WHICH FACTORS MAY AFFECT RATES IN THE COMING MONTHS? Certain mortgage-related bonds sectors are not eligible for the Fed’s alphabet soup of special lending and purchase facilities. There are growing calls for the Fed to address bond market weakness for non-government eligible mortgages. If the Fed addresses these situations, improved liquidity could bring rates lower—or facilitate greater access—for certain residential mortgages such as jumbo or non- conforming loans.
If that’s the case, the economy may rebound and nudge interest rates higher. Additionally, bond issuance to help fund the extensive government stimulus will increase later this year and may exert upward pressure on interest rates. WILL THERE BE ANY IMPACT TO HOUSING PRICES GIVEN THE INTEREST RATE ENVIRONMENT? The housing market may have weakened in March and early April in response to COVID-19 closures, but since mid-April, buyers have returned. The offset is that in areas of high demand such as California, the impact may be less than in other areas of the country. As the economy slowly improves and rates stay low, prices should remain relatively firm with record low interest rates and low inventory should continue to support housing prices and limit weakness, if any. Mortgage purchase applications have steadily increased from mid-April through early June, showing that home buyers are taking advantage of low interest rates. Although still early, data shows only a limited impact to housing prices with prices still up five to seven percent “year of stress” year-over-year through April.
CONTRIBUTORS ANTHONY VALERI Investment Management Director, Wealth and Fiduciary Services anthony.valeri@zionsbancorp.com
BRUCE DUCLOS Senior Vice President and Mortgage Division Manager bruce.duclos@calbt.com
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