point up, or down, for however long this current ZIRP is in place. In fact, Fannie Mae and Freddie Mac have both forecasted moderate increases in interest rates in 2021 in anticipation of this inevitability, though rates could certainly head in the opposite direction given the right market conditions.

In these past few months, I’ve heard people say things like “The market’s not going anywhere for a few years. The Fed said so, and it’s already priced in, right?” While that may be the case for the Interest on Excess Reserves and Fed Funds, which the Fed has pegged at near zero, there will not be an alarm that goes off letting lenders know to lock the doors. Just because the Fed is staying put doesn’t mean that mortgage rates, and prices of MBS, are staying put as well. As history has shown us, shocks can — and do — come when markets least expect them.


Mortgage hedgers won’t add fuel to rates fire, JPMorgan says

Mortgage hedgers are unlikely to exacerbate the Treasuries sell-off this time around, according to JPMorgan analysts.

Where once Fannie Mae and Freddie Mac held and actively hedged massive mortgage-bond portfolios, the largest players now in the market are those who don’t, such as the Federal Reserve and non-bank servicers.

Mortgage bonds are continuously callable, so when rates increase, a mortgage portfolio’s duration — a measure of its interest-rate sensitivity — can rise dramatically, which necessitates rebalancing. When mortgage investors react to that, the trades they make — such as selling Treasuries — can worsen the very event they are trying to escape, adding impetus to rate sell-offs.

The potential for that kind of hedging could worry any mortgage-bond investor, as the duration of the agency MBS universe is extending after hitting post-2008 lows last year. Meanwhile, the overall weighted-average coupon of mortgages has dropped by 0.3% over the past six months, according to JPMorgan analysts Joshua Younger and Nicholas Maciunas.

But today the mortgage players who most actively hedged — Fannie and Freddie, real estate investment trusts and large bank servicers — have significantly reduced their need to to do so, the analysts added. The government-sponsored enterprises, for example, owned more than 20% of the market in 2003; they hold just 1.5% now.

The JPMorgan Chase & Co. logo. Photographer: ANDREW HARRER


Large banks have moved away from servicing mortgages, with non-banks, which rarely hedge, becoming major players in that space. Bank-serviced loans as a percentage of the universe have dropped to about 16% from 40% back in 2014.

REITs, whose hedging moves in 2013 had an outsized impact because they were caught off-sides, remain a relatively small player and are in a much better position now to handle a rate sell-off, according to the analysts.

U.S. commercial banks, due to the size of their holdings and infrequent rebalancing activity, “are the wildcard,” the JPMorgan analysts added.

It’s not the amount of mortgages so much as who exactly holds those mortgages that matters when trying to determine the level of hedging activity to come. With that in mind, the analysts expect “a fairly benign outlook” overall for mortgage hedging activity, with a repeat of the past unlikely.


U.S. existing-home sales unexpectedly rise to three-month high

Sales of previously owned U.S. homes unexpectedly rose to a three-month high in January as Americans sought to take advantage of ultra-low mortgage rates that have powered the boom in housing.

Contract closings increased 0.6% from the prior month to an annualized 6.69 million, after a downwardly revised 6.65 million in December, according to National Association of Realtors data released Friday. The median forecast in a Bloomberg survey of economists called for a 6.6 million rate in January.

Low borrowing costs paired with a desire for single-family homes with more space during the pandemic has propelled demand, even as other parts of the economy lag. Sales of existing homes last year were the strongest since 2006. Still, prices are rising, inventory is limited and expectations of higher mortgage rates may weigh on buyer demand going forward.

“We have to get more inventory,” Lawrence Yun, NAR’s chief economist, said on a call with reporters. “Sales could be even higher,” if more homes were put on the market, he said.

Single-family homes with rooftop solar panels and backyard pools are seen in this aerial photograph taken over a Lennar Corp. development in San Diego, California.

Bing Guan/Bloomberg

While low mortgage rates have helped make buying a home more affordable, prices are soaring. The median selling price increased 14.1% from a year earlier to $303,900 in January, a record for the month.

Properties remained on the market for 21 days in January, compared with 43 days in the same month last year.

There were a record-low 1.04 million homes for sale last month, down 25.7% from a year earlier. At the current pace, it would take 1.9 months to sell all the homes on the market, down from 3.1 months in January of last year. Realtors see anything below five months of supply as a sign of a tight market.

Recent data also suggest the housing market will remain a bright spot for months to come. While home-construction declined in January for the first time in five months, permits to build single-family houses rose at the fastest pace since 2006. The number of one-family dwellings authorized but not yet started increased to the highest in more than 13 years.


