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Jason Obradovich - Chief Investment Officer

Housing Market News & Updates

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

New Year, New Market?

Alexis: Hey, everybody! Welcome back to the Mortgage Rundown, the first Mortgage Rundown of 2021. We hope you all had a great New Year. So, I'm here with Jason Obradovich, CIO of New American Funding. How have you been doing, Jason? It's been a minute.

Jason: It has. I’ve been great. Thank you very much.

Alexis: Yeah, of course. So, I wanted to get some information from you about everything that's been going on in D.C., including the runoff that happened in Georgia, everything that's been going on in the last few weeks since we spoke. So, can you just give us a brief update there?

Jason: Yeah. You know, without getting too much into the politics of things, right? We've had this special runoff in Georgia. It looks like there's going to be a split Senate. The House will be dominated by the Democrats and they also have the Executive branch with the President and Vice President.

So, you know, I think the market was really unclear. Or honestly, knowing that there was going to be division in Washington, D.C., you know, there was a lot of questions around really what can the new administration do? If they if they didn't have control of the Senate and the House of Representatives, probably they wouldn't be able to do as much as they'd like to. And so, now that it looks like they're going to have complete control, I know 50/50 isn't necessarily, you know, a lot of control, but it looks like they have control over the legislature. What are they really going to do? And, you know, with that, it looks like they can get a lot more done than what they would have otherwise. And so, I think there's, from the market's perspective, there's this hope that more can be done, and this was going to be, you know, two to four years of a divided house.

Alexis: OK, OK. And how would you say that kind of all this stuff going on really affects the market. I know there was a recent little, small jump in rates. So, does that have anything to do with that or what can you tell us there?

Jason: Yeah, you know, the immediate market reaction was quite interesting because, you know, we did see interest rates pop up. Right? And the way you should look at it in the way the world should kind of look at is not necessarily like, OK, watch out, rates are going to go up now,,,get out of the way. You know, it was great while it lasted and now we're going the other direction. It was really the market reacted to say, look, the 10-year Treasury is at or under one percent. You have this new administration here. They've got a lot of lofty goals. There's a pandemic they are dealing with. But there could be a potential growth story there. And if there is a potential growth story, do you really want to own a 10-year treasury at one percent yield? Right? Couldn't your money be best used somewhere else? And so, I think everyone looked at their positions and said, ‘look, I don't necessarily want to own a 10-year treasury under one percent.’ So, we started to see rates go up a little bit. You know, they kind of spiked up for about a week and now they're starting to kind of crawl back slowly as we get back to reality.

And so, yeah, mortgage rates are up higher than they were a month ago, but that doesn't necessarily mean we're running back up. And so, things have leveled off, albeit actually very, very quickly. I honestly thought it would run up a little bit higher than it has. And so, you know, there's still a lot, right? We haven't got to Inauguration Day. There's still a lot of things that have to get worked out. But by and large, you know, there's a lot of questions around the Biden agenda and what they plan on doing for the next, at least this first year. What's going to happen in 2021, and really, what's that going to mean to the pandemic and how it's affected homeowners? What's going to be the stock market, the bond market, and the overall economy?

Alexis: OK, well, that leads kind of nicely into my next question I have for you is what do you think is going to come forward in 2021, you know, kind of more recently, but also long term? Like, what do you think is going to happen?

Jason: Yeah, you know, I think 2021, everyone's scratching their head in and trying to say, ‘you know what's going to happen this year? What's going to happen with the new administration? What are they going to do in their first hundred days?’ Because really that first hundred days is the most meaningful, right? They have all the momentum in the world. You know, reality is going to be in everyone's face in terms of dealing with the pandemic, dealing with the vaccine, and distributing the vaccine, which is already going to be a really tall order. But from an economy standpoint, you know, what are they going to do from a legislative standpoint to get the economy to reflate? You know, sending out stimulus checks is great. That's going to help people in most immediate need. But the day after those checks are spent, really, what are you going to do so the economy is running on its own? Or you're not just sending out checks because, you know, the economy is just almost starting to go back down, which is I think is the bigger fear.

What are they going to do? And no one really knows what that is. And so, I think if anyone is to expect anything over these first hundred days, they expect volatility. Right? There is going to be some great ideas that could really pan out and help the economy. And there could be the other side of it, which is we're still dealing with the pandemic. There are still people at risk. We still have to require people wearing masks. There might have to be local shutdowns. There's the reality of that situation you still have to deal with. So, there's going to be days of highs and days of lows. So, if I'm a loan officer, if I'm a borrower, expect a lot of volatility over the next 30 to 90 days, unfortunately. It's not something we like to see as stock prices going up and down, rates going up and down. But it is the most likely of what's to happen.

