Welcome back to iLeads Mortgage Market Minute, where we bring you the latest, most relevant news regarding the mortgage market. We hope you enjoyed last week’s edition where we talked about Powell: “Ground to Cover” Before Tapering Asset Purchases. This week we’re bringing you:
More households paid their rent and mortgage in Q2 2021*
Still, rental property owners lost $7 billion in missed payments
Fewer than five million households failed to make their rent or mortgage payments in the second quarter of 2021, despite the effects of the COVID-19 pandemic still being felt across the country.
According to the Mortgage Bankers Association’s Research Institute for Housing America (RIHA), 8.6% of renters (2.86 million households) missed, delayed, or made a reduced payment in June 2021, while 4.6% homeowners (2.19 million) missed their mortgage payment. In addition, 28 million student debt borrowers (44.8%) missed payments.
Since the onset of the pandemic in the second quarter of 2020, 6.8% of renters and 5.7% of homeowners have missed four or more payments, per the MBA. Missed rental payments now total $41.7 billion, missed mortgage payments total $76.5 billion, and missed student loan payments total $155 billion.
The delta variant of the coronavirus has slowed down what many economists believed to be the turning point following the pandemic’s outbreak 15 months ago.
“The recent rise in COVID-19 cases, and elevated inflationary pressures, could slow economic growth and hiring. These potential headwinds could also impact households still facing hardships,” said Gary Engelhardt, economics professor at the Maxwell School of Citizenship and Public Affairs at Syracuse University. “Given the level of government support during the pandemic and the more recent improvements in the economy and labor market, it is quite possible that the observed levels of rental non-payments may be at or close to pre-pandemic levels.”
Property owners continue to play a key role in helping renters, as 11% of renters missed one rent payment over the 15 months of the pandemic, 4.4% missed two payments, 2.7% missed three payments, and 6.8% missed four or more payments. In aggregate, rental property owners lost as much as $7.10 billion in second-quarter revenue from missed rent payments. This was down from $7.48 billion in the first quarter of 2021.
Mortgage Rates Move Up From Long-Term Lows*
Mortgage rates hit their best levels in 6 months yesterday, but moved higher today following a strong report on the services sector.
The economy is one of the key inputs for interest rates. As such, several of the most relevant economic reports have a longstanding history of causing day-to-day volatility. Today’s ISM Non-Manufacturing Index is one of a handful of the most important reports. By coming out much stronger than expected, it suggested the economy was closer to a level that would prompt the Fed to make changes to rate-friendly policies. Bonds reacted with lower prices and higher yields (aka “rates”).
Of course we’re only talking about only one economic report. A few short hours earlier, another important report, ADP Employment, missed by a longshot. A few days ago, ISM’s own manufacturing index suggested the post-covid economic growth was leveling off.
The balance of economic reports in the recent past isn’t as important as what’s ahead. Friday brings what’s considered to be the most important piece of economic data for the bond market on any given month: the Employment Situation (the federal government’s official jobs report).
30-year mortgage rate tracked by MBA drops below 3%*
First time since February the MBA rate has been below 3%
Mortgage applications fell 1.7% in the week ending July 30, according to the latest report from the Mortgage Bankers Association. That’s despite the 30-year fixed rate falling to its lowest level in roughly six months.
It’s an about-face from the prior week, in which applications increased 5.7% on the strength of descending mortgage rates.
Mike Fratantoni, MBA’s senior vice president and chief economist, said this past week’s drop in mortgage applications can be attributed to the market’s assessment of the latest COVID-19 delta variant.
“Thirty-year mortgage rates dropped below 3% in our survey for the first time since February, presenting an opportunity for many homeowners who have not yet refinanced to lower their rate and payments,” he said. “Refinance application volume slightly decreased following an 11% jump last week, and purchase application volume decreased again, reflecting the ongoing lack of inventory that continues to drive rapid home-price appreciation across the country.”
The refinance share of activity of total mortgage applications increased slightly to 67.6% from 67.5% the previous week. On an unadjusted basis, the market composite index decreased 2% compared with the previous week (when it increased 6%). The seasonally adjusted purchase index decreased as well, down 2% from the previous week.
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