Rates are Creeping Higher

March 22, 2021

Housing and jobs drive the U.S. economy. Employed people are not only financially better able to afford a home, but also psychologically in a better position for homeownership. It is important for Orion’s brokers to inform your clients to know what is going on in both sectors so that they can be educated during the loan process!

One of the interesting trends during most of 2020 and as head into late March is the general population shifts between suburban and urban (city) housing markets. Suburban homes sold faster than urban homes by the end of 2020, but home value growth, sales volume, and interest in certain properties via the internet in urban areas that Orion covers has kept pace with or exceeded levels in suburban areas.

Urban home value growth outperformed the suburbs in much of the Midwest, where homes are typically less expensive near city centers. In some of the most-expensive markets, including New York, Los Angeles, and San Francisco, urban housing demand softened relative to the surrounding suburbs. And urban rent growth fell behind growth in the suburbs in 2020, but analysts expect urban rents to quickly recover as the pandemic subsides. As we enter late March this is already happening in Manhattan.

While this is good news for many of your clients, what about our economy? The experts are thinking that any growth won’t occur until the 2nd half. But the expectation remains for improving Gross Domestic Product growth during the second half of the year as more people are vaccinated and social mitigation policies ease. In a related issue, the major European economies saw worse annual GDP performance than the U.S., and the UK recorded its worst annual GDP decline in more than 300 years at minus 9.9 percent in 2020.

Back home, our unemployment is hovering near 6.3 percent in January and February but Fed chairman Jerome Powell believes the rate is closer to 10 percent due to “misclassifications” in the data. The Fed is expected to continue its accommodative stance through the middle of the year and possibly for the entire year depending on the path of inflation, and last week’s Fed meeting verified this.

What does this mean for Orion’s brokers and your clients, and borrowers everywhere? Although no one owns a crystal ball, as U.S. bond yields begin to firm, expect mortgage rates to inch up throughout the spring. Talk to your Orion AE about our rates and programs!

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