Rates have once again fallen to the all-time lows we saw earlier this year in August 2020. The 30-year fixed rate mortgage and the 15-year fixed rate mortgage both dropped a single basis point to settle at 2.79% and 2.37% respectively.
The CDC approved the Pfizer vaccine over the weekend, but future distribution is contingent on the release of another stimulus bill. As of Tuesday, lawmakers had proposed splitting the $908 billion stimulus bill into two, one worth $748 billion for programs with bipartisan support and another worth $160 billion just allocating funds to state and local governments. In other news, the Fed meeting today is probably going to be the last major market-mover of 2020.
What’s Next for Rates?
As of last Thursday, the cushion between mortgage rates and Treasury yields is at nearly normal levels at 1.8%. This makes mortgage rates more susceptible to moving with Treasury bonds.
So what’s happening with Treasuries?
- Yields on the 10-Year Treasury note rose to 0.901% in response to progress on the stimulus bill
- The Federal Reserve is not expected to change rates or the numbers of bonds it buys, but it may change the weighted-average maturity (WAM) of its bond portfolio by buying longer- or shorter-term bonds
- Depending on the Fed’s decision, Treasury yields may either move below 0.8% or above the former ceiling of 1.0%
There is also a gap between today’s mortgage rates and mortgage rates as implied by the MBS market. This gap is in part because mortgage lenders need to make a profit.
Multi-Unit Properties Left in the Dust
Single-family housing permits grew year-to-date and are up 11.1% from their levels last October. All four regions and 43 out of 50 states experienced growth. Multi-family permits on the other hand fell 9.2% year-to-date. All four regions and 32 out of 50 states reported fewer multi-family permits in 2020. This is in line with Americans’ desire for more space, both in terms of square footage and distance from neighbors.
Renters’ Confidence Takes a Hit
The Fannie Mae Home Purchase Sentiment Index fell 1.7 points to 80.0 after three consecutive months of increases. Consumers feel that buying conditions have worsened with interest rates likely to increase. However, they feel more optimistic about selling conditions as home prices have grown. Also notable is the wide gap between renter and homeowner sentiments, which remains elevated despite narrowing slightly in November. Renters have been harder hit by the pandemic and so have’t recovered as much of their home purchase confidence.