01/05/2021
Happy New Year Everyone! I hope that you and your loved ones are in health and prospering in every area of your lives.
ECONOMIC COMMENTARY
Looking Through The Looking Glass
You cannot look back at 2020 without using an acronym most of us had never heard of before 2020. Of course, that acronym is COVID. We started the year somewhat normally. The economy was slowing down a bit and the real estate sector was doing well. Then in March, the economy shut down like it never had before. In March we had a historic drop in the stock market, and it looked as though we were going to have a rough year in equities. Yet, by the end of the year, stocks were convincingly higher compared to the end of 2019.
Interest rates plunged as the Federal Reserve pulled out all the stops to help rescue the economy. Even though stocks rebounded, rates stayed at historic lows the rest of the year. Congress also acted to stimulate the economy, passing trillions of dollars of economic relief, along with foreclosure and eviction moratoriums. This medicine helped as the economy recovered just over half of the over 20 million jobs lost during the sharp and brief rece ssion.
The economy itself recovered from a record plunge it experienced in the spring, but we still expect to see negative growth for the year. This winter we head into the new year with surging COVID cases, high hopes for vaccinations, a very hot real estate market bolstered by record low interest rates and an economy still on the mend with millions of jobs still to recover. Hopefully 2021 will be the year of recovery in more ways than one.
WEEKLY INTEREST RATE OVERVIEW
The Markets. Rates remained close to their record low to end the year. For the week ending December 31, Freddie Mac announced that 30-year fixed rates rose one tick to 2.67% from 2.66% the week before. The average for 15-year loans decreased to 2.17% and the average for five-year ARMs fell to 2.71%. A year ago, 30-year fixed rates averaged 3.72%, more than 1.00% higher than today. Attributed to Sam Khater, Chief Economist, Freddie Mac - "All eyes have been on mortgage rates this year, especially the 30-year fixed-rate, which has dropped more than one percentage point over the last twelve months, driving housing market activity in 2020. Heading into 2021 we expect rates to remain flat, potentially rising modes tly off their record low, but solid purchase demand and tight inventory will continue to put pressure on housing markets as well as house price growth." Note: Rates indicated do not include fees and points and are provided for evidence of trends only. They should not be used for comparison purposes.
Current Indices For Adjustable Rate Mortgages
December 31, 2020
Daily Value Monthly Value
Dec 30 November
6-month Treasury Security 0.09% 0.10%
1-year Treasury Security 0.12% 0.12%
3-year Treasury Security 0.17% 0.22%
5-year Treasury Security 0.37% 0.39%
10-year Treasury Security 0.93% 0.87%
12-month LIBOR 0.333% (Nov)
12-month MTA 0.500% (Nov)
11th District Cost of Funds 0.503% (Oct)
Prime Rate 3.25% (March)
