May Mortgage Newsletter

I hope your family and you are safe. The Coronavirus is the major concern currently. It has been spreading all over the world. Each day the reports seem to be getting worse. Hopefully it will come under control and there will be a vaccine developed. Johns Hopkins has created a wonderful report that is very helpful to understand the Coronavirus. : https://www.medpagetoday.com/infectiousdisease/publichealth/84698

On March 3rd, the Federal Reserve had an emergency rate cut to Interest rates. There was a full .5% rate cut. To put in in perspective, in the entire year of 2019, there were three rate cuts totaling .75%. So, .5% in an emergency situation is a good indication of the concerns of senior economists and policy makers.

Prior to the Coronavirus, forecasts were for interest rates to come down. Typically, mortgage lenders forecast the economy and offer interest rates accordingly. We are currently at or near the lowest mortgage rates in the past 30 years, perhaps the lowest in history.

One of the key indicators of interest rates is the 10 year Treasury yield. We did see the lowest yield in history. Even if the 10 year note goes down, I don’t think interest rates will go down too much further. There needs to be a spread between the mortgage rates and the 10 year note.

New Business Processes
To facilitate processing of loans, closings and other similar processes that require face to face contact, there are new methods we are adopting. For appraisals, Fannie/Freddie are granting a higher number of “waivers”. There are large amounts of historical data regarding property values. Therefore, a larger amount of appraisal waivers are being granted by the Fannie/Freddie automated underwriting systems. For those that do require an appraisal, in some cases, variations such as “drive by appraisals” and “desktop appraisals” are being considered. Both do not require an interior inspection by the appraiser.

The other major processes that will see changes are real estate closings. The state of NJ recently passed the acceptance of Remote notaries. Courts will now officially accept digital signatures. Lenders are scrambling to see how this can be implemented into their transaction life cycle. I foresee this will be a new and better way of closing real estate transactions. Although identification is still required, it can be done remotely. This eliminates the need for face to face engagement of the parties in a real estate settlement.

Here are our current rates:

30 Year Fixed : 3.125%
20 Year Fixed: 2.875%
15 Year Fixed : 2.750%
7 Year ARM: 3.000%
30 Year FHA: 2.875%

With rates so low, ARMs are not attractive for conforming loans. Longer term ARMs such as the 10 year ARM, still may be attractive for Jumbo loans.

Surprising March 2020 Real Estate Numbers
The New Jersey Association of Realtor recently released numbers for March:

3/19 3/20 % Change
New Listings: 18,073 12,956 -28.3%
Pending Sales: 10,907 9,691 -11.1%
Closed Sales: 85,41 8,114 -5.0%
Median Sales Price: $280,000 $312,000 +11.6%
Avg Sales Price: $335,768 $390,988 +9.9%
Days on Market 72 69 -4.2%
Homes for Sale 52,116 37,041 -28.9%
was very surprised to see the median and sales price increase. In fact, I have been monitoring NJ rates for the past 14 years or so and I can not recall such a huge jump. This clearly shows that there is still demand and the lack of supply has driven up prices. This is good news for sellers. There will be a supply increase in the coming months and it will be interesting to see how the market reacts. With interest rates as low as they are, prices can continue to climb. I am looking forward to see April and May numbers as this is historically the prime spring real estate market.

Stay Safe! .

Vibha Singh
CEO
732-648-1754
NMLS ID 66034

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