New Homes Sales tumbled over 11 percent in November. Does that mean no one wants new homes, they’re over-priced, or there aren’t any to buy? One has to look at statistics critically. Housing stats tell us that bigger isn’t always better. Per the Census Bureau, the average square footage of new homes sold in the U.S. dropped from 2,724 in 2015 to 2,518 in 2019. Despite the decline in average square footage, the average sales price of new single-family homes sold in 2019 was $383,900, up from $272,900 in 2010 (not adjusted for inflation). 69% of new single-family houses sold last year were purchased using conventional financing (and other types of financing excluding Federal Housing Administration (FHA), Veteran’s Administration (VA) or cash purchases), up from 58% in 2010. Lest we forget, conventional financing is a mortgage loan not guaranteed by any government agency, such as the VA or FHA. While we’re talking about homes, since we’re all in some form of quarantine, I guess we’ll be making only inside jokes for the foreseeable future.

Verification Product

Only 7 days left to lock-in 2020 pricing for Service 1st’s “More Than a Handshake” program. This program guarantees service levels for our must popular, class leading solutions, such as VOEs, credit supplements and CreditXpert® product enhancements. 1 in 2 manual VOEs were completed in 12 business hours. 87% of all credit supplements were completed in 24 hours this month, beating industry benchmarks by well over 50%! S1’s “More Than a Handshake” program most importantly rewards your company for each loan closed. Imagine a service provider rewarding your team for each success… That’s Service 1st!  Enrollment is free. Visit srv1st.com. Hurry, time is running out.

Disasters Don’t Care About Holidays

On December 10, 2020, with DR-4573, FEMA granted Federal disaster aid with individual assistance due to Hurricane Zeta to seven Alabama counties: Clarke, Dallas, Marengo, Mobile, Perry, Washington, and Wilcox.

Carrington Correspondent posted Announcement 20-0071: Updated FEMA Disaster Declaration for Louisiana Hurricane Delta.

First Community Mortgage posted Disaster Announcement DA-20-9- Alabama Hurricane Zeta.

Mortgage Solutions Financial posted announcement DR-4573_24-20C in regard to Hurricane Zeta.

Caliber Home Loans posted FEMA updates regarding Hurricane Zeta, declaring the Alabama counties of Clarke, Dallas, Marengo, Mobile, Perry, Washington, and Wilcox as disaster areas.

The Changing Borrower and Builder Landscape

As a kid I remember sharing a Coke with the kids on my street between hoops games, having a bite of a buddy’s cookie, or merely rinsing off a scratch with hose water. (Don’t ask me about the initiation into the Rocky Mountain Oyster Club in college.) Now builders are talking about the future of the home including a bladeless ceiling fan that kills microorganisms, self-cleaning antibacterial pop-up home office, ceiling panels that use ultraviolet technology to remove infectious air particles, a contactless button system to install in existing office elevators to reduce bacteria transmission, and shelves that disinfect hands and phones.

“Build for rent” is a development that lenders are watching. Investors are pairing with builders to build a house and rent it out. In most areas owning is cheaper than renting on a monthly basis, given interest rates, but individuals and families are still renting, primarily since renters don’t have the down payment, or want the flexibility.

14.5 million people will leave the cities for the suburbs, according to an analysis by RedFin. Redfin predicts that many will move to cheaper cities as well, which will benefit places like Buffalo, Cleveland, and Pittsburgh. 2021 should see a massive relocation in general. Second, it’s economists anticipate the homeownership rate will hit 70% next year, which will be the highest number since 2005, and mortgage rates staying low with the 30-year fixed rate mortgage finishing 2021 around 3%.

These people are impacted by moves in the capital markets, and the Federal Reserve’s Open Market Committee continues to direct the buying of billions of dollars of MBS and Treasuries every day definitely keeps demand high and rates low. Typically, a rate cut from the Federal Reserve reduces financing costs for consumers, in turn freeing up cash flows to be used on things like spending that stimulate the economy. And while the FOMC has been steering expectations in the direction of more accommodative policy despite no glaring need at present for easier monetary policy, household finances won’t be helped as much from a rate cut compared to prior cycles.

In this pandemic-driven cycle, the expansion in household debt has not occurred in variable rate categories that would see the greatest benefit (ARMs or credit card debt), but instead almost exclusively in fixed-rate categories like student and auto loans where rates do not move in conjunction with the fed funds rate. Even without additional rate cuts, the consumer is already on pretty solid footing, as personal consumption expenditures (PCE) are historically high, and household debt as a share of disposable income and as a share of the economy remains well-below levels seen prior to the financial crisis.

In prior economic cycles, a drop in the fed funds rate quickly translated into lower payments on mortgages and credit card debt. But with homeowners financing their purchases differently and consumers not accumulating credit card debt at pre-recession levels there may be less of an immediate boost for consumer finances from rate cuts. To be clear, consumers with an adjustable-rate mortgage may be in store for some relief as lower rates equate to lower interest payments, but with most homebuyers (95 percent now versus 70 percent pre-recession) choosing fixed-rate mortgages the economic benefits to the housing sector from rate cuts will likely be muted compared to prior cycles.

