Insight for 2021:
Basic needs: Between the end of August and December the number of Americans not getting enough food increased by 5M and is now up to 27M or 1 in every 8 Americans. Hopefully this will drop back down by 5M with new stimulus extending unemployment benefits
Service spending: spending money on services (restaurants, nail salons, etc.) declined 7% and this is a major sector of the economy, will this bump back up this year?
Permanent changes? – will our economy make a more permanent shift to working and shopping remotely? One indicator is the Architecture Billings Index which shows the demand for new construction projects. This index has dropped for 9 straight months, we will see if it turns back around.

Rates – moved higher last week as the price of Mortgage Backed Securities (MBS) declined sharply after the result of the Georgia Senate elections. Currently they are testing the lower levels of the previous 3 month trading range. A significant move lower would signal higher mortgage rates. Currently rates are still down roughly 1% from last year and near historic lows.


Jobs – the Bureau of Labor and Statistics (BLS) reported 140,000 job losses in December much lower than the expected 65,00 creations. The unemployment rate stayed flat at 6.7% (with misclassification error it should be 7.3%). The all in U6 unemployment rate which includes workers that are part time to do economic reasons decreased by 0.3% to 11.7%. Weekly earning increased by 0.4% to 6.3% year over year growth which more than compensates for 8% home appreciation (you don’t use your entire income for mortgage payment).


Stocks – hit record highs again on Friday. The Citigroup Panic/Euphoria model is now at 1.83 and near the highest level in history. During the dot com bubble this index registered 1.5. If a correction did happen mortgage bonds would likely benefit.

Applications – the Mortgage Bankers Association showed that application volume decreased by 4.2% from the previous week. Since this encompasses holidays it should be taken with a grain of salt. Year over Year refinance applications are up 100% and purchases are up 3.2%.

Forbearance – the share of mortgage loans in forbearance remains at 5.53%, roughly 2.7M homeowners are in forbearance plans. Conventional loans at 3.24% forbearance rate (fannie/freddie) continue to outperform Ginnie Mae Loans @ 7.92% (FHA, USDA, VA) & portfolio loans @ 8.87%.

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