Get a no-closing-cost mortgage and a low rate, too

Out-of-pocket mortgage fees are optional

Mortgages always have closing costs, whether you’re buying a home or refinancing. But you don’t always have to pay them out of pocket.

You get to choose how your home loan is structured.

You could take your lowest rate and pay closing costs on your own dime. Or you can ask your lender to cover closing costs and pay a slightly higher interest rate.

These “no-closing-cost” mortgages aren’t always a good deal because a higher rate means you pay more in the long run.

However, today’s mortgage rates
are so low that many borrowers can get the lender to cover their fees and still
get an ultra-low rate.

Find a no-closing-cost mortgage (Feb 19th, 2021)

In this article (Skip to…)

What is a no-closing-cost mortgage?

A no-closing-cost mortgage or no-closing-cost refinance isn’t exactly what it sounds like. There are still closing costs. You just don’t pay them yourself.

What a no-closing-cost mortgage really means is that the lender covers part or all of your closing costs. In exchange, you pay a higher interest rate. The lender’s extra profit from your higher rate repays your closing costs in the long run.

Lenders can cover some or all of your closing costs in most cases, including loan origination fees, appraisal fees, title search and title insurance fees, and prepaid taxes and insurance.

Depending on the lender, a no-closing-cost mortgage loan can also be called a:

  • Zero-cost mortgage
  • No-cost mortgage
  • Lender credits
  • Rebate pricing
  • Lender-paid closing costs

All these terms refer to the same arrangement, where you’ll pay a higher interest rate in order for the lender to cover closing costs.

This is no free lunch — if you keep the loan for a long time, you could end up paying more via the higher interest rate than you would have paid in upfront closing costs. So you should think about how long you plan to keep your new loan before deciding on a no-closing-cost refinance or home purchase loan.

However, if you’re ready to buy a home or refinance but don’t have the upfront cash, a zero-cost mortgage can be a smart way to lock in at today’s low rates without having to wait and build your savings up.

Check no-closing-cost mortgage rates (Feb 19th, 2021)

Types of no-closing-cost home loans

There are several ways to
structure a no-closing-cost loan. A lender might cover all your
upfront fees or only select closing costs.

The amount and type of closing
costs your lender absorbs will affect your interest rate, so it’s important to
compare offers on equal footing.

To compare zero-cost offers,
make sure each lender covers the same items. For example:

  • The mortgage lender covers lender fees but not the third-party expenses or prepaid items (upfront property taxes and homeowners insurance)
  • The lender covers lender fees and third-party charges, but not prepaid items
  • The mortgage lender absorbs everything, including loan costs and prepaid expenses

A lender that covers all
three parts of your closing costs will likely charge a higher rate. Conversely,
a lender that charges a lower rate is likely only covering its own fees, not
fees from the appraiser, title company, or escrow service.

No-closing-cost mortgage example

For example, your
various rate and fee options might look like this:

  • 2.750% rate — The borrower pays all closing costs, including lender fees, third party fees, and prepaid costs
  • 2.875% rate — The borrower pays no lender fees, but does pay third party costs and prepaid costs
  • 3.250% rate — The borrower pays no lender or third party charges, only prepaid costs
  • 3.50% rate — The borrower pays nothing out of pocket whatsoever

None of these options are
good or bad. Borrowers should understand that lower rates cost more upfront,
and higher rates cost less upfront.

To be able to pay your
closing costs, lenders increase your interest rate and use the extra profit
from the loan to pay your costs.

It’s up to you to decide if the upfront savings are worth the higher interest rate and payment.

No-closing-cost refinancing

A no-closing-cost refinance can be a particularly good idea because it eliminates the one big drawback to refinancing — the upfront cost.

For this to work, however, your new interest rate needs to be low enough that you can accept a slight rate increase and still see your desired savings.

A higher interest rate will result in a higher monthly payment and a bigger long-term cost. So before using a no-cost refinance, you should check the numbers and determine:

  • Will your monthly payments still be reduced at the no-closing-cost mortgage rate?
  • How long do you plan to keep the mortgage before moving or refinancing again?
  • How much more will you have paid in interest by the time you sell or refinance? Is this amount higher or lower than paying closing costs upfront?

The point at which the added interest cost starts to outweigh your savings is the “break-even point.”

With a no-cost mortgage refinance, you’ll likely want to move or refinance again before you hit the break-even point.

Of course, if you need lower mortgage payments because your monthly budget is too tight, the higher long-term cost might not matter as much. You might be happy with the month-to-month savings and lack of upfront fees.

As always, the right mortgage refinance strategy depends on your current loan and your personal finances.

