Coronavirus storyline #6: housing market

March 22

Mortgage rates still above 4%.

March 18

Mortgage rates remain elevated.

Fannie and Freddie suspend Mortgages for 60 days.

Redfin CEO: Housing is down, but from high levels. Interesting commentary on Mortgage market: “One bullet that the government fired to help housing this week didn’t hit its mark. Even as the Federal Reserve has lowered the federal funds rate to zero, mortgage rates have increased about 30 basis points, from a low of nearly 3% in early March. Money has only gotten cheaper, but the people originating loans can’t keep up with demand; volume is so high that lenders are taking profits.”

March 16

Although interest rates have been pushed to the zero lower bound, mortgage interest rates seem to be increasing, at least for now. The reason is that banks don’t want to hold the mortgages, and nobody wants to hold mortgage backed securities. Spread between 10 year treasury and mortgage rates is now over 3 percentage points.

Although mortgage rates are increasing, it seems that mortgage refinancers are not yet informed about this, and they are submitting refinance applications at a record place.

March 17: Mortgage rates now dropping, down to 4.1%.

Jacob Robbins

Author: Jacob Robbins

Jacob Robbins is an assistant professor of economics at the University of Illinois at Chicago.

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