Morning Report: Freddie Mac sees mortgage originations hitting $3.2 trillion in 2021

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S&P futures 3798 27.3
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10 year government bond yield   1.12%
30 year fixed rate mortgage   2.88%

Stocks are higher this morning as more financial stocks report earnings. Bonds and MBS are down.


The upcoming week is pretty data-light, although we will get some housing data with housing starts, the NAHB Housing Market Index and Existing Home Sales. The Spring Selling Season will be starting in about a month or so, and we should see plenty of pent-up demand from last year. Existing home inventory is at record lows, and prices are rising.


Bank of America reported better than expected earnings, however revenues fell 10%. The Fed has loosened the reins on stock buybacks, and the company announced it intended to repurchase $2.9 billion shares. Separately, Goldman Sachs reported strong earnings.


Janet Yellen is scheduled to return to the Hill today for testimony about her new role as Treasury Secretary. Unsurprisingly, she is going to advocate for a lot of additional fiscal stimulus. Note that with the change of the administration, many Democratic lawmakers are suddenly interested in re-opening the economy.


Joe Biden nominated Rohit Chopra to lead the CFPB. It sounds like the Administration is going to focus on student loan servicing practices. I am sure that the Agency will also focus on mortgage servicing as well. Chopra is a well-known name in DC and was most recently at the FTC where he focused on market domination in the tech space.


Merrill Lynch is out with a bullish take on the 2021 economy, predicting that the most vulnerable parts of our population will be vaccinated by April and May, and earlier and larger stimulus package will help things as well. They are taking up their GDP forecast from 4.6% to 5%. Note the Fed is predicting 4.2% for next year. If historical patterns hold, we can expect the Fed to overshoot growth estimates for the next four years.


Freddie Mac is forecasting that originations will decline 20% from their all-time high of $4 trillion in 2021. $3.2 trillion is still a hefty number, and should allow for great times for the industry. They see mortgage rates averaging about 2.9% this year before rising to 3.2% in 2022. Freddie also sees home price appreciation leveling out to about 0.7% in 2021. With the current supply-demand imbalance, that seems unlikely.

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