Market Commentary 8/14/20

The U.S. Treasury and agency bond markets became more volatile as inflation data heated up and came in better than expected. Unemployment claims dropped below a million claims. Consumers continue to spend even though spending habits have shifted to e-commerce. These reports support the notion that some economic recovery is occurring as businesses and individuals adjust to the pandemic. However, economists and analysts are concerned about how far the economy can grow in the current environment. With major U.S. indexes near or above all-time highs, the dislocation between Wall Street and Main Street will need to be reconciled. Yet there are few alternatives for investors other than equities. Historically low government and corporate bond yields leave investors not a lot of options outside of taking on more risky asset classes. 

The housing market remains busy, fueled by low-interest rates and the desire by many apartment and condo dwellers into single-family homes. The tight supply of single-family homes has also kept prices stable. 

Affluent buyers have been taking on more second and third home purchases in a bid to own more tangible property.

All of this good news suggests rates may move higher. This week the FHFA added .50 bps hit to all refinances, impacting agency products. Mortgage refinances ticked up in response, leaving many people in the middle of a refinance in limbo, wondering if a refi is now worth it. Jumbo-portfolio lenders are less apt to price their products day-to-day and to date, they remain eager to grow their loan volumes. This is good news for our many self-employed borrowers and for those with complex loan scenarios.