7Y 0% APR? Forbearance Update, Strong Applications, Tight Inventory

The auto industry is taking hits: Hertz filed for Ch 11 bankruptcy after surviving the great depression. You may not be able to get a 0% interest rate on your mortgage but some auto dealers are attempting to survive an 80% decrease in sales by advertising 0% APR for 7 years after 6 months of no payment.

Rates – ended the week where they started and have been tepid since early April. They continue to languish at historic lows down roughly 1% from 12 months ago.

Jobs – the number of people filing for unemployment benefits for the first time is decreasing every week but is still over 10X pre-covid levels. Current unemployment levels are in the 21.5% range and if you subtract temporary PPP jobs they could be in the 24.7% range. (pre-covid was 3.5%)

Forbearance Update: approximately 6.25% of homeowners with conventional loans are in forbearance. Roughly 70% of folks in forbearance were homeowners that had the means to remake their payments. Guidance was released from FHFA (conventional loans) stating that if you are in forbearance and you have continued to make payments on time you will be able to purchase or refinance without waiting 12 months. If you did miss payments in forbearance you will need to settle what you have not paid and then you are eligible for a conventional loan. So if you were in forbearance & missed payments you would be eligible for a loan if you sold your house (paying off your loan) or paid off the balance you had missed with a large payment. If you were in forbearance and are not in a repayment plan or deferral you need to show 3 consecutive on-time payments before your are eligible.

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Home Sales – as expected home sales dipped in April. Interesting to note that condo sales were down significantly more at 26.4% month over month which could hint at some migration out of cities. A supply of 4.1 months in April is the lowest figure on record which supports home prices that are up 7.4% year over year.

Applications: after being down 35% in April purchase applications are making an incredible comeback (increasing for 5 straight weeks) and are up 6% from the previous week. Currently purchase apps are only down 1.5% from this time last year. Redfin notes that over 41% of homes faced a bidding war from April 12th – May 10th up from 9% in January. Refinance application are up 160% year over year and continue to make up roughly 2/3rds of applications.

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