Mortgage rates in general tend to track more closely with the yield on the 10-year Treasury than the fed funds rate, which limits the direct effect the Fed can have on mortgage financing costs. Most importantly, the low fed funds rate has not addressed the low supply of affordable homes. While mortgage debt still accounts for a majority of total household debt, it is down both in total amount outstanding and as a share of total household debt this cycle. As recently as 2009, student loans were the smallest category of consumer debt, but is now the second largest (after mortgages) today, and the largest category of debt for those aged 18 to 29 years of age. Student and auto loans have driven most of the growth in household debt in recent years, but these categories tend to have a fixed interest rate, meaning lower rates will have very little effect on these categories.

Capital Markets

As the year winds down, have you taken any time to reflect on how fortunate the mortgage industry has been this year? Record volumes on the back of low interest rates, all-time margins, and a housing industry that is poised to drive the economic recovery in 2021 from the shutdowns and restrictions that plagued the economy over the course of 2020. If you didn’t hear, house prices rose more than 10 percent year-over-year nationwide, according to the latest FHFA House Price Index. And Zillow has predicted that the upcoming spring selling season should be the biggest in 40 years, as pent-up supply and demand from last spring will entice buyers before the inevitable rise in rates. At what point rates will rise is anybody’s guess (never listen to those that say they can tell you where rates are going).

The trading day yesterday was predictably quiet, even after President Trump demanded the size of direct payments in the fiscal stimulus bill increase to $2,000 from $600. Economic data on the day showed a sizable drop in Initial Claims and better than expected November Durable Orders (+0.9%), while November Personal Income and Spending disappointed. The latest Michigan Consumer Sentiment Survey showed a small decrease while November New Home Sales disappointed, decreasing 11% month-over-month. By the end of the trading day, the UMBS30 basis closed mostly tighter, led by lower coupons, as treasuries sharply steepened, including 10-year yield pulling back to flirt with its post-pandemic high.

Today’s Christmas Eve calendar is light with just Freddie Mac’s Primary Mortgage Market Survey (for the week ending December 24) due out later this morning. In last week’s survey, both the 30-year and 15-year mortgage rates hit survey lows of 2.67% and 2.21%, respectively. The early close sees settlement close at 1:00pm ET with SIFMA recommending a 2:00pm ET close for cash. We begin the day with Agency MBS prices roughly unchanged from Wednesday’s close but the 10-year yielding .93 after closing yesterday at 0.96 percent.

Employment

“Caliber Homes Loans is excited that its proprietary loan origination system, H2O, is going digital! Our new version, H2O-Digital (H2O-D) is a user-centered, intuitive, and task-based interface. This improved technology reduces the time it takes to process and close loans. The H2O-D workflow provides role-specific responsibilities, parallel work, auto-assignment and much more. Stay tuned for more updates as we continue to roll out more features of H2O-D in 2021. If you want to work for a company that's investing in technology to improve work life for its team members, Caliber is for you! Visit our website today to view open opportunities. To be immediately considered for Operations or Sales positions, email Jonathan Stanley or Brian Miller respectively.”

Homepoint has had 96% of its associates working from home since mid-March. While growing loan volume and building capacity have been focal points, the company’s top priority is the care and well-being of its associates and their families. With many people pulling double-duty (working remotely while supporting young virtual learners) Homepoint committed to providing laptops, tablets, or Chromebooks to all associates with children (kindergarten through age 22) that are attending school virtually from home. If you want to be part of a team that makes your career, and your family, a priority, apply for an open position on Homepoint’s careers page.

If you’re a motivated sales professional with a passion for helping clients overcome business challenges with technology, then read on. LBA Ware is expanding its sales team with a business development specialist. Join an innovative and rapidly growing mortgage technology firm that helps mortgage lenders leverage data to improve performance and profitability. The two-time Inc. 5000 winner works with over 100 lenders including Guaranteed Rate, Fairway Independent Mortgage and Movement Mortgage. If you’re interested in joining a collaborative team that promotes creativity, professional growth, and autonomy, then view the full job description and apply here.

Commerce Home Mortgage TPO is a Division of Commerce Home Mortgage, a national mortgage banking company founded in 1994. Commerce is certified by the United States Department of the Treasury as a Community Development Financial Institution (CDFI) is excited to “Relaunch its Portfolio Non-QM programs with features like “No Income on Primary and Second Homes”, DSCR >.50, 12 Month Bank Statement Program that only requires the 1st page of the Bank Statement and a Jumbo product that allows for up to 90% financing with No Mortgage Insurance. In addition to these programs Commerce also offers a No Score Mortgage Only for Streamlines and VA IRRRLS with aggressive pricing. Commerce Home Mortgage is also currently recruiting talented Wholesale Account Executive to meet this growing demand from its expanding national footprint. Seasoned AEs interested in learning more about available opportunities can email James Hooper or click Commerce TPO Careers to apply.

NEXA Mortgage has a "Revenue Share" program where it shares revenues for growth with Loan Officers. It's a residual income. NEXA gave out $509,737 in October, bringing the YTD total to $2.9M for 2020. That income will continue into retirement for Loan Officers. NEXA is also a "pure broker" with dedicated underwriting teams that boast CTC in 15 days on average for clients on purchases and refinances. Learn for yourself during the "Why NEXA" demonstration held every Thursday at 11am MST (Yes, even Christmas Eve). Just login here and click on the "Why NEXA" link. The CEO and Founder, Mike Kortas, will be on hand to answer all questions. Want info sooner? Contact Michael Neill (480-643-9161).