Market Commentary 12/18/20

As we approach Christmas, rising hopes of a stimulus package continue to circulate. The fiscal stimulus which Fed Chair Powell alluded to in his post-Fed meeting statements will be key to carrying our economy through a tough winter and rising Covid cases. The hope is that the uptake of the newly approved vaccines and resulting herd immunity will speed a return to normalcy by June 2021. The Fed has all but guaranteed zero interest rates through at least 2022. All of this is being done to keep our economy going. We applaud the swiftness of government action during this major crisis after having experienced the 2008 housing crisis. Transfer payments from the government this time around have kept the consumer-based economy grinding through a very unusual time and have probably kept our economy from falling off a cliff. The Fed sees better days ahead with projected 2021 economic growth of 4.50% and unemployment falling to 5%.  

With the Fed holding interest rates at zero and a huge government debt load, there has been little consumer price inflation, but asset prices have soared. It was not expected that household savings would rise during this time. The combination of low rates, swift action by the Fed to backstop the financial markets, and the work-at-home trend has pushed forward housing demand, especially for single-family homes in more suburban areas. Housing plays a huge role in our economy in normal times, but during this pandemic, it has been a crucial provider of employment and consumption.  

Ultimately, our focus is on how Fed policy and economic activity affects interest rates. For the moment, the clear path of no rate hikes will keep interest rates low. Banks will compete for yield and we expect to see more lending options into 2021 as bank and non-bank lenders try to differentiate themselves from one another. This is a great time to be a broker who can match a borrower with the right fitting lender. Insignia Mortgage continues to focus on more opaque borrowers who require more attention and a deeper dive into their financials. Our lenders are eager to close deals and are offering no-limit cash-outs, bank statement only loan programs, interest-only, and loans to real estate investors and foreign nationals.    

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