Market News 7-10-2020
Mortgage Market Update
FORECLOSURE THREAT GROWS AS COVID-19 SURGESThe danger of mortgage forbearances turning into foreclosures is rising as COVID-19 infections surge in the U.S., according to the Federal Reserve Bank of Atlanta. COVID-19 cases in Texas, Arizona, Florida and other sunbelt states have set record highs in the past week and some intensive care units have exceeded capacity. The nation had a record 54,500 new virus infections on Thursday, before the long holiday weekend, according to data from Johns Hopkins University. “The threat that forbearance will transition to foreclosure has regained power because the number of COVID-19 infections is increasing and the CARES Act unemployment insurance benefits will expire at the end of July,” the Atlanta Fed economists said in the Thursday report. The beefed-up unemployment benefits have kept forbearance rates lower than some of the most pessimistic forecasts of 20% to 30%. Instead, the forbearance rate was 8.6% of all active mortgages in June’s final week, according to a report issued July 2nd by Black Knight. Economists are worried about a new round of layoffs if the COVID-19 resurgence forces states to reverse their reopenings. Federal Reserve Chairman Jerome Powell has warned that additional relief measures are needed from Congress to avoid “long-term damage” to the economy.2
MORTGAGE RATES APPROACH 3% MARKThe 30-year fixed-rate mortgage averaged 3.07% this week, the lowest ever recorded by Freddie Mac since it began tracking such data in 1971. “Mortgage rates continue to slowly drift downward, with a distinct possibility that the average 30-year fixed-rate mortgage could dip below 3% later this year,” says Sam Khater, Freddie Mac’s chief economist. “On the economic front, incoming data suggests the rebound in economic activity has paused in the last couple of weeks, with modest declines in consumer spending and a pullback in purchase activity.”3
Freddie Mac reported the following national averages with mortgage rates for the week ending July 2:
• 30-year fixed-rate mortgages: averaged 3.07%, down from last week’s 3.13%—the previous all-time low average. Last year at this time, 30-year rates averaged 3.75%.
• 15-year fixed-rate mortgages: averaged 2.56%, falling slightly from last week’s 2.59% average. A year ago, 15-year rates averaged 3.18%.
• 5-year hybrid adjustable-rate mortgages: averaged 3%, falling from last week’s 3.08% average. A year ago, 5-year ARMs averaged 3.45%.
Sources: 2HousingWire; 3National Association of Realtors