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Jason Obradovich - Chief Investment Officer

Housing Market Update Center

Translating the complexity of the markets into a concise and easy to digest format. Watch videos, read blogs, and view key data on short and medium term trends impacting interest rates, so you can make the right decision for your situation.

Latest Market Update

Another Dip in Rates

Alexis: Hey, everybody! Welcome back to the Mortgage Rundown. Hope you've all been doing well. I'm Alexis Quinney, and I'm here with Jason Obradovich, CIO of New American Funding. Jason, how have you been doing the last few weeks?

Jason: You know, I'm doing very well. Thanks, Alexis. How are you?

Alexis: I’ve been good. I can't complain. So, since we last spoke, I have a couple of questions about the rates. So, it seems like they continue to go down and hit new all-time lows. Can you tell us a little bit about that?

Jason: Absolutely. You know, we've seen, you know, since this whole Covid thing, right? Mortgage rates, treasury rates, not even just the United States, but Treasury rates or what you want to call them? Bond rates around the entire world have come down and down and down. And so, really, in the last few weeks, we've seen another a little dip. Right? There's been these big swings and things flatten off, which rates really flatten off in May and June. But in July, they really started to come down even further. So, there's just been this further deterioration of mortgage rates where, quite honestly, people can get a mortgage rate under 3% for 30 years.

Alexis: So, do you think this trend will continue? And like, how much lower can they really go?

Jason: You know, we've had so many times since the Fed really got involved in buying Treasury bonds and buying mortgage-backed securities, this whole quantitative easing thing, we've just seen mortgage rates drop. Then they go back up, they drop even further. And that's actually been a trend, honestly, since the 1970s. Rates have just come down and down and down. And there might be a few years where rates go up. But the long-term trend over decades as rates have come down. Now, what will happen during Covid and what happens over the next couple of years? We don't really necessarily know. But the one thing we do know is the Federal Reserve is going to continue to buy mortgage-backed securities, continue to buy Treasury bonds, and continue to keep interest rates at low levels. Now, whether that's lower than where we are today, we don't know. But if I'm a betting man, I would say, yeah, over the next few years, we might see a couple more dips.

Alexis: Something else that I've been hearing about is the stock market just continuing to climb. So do you think that there's going to be a bubble? And if so, what is that going to do to mortgage rates?

Jason: It's hard to say in the stock market. It is trading very strangely, I guess. You have a bunch of money moving into tech stocks. A bunch of money moved out of the travel industry, whether it be hotels, airlines, anything that really was physically impacted by Covid. You know, the tech sector really wasn't impacted by Covid. That's the one thing I think that was the learning lesson was that tech companies can have workers work remote. Technology actually becomes more important when people are locked indoors. Right? Just think about the videos we're doing right now. It becomes of greater importance than a physical location. Instead of being in a building, the technology that's behind what we're doing now becomes really relevant. So the tech sector has done really well. Are we in bubble category? I don't think so. But, you know, investors are trying to invest somewhere. You know, they don't necessarily want to own Treasury bonds at a zero point something percent return. You know, they're a little bit scary and a little bit skittish about the airline or other credit sectors. And so, yeah, all their money's in technology. If there was a bubble and if that bubble were to burst, where does the money go? Well, it’s probably in the short term not going to run into restaurants and airlines and hotels. It actually might push rates down further because they start buying bonds, you know that flight to quality. I want to get away from risk. I want to buy things that have less risk. And so that actually could cause rates to go down further—if there was a bubble, even though I'm not saying that there is one.

Alexis: Makes sense.

Alexis: Well, that's all I have for you today. This is a lot of great information. I appreciate you taking the time to talk to me today and talk to our audience, but that's all I have for you.

Jason: Alright. Great. Thanks, Alexis. Hope all is well. And everyone out there hope you're doing well during the Covid crisis and, you know, frustrating time that we have. But I hope everyone is doing well.

Alexis: Yeah. And same here. Have a great day, Jason.

Previous Market Update

A Look Ahead With COVID-19

Alexis: Hey, everybody. Welcome back to the Mortgage Rundown. My name is Alexis Quinney, and as always, I'm here with Jason Obradovich, CIO of New American Funding. Hey Jason, how are you?

Jason: Good Alexis, how are you?

Alexis: I’ve been doing good! So, in the last couple of weeks, since we last talked, what’s been going on with rates?

