The housing industry remains a silver lining for the United States economy as the rapid spread of coronavirus (COVID-19) continues. The 11-year bull market on Wall Street came to an end this week as the Dow Jones Industrial Average dropped to 20% below its peak, putting it into bear territory. Thursday marked one of the Dow’s worst performances since the infamous “Black Monday” in 1987. Friday morning saw the Dow paring some losses as the futures market traded up nearly 1,000 points, but a lot of damage has already been done.
As the market tumbled this week, the yield on the 10-year benchmark Treasury note slipped to unprecedented levels, as low as .314%. That yield fluctuated throughout the week and was trading early Friday morning at 0.882%. Mortgage rates have tumbled with the yield providing an incredible opportunity for consumers to potentially save money.
Refinances have ballooned according to the weekly totals from the Mortgage Bankers Association. The numbers from Feb. 24 to March 6 show an impressive week-over-week increase of 79% with an annual increase of 479%.
Purchase applications were also up by 12% year-over-year with mortgage applications overall up 55.4% week-over-week. This data caused the MBA to take another look at its 2020 predictions. Now, the group is predicting $1.2 trillion in refinance volume this year, a 37% increase from 2019. The MBA also predicts total overall mortgage originations to total $2.61 trillion this year. What is interesting to note is that Freddie Mac’s 30-year fixed-rate mortgage average went up this week to 3.36%. Remember, that is just an average from all reporting companies. We encourage you to call a Movement Mortgage loan officer to see for what you could qualify.
One eye-popping statistic comes from CEO of Optimal Blue Scott Happ. Optimal Blue is a service through which lenders and investors can communicate regarding the secondary market. Happ said that from March 1 to the beginning of this week, Optimal Blue had handled $73 billion worth of mortgages.
What’s happening with the market?
The Federal Reserve made multiple interventions to try and stimulate the market. On Thursday, the Fed announced it would inject $1.5 trillion into the market in the form of purchasing assets to free up cash reserves for non-government backed institutions. This gave brief life to the market as the Dow pared some losses. That was short-lived, however, as the Dow continued its free fall as Thursday trading continued.
The extreme volatility in the stock market will likely continue until there is a more certain expectation of what will happen with the spread of COVID-19. Typically the true effect a global pandemic has on the economy will not be seen until enough data can be gathered. For example, weekly jobless claims fell last week, meaning fewer people are applying for unemployment. That will likely change after the next reading considering current reaction, such as Boeing halting hiring. Producer prices also fell sharply, spurred mainly by the stark drop in the price of gasoline.
Companies and local governments are taking drastic measures to help combat the spread of the virus. The NBA has suspended its season, the NCAA canceled its March men’s and women’s basketball tournaments and Washington state has banned gatherings of 250 people or more. Measures such as these will have an exceptionally strong impact on profits, which will contribute to the economic slowdown.
It’s expected that the Federal Reserve will make an aggressive rate cut next week, eventually reducing its federal funds rate to zero by the end of the year, to spur spending and keep the economy going.
In short, this volatility will keep going for some time and it will be difficult to predict when it will end. And if you’ve read this far, go ahead and wash your hands then call a Movement loan officer about your refinance options.