CoreLogic released its latest Homeowner Equity Report This Week in Real Estate that showed homeowners realized an increase of more than $3.2 trillion of equity in mortgaged real estate in 2021. That was an annual increase of 29.3%. The Fed will hike its key policy rate for the first time since 2018 next week. Sam Khater, Freddie Mac’s chief economist, says uncertainty about the war in Ukraine is driving rate volatility in the short-term, however over the long-term rates will continue to rise as inflation broadens. Below are a few newsworthy events from the second week of March that influence our business:
Homeowners Gained Over $3.2 Trillion in Home Equity in 2021. Soaring home prices over the past year boosted home equity wealth to new highs through Q4 2021. The amount of equity in mortgaged real estate increased by more than $3.2 trillion in Q4 2021, an annual increase of 29.3%, according to the latest CoreLogic Homeowner Equity Report. The average annual gain in equity was $55,300 per borrower, more than two times the gain from a year earlier. U.S. home prices rose by 18% year over year in Q4 2021, up from the 8% annual gain recorded in Q4 2020. Year-over-year home price appreciation increased by 19.1% in January 2022 according to CoreLogic’s latest Home Price Index, though growth is projected to eventually slow over the next 12 months.
Volatile Mortgage Rates Rise To 3.85% Amid War, Record Inflation. Mortgage rates have been all over the place lately. They rose this week, reflecting the volatility of the U.S. economy brought by inflation and Russia’s war in Ukraine. The average 30-year-fixed rate mortgage increased to 3.85% for the week ending March 10, up from 3.76% in the previous week, according to the latest Freddie Mac PMMS Mortgage Survey. According to Sam Khater, Freddie Mac’s chief economist, over the long-term, rates will continue to rise as inflation, which spiked 7.9% in February, broadens and shortages increasingly impact many segments of the economy. “However, uncertainty about the war in Ukraine is driving rate volatility that likely will continue in the short term,” he said in a statement. Economists have said that the war in Ukraine could bring a short-term reduction in mortgage rates, as investors flock to safe-haven assets like mortgage-backed securities and bonds. However, longer-term inflation brought on by the conflict, mainly via oil prices, will cause mortgage rates to rise. The expectation of higher rates increases borrowers’ appetite for new loans.
Highest Rates In Nearly 3 Years Ahead Of Next Week’s Fed Hike. The Fed will hike its key policy rate for the first time since 2018 next week, but mortgage rates aren’t waiting to move higher. By the end of this week, they were as high as they’ve been in nearly 3 years. The mortgage market has long since moved on from caring about next week’s hike. It was a foregone conclusion by mid-January. Rather, mortgage rates have been responding to a perfect storm of problems that have combined to push the average 30-year fixed-rate higher at its fastest pace since 2013. The bottom line, everything hinges on inflation right now. That was already true before Ukraine, and now it’s painfully true. Inflation is the Fed’s key consideration in making changes that have pushed rates higher. From here, markets will be paying even closer attention to oil prices and inflation metrics. They’ll also be listening intently next week as Fed Chair Powell comments on whether the Fed’s reaction function might change again in light of the commodity price surge.
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