Jason: You know, in terms of rates, what we've seen obviously, right, in all of 2020, we've seen rates drop and we had some volatility in March, which we talked about in prior episodes, but really, in the last 30 days, mortgage rates keep coming down. And so that might be a trend that continues, but it's really hard to say. Obviously, we've talked before about the Fed holding rates low until 2022 or through 2022. So, you're just seeing that right now, right? Even though the stock market is going up, interest rates are continuing to fall. And, you know, we're going to have low-interest rates for quite a while.  

Alexis: All right. Well, okay. I'm just curious, with the country starting to open back up, do you see that moving the rates at all?  

Jason: You know, there's been a lot of speculation around whether it be vaccines or other things that might potentially impact rates. It’s not like I am going to run back out and okay, the economy is going to restart again, and we're going to see interest rates jump back up. The problem is, with the country shut down as long as it has been, with as many job losses as there's been, you're not going to see mortgage rates move as quickly as when the country starts opening back up again, right? There are still a lot of potential permanent job losses. There is still a lot of damage to the economy. There is still a lot of delinquent borrowers. There are still a lot of borrowers in forbearance plans. So, the Fed's not going to move quickly. They're going to keep rates low and that's why they said, ‘look, we're going to keep rates low for a long time. We understand what a pandemic is. We understand the disruption there is going to be. We've looked, you know, from prior events in the past, and we just know the rates have to be low for a long time. It really doesn't matter what happens in one county or another where their cases spike up or down like this has all been expected.’ 

Alexis: Okay. And with COVID starting to be more of a serious threat again, why would you say the stock market is doing so well right now?  

JasonYou know, I think the stock market surprises a lot of people. And the thing that you have to remember is, where you're seeing the stock market really take off is in the tech sector. And technology is not really, necessarily impacted. Actually, it's been almost impacted in a positive way. Yeah, there are people losing jobs and maybe they won't buy as many devices, but I think there is this belief that technology is a lot more bulletproof than other sectors, right? Hotels, restaurants, other areas of the economy that are actually being harmed. The travel industry, airlines, and other things are being impacted. Even banks are really being impacted. And so, yeah, the stock market is being driven up, but you have Apple, you have Google, you have all these other tech stocks, you know, Facebook and others that are just driving the index. You know, when you look at the stock market, you will think, oh, the S&P, we got to remember, like, it's heavily weighted in especially a lot of technology stock, which is dragging it up. But there are certainly a lot of sectors that are really suffering.  

Alexis: Yeah, that makes a lot of sense. So, something else we've been hearing a little bit about is a vaccine for COVID-19. So if that becomes available, do you think that will cause mortgage rates to move up or down in any way, or what can you tell us there?  

Jason: Yeah, the vaccine, I think, is an unknown, right?  It's kind of an X factor of what happens. You know, will there be a vaccine? When could it come out? How many people would it impact? I think the thing you have to remember is, typically vaccines get tested for several years. It's not something where we say, ‘oh, we found a cure. We'll hand it out tomorrow, then we can all go back outside and enjoy our lives.’ You know, there's going to be limited availability. And, in vaccines, you have to remember, there is a lot of side effects. So, there might be a lot of people it can't help. And so, you really have to, you know, think about it as, a vaccine is really a test, it's not a solution. And so, yeah, they'll be testing different vaccines, and there will be ones that help certain groups of people. But there are a lot of people that won't have availability or will not take it. You just can't expect to have this hugely positive result from a vaccine. I mean, I think it creates a lot of hope, and I think it puts a lot more confidence that we're getting closer to the end of this. But it certainly is not going to really quickly accelerate that process.  

Alexis: Right. That makes a lot of sense that it may help, but it's not going to be a solution for everybody. So, it'll be interesting to see how that goes. Well, looking forward to the remainder of 2020, what do you think is going to happen?  

Jason: You know, in terms of mortgage rates, I think we're just going to stick on the path that we are on, right? Mortgage rates are really, you know, for a lot of people are in the twos. You know, low threes were fantastic at the beginning of the year. Now we're talking about high twos and low threes for certain borrowers. It really depends on your scenario and kind of your risk profile. Likely through the rest of the year, you're going to see mortgage rates in the twos. We don't generally note a dip down from here, but it's certainly not going to race a lot higher. So, you know what? If I'm a betting man, I'd say expect mortgage rates to be staying the twos on a 30-year fixed. It's pretty phenomenal.  

Alexis: Yeah, that is phenomenal for sure. All right.  

Alexis: Well, that was all I have for today. Thank you so much for meeting with me again. A lot of great information. And it was great talking to you.  

Jason: Yeah. Good to see you, too. Take care, Alexis. You, too. 

Alexis: Bye, Jason.  

Jason: Bye, everyone.  

 

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