When you’re shopping around, you can ask lenders for offers both with and without closing costs to compare your potential interest rates and long-term costs.

No-closing-cost vs. ‘rolled’ closing costs

A zero-cost loan isn’t the only way to eliminate closing costs when you refinance. Most homeowners also have the option to roll closing costs into their new loan balance.

Rolling closing costs into your loan is not the same as a no-closing cost refi.

By rolling in closing costs, you increase your mortgage amount, which means you’ll pay more interest in the long run. But your actual interest rate stays the same.

Compare that to a no-closing-cost mortgage refinance, which keeps your loan balance the same but increases your rate.

There are pros and cons to each strategy.

Keeping your lower interest rate by rolling closing costs into the loan might save you more on interest. But it also increases your loan-to-value ratio (LTV), which could impact your refinance eligibility or your ability to cancel private mortgage insurance (PMI).

Your refinance options also depend on the type of loan you have.

For instance, FHA and VA Streamline Refinance loans only allow borrowers to include upfront mortgage insurance fees in the loan amount. All remaining closing costs need to be paid out of pocket. 

Note, including closing costs on the loan balance is only an option when you refinance — not when you buy a home. But you can get a no-closing-cost loan with a higher interest rate when you purchase real estate.

The right no-cost option depends on your particular mortgage.

You can compare both options when you’re shopping for refi offers to see which makes more sense for your financial situation.

Compare no-closing-cost mortgages (Feb 19th, 2021)

Getting a zero-closing-cost loan from a
mortgage broker

A no-closing-cost loan looks a
little different with a mortgage broker than it does when you’re working
directly with a lender. That’s because the broker is an intermediary; they can
help you negotiate the rate and terms of your loan, but they don’t control the
end lender’s pricing.

However, a no-cost loan is still
possible via a mortgage broker. You just need to know how they work.

Mortgage brokers collect a
yield spread premium, or YSP, as payment to work on your loan.

The end lender pays this fee
to the mortgage broker for delivering your loan. The YSP is the mortgage
broker’s profit.

Knowing this, you can request
that the broker use the YSP to engineer your no-cost home loan.

For instance, a broker
getting paid a 1% YSP by the lender need not charge the borrower an origination
fee. In this case, the YSP can save you one percent of your loan amount in
out-of-pocket costs. A broker getting 2% YSP can cover even more of your
closing costs.

When comparing no cost loans
between mortgage lenders and brokers, ask for the same structure
from each.

In other words, ask them all
for offers with no lender fees. Third party costs like appraisal, credit
report, title and escrow and recording fees should be fairly similar. Your taxes
and insurance should be the same regardless of which lender you choose.

This allows you to look at just one variable: the interest rate.

Mortgage rates with no closing costs

The downside to a no-closing cost mortgage is that you’ll pay a higher interest rate. Even a slight increase in your rate can cost you thousands more over the life of the loan.

However, you should consider the interest rate increase in perspective.

Today’s rates are at historic lows. And that means many borrowers can accept a slightly higher rate while still ‘saving’ compared to homeowners who bought or refinanced a year ago or more.

Imagine you’re offered a 30-year fixed mortgage rate of 2.875%. Your lender is willing to cover closing costs but will increase your rate to 3.5%.

That’s a big increase compared to your original rate offer. But 3.5% is still less than half the historic average for 30-year rates — and it’s less than most borrowers would have paid any year prior to 2020.

Yes, you should get the lowest rate you can to save money in the long run. But if a no-closing-cost loan is your only route to homeownership or refinancing, it’s not a bad deal.

The important thing is that you’re aware of the tradeoff between zero upfront costs and bigger long-term costs so you’re certain you’re making the right decision.

Tips to lower your no-cost mortgage rate

The lower your initial mortgage rate is, the lower your no-closing-cost mortgage rate will be.

To get a no-cost mortgage loan and a low rate, try to present a strong mortgage application. You’ll typically get a lower interest rate if you have:

  • A credit score above 720
  • A clean credit report with no late payments
  • A debt-to-income ratio (DTI) below 43%
  • A loan-to-value ratio (LTV) below 80% (meaning you have at least 20% home equity)

Additionally, refinancing with at least 20% equity (or buying a home with 20% down) can help you avoid private mortgage insurance (PMI) or FHA mortgage insurance premiums (MIP).

Eliminating mortgage insurance costs can go a long way toward reducing your monthly payment and making up for the increased interest rate on a no-cost loan.

But perhaps the most powerful way to lower your rate is to let lenders compete for your business. Get two or three quotes. Send the quote with the lowest rate and fee combination to one of the other lenders. See if that lender can beat it.

You may end up getting much of your closing costs paid for and get close to the full-closing-cost rate.

What are today’s mortgage rates?

Purchase and refinance rates are still at historic lows. Many home buyers and homeowners can get the lender to cover their upfront costs and still secure a great interest rate.

Make sure you compare no-cost offers from a few different lenders if you want to go this route. Check that each one is covering the same closing costs so you can make an apples-to-apples comparison of upfront costs and interest rates.

Verify your new rate (Feb 19th, 2021)

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Mortgage rates jump to 3-month high as Treasury yields climb

Borrowers holding out for mortgage rates to keep dropping may have missed their chance.

After a two-week holding pattern, mortgage rates finally caught up with the growing Treasury yields and gradual economic recovery driven by the most recent stimulus package.

The 30-year fixed rate mortgage shot up 8 basis points to 2.81% from 2.73% one week earlier, according to Freddie Mac’s Primary Mortgage Market survey. That compares to a rate of 3.49% from the same time a year ago and it marks the highest weekly average since reaching 2.84% on the week ending Nov. 12, 2020.

The 10-year Treasury yield benchmark — a general indicator of interest rate movement — has been on an upward trajectory since the end of January, reaching its highest level since March 2020 this week. The strong yields, combined with boosted economic spending and downstream inflation made this week’s mortgage rate spike inevitable, Zillow Economist Matthew Speakman said in a separate press release.

“Investors also appear to be increasingly wary that more fiscal relief and accelerating economic growth through increased vaccination rates could translate to higher inflation,” Speakman said. “That’s something that would reduce the value of bonds’ fixed-payments, and possibly lead the Federal Reserve to raise interest rates and place more upward pressure on yields and mortgage rates.”

Industry forecasts predicted moderate interest rate growth over the course of 2021 and the recent market shift is suggestive of that outlook coming to fruition.

The average 15-year fixed-rate mortgage also rose, going to 2.21% from 2.19% the week before while falling from 2.99% the same time a year ago. The five-year Treasury-indexed hybrid adjustable-rate mortgage averaged 2.77% with a 0.2 point average, down from 2.79% week-over-week and 3.25% year-over-year.


Despite shrinking inventory, 2021 home sales started ‘with a bang’

With record low mortgage rates encouraging an atypically high volume of home sales for the time of year, 2021 opened with indicators for another strong year, according to Remax.

But constraints remain: the number of for-sale properties fell to the lowest point since Remax started its National Housing Report in 2007, setting up high demand and potentially limiting future sales volumes. January inventory dropped 12.1% month-over-month and 35.7% year-over-year. The national supply decreased to 1.7 months from 1.8 months in December and 3.5 months the year prior.

Among the 53 largest metro areas, Albuquerque, N.M., and Boise, Idaho, tied for the lowest supply for the second straight month at 0.5 months. Denver, Phoenix, Salt Lake City and Seattle followed in a tie at 0.6 months. A 6-month supply defines market equilibrium.

While time on market rose to a 40-day average from the record low December of 37 days, it dropped from 59 days year-over-year. Omaha, Neb., continued to have the fewest days on market at 18, followed by Boise at 19 and a tie for third with Cincinnati and Nashville, Tenn., at 21. The slowest times came in Des Moines, Iowa, at 99 days, Miami at 88 and Augusta, Maine at 78.

Similarly, the median sales price dipped 1.7% monthly to $285,000 from $290,000 but that represents an annual growth of 11.8%. None of the largest 53 housing markets declined in sales price year-over-year. Meanwhile, Boise led all metros with a 24.3% jump from January 2020, trailed closely by 21.3% in Pittsburgh and 20.5% in Indianapolis.

“January home sales started the year off with a bang despite the current shortage of homes for sale. It signals that 2021 could be a historically good year for housing,” Adam Contos, CEO of Remax Holdings, said in the report.

Closed sales in January fell 32.1% from December, but the volume reflected a 13.5% increase from the year earlier. San Francisco outpaced the country with a 38.5% annual spike in sales, followed by Anchorage, Alaska at 31.7%, and the Wilmington-Dover, Del., combined statistical area at 30.9%.

Interest rates continue to stoke consumer demand. The average 30-year FRM on closed loans fell to 2.88% in January from 2.93% in December and 3.96% annually, according to ICE Mortgage Technology’s Origination Insight Report.

The split in loan types leaned two-thirds toward refinance versus purchase. The refi share grew from 60% in December and 50% in January 2020 as more borrowers take advantage of the sub-3% rates. While a shift toward a more purchase-oriented market is expected for later in 2021, the latest application data from the week ending Feb. 12 shows consumers are still refinancing in droves.