And if you push past that and start looking at 2021, you know, until we really know what the Biden agenda is, we don't know. We do know that the virus is not going away. The pandemic is not going to go away probably this year. Yeah, we will get our hands around it better than we have, but it's not going to go away. And so, what rates are going to look like toward the end of the year? They could end up going lower than where they are today or you know what, the Biden camp can come and do a great job, get the economy going and maybe they level off. We just don't really know. But I would say, if I’m going to leave you with anything, expect volatility.

Alexis: All right. Yeah, I mean, that makes sense with how much is going on. And, as always, we kind of just have to wait and see.

Jason: So, yeah, let's you know, the next step, though, probably an important one, because we'll be just past inauguration and there'll be more clarity about what's going to happen with the new administration, what their plans are. But I'm sure at some point they're going to have a very bold announcement of, ‘hey, this is what this administration is about. This is what we're going to do.’ And then we'll have to just see what the market's reaction is going to be. That is that meet expectations. Is that below expectations? You know, what have you?

Alexis: Yeah, definitely. All right. Well, I look forward to that next update. That's all I have for you today, though. So, thank you so much for taking the time.

Jason: You got it. Thanks Quinney!

Alexis: Yeah, I'll talk to you later. Bye.

Jason:  Have a great day.

Previous Market Update

Putting The Market in Perspective

Alexis: Hey, everybody! Welcome back to the Mortgage Rundown. My name is Alexis Quinney and I'm here with Jason Obradovich, CIO of New American Funding. How have you’ve been doing, Jason?

Jason: I've been doing really well. Thank you. How are you?

Alexis: Good, good. It's been a minute since we talked, so I have a few questions for you. Since our last update, what is the state of the market right now?

Jason: You know, really, there hasn't been a lot of change, both with Treasury rates and mortgage rates. You know, I think we talked about that before. Treasury rates are moving up very subtly, but mortgage rates are actually moving down. And so, over the month of November and a little bit into December, mortgage rates are ticking down ever, ever so slightly. So, not a ton of changes. We've had the election. We think it's over. We think the results are going to get certified. We think there's going to be a new administration. There's still some unknowns around the Senate. And so, some of those things are starting to crystallize. There really hasn't been a lot of change in the market itself.

Alexis: OK, got it. So, things are still staying pretty even there?

Jason: Right.

Alexis: So, speaking of the election, something else that's come up since we last spoke is talk of a vaccine. So, I kind of wanted to get your take on how this vaccine relates to the election and how it's going to affect the market moving forward.

Jason: Right. Yes. So, we have the election. There could be a lot of changes, both in terms of administration, but all the different appointments, you know, whether it's in housing and other markets. Obviously, the new administration is going to want to do as much as they can their first year. Right? Because that's where they have the most momentum to do something. And what they're going to do is we don't necessarily know yet. We do know that there is a COVID plan. Right? There's probably likely going to be either a mandate or a request for everyone to wear masks for at least 30 days, if not longer. Right? They're going to want to tackle the virus as soon as they can. And we also have seen or many different companies that say they have a vaccine. How that's going to be distributed, who is going to be offered to, how many doses, what the impact that will be on reopening, how much that will impact the economy—everyone's just guessing. We really don't know how that's still going to play itself out. So really, I don't think there's been a lot of information and how much that's going to affect the market or the economy, you know, for probably for a couple of months. I hate to say it, but I just think that's the most likely case.

Alexis: OK, got it. So, another question I had was compared to other recessions we've had in the past, how does what we're going through right now kind of relate? How can we put that into perspective?

Jason: Yeah, you know, this is a very unique market, right? I've even told my kids, like, what we're going through now, like I never had to go through as a kid. And so, you have to take everything into context of this is so different than anything that anyone alive today is probably really ever dealt with in their lives. And so, one of the things I wanted to do, just to give the viewers some perspective, is I want to show two graphs. And so, on your screen, you'll see one chart. The first chart is just GDP, United States GDP for the last 50 years or 49 years prior to COVID. So, from 1970 through 2019, this is quarterly GDP and you can see the lines go up and down. Right? One quarter things grow. The next quarter things shrink, and you can see anything below the line ‘zero’ generally is a recession. And so, you'll see times in the mid-70s, in the early 80s, I think early 90s, early 2000s, and then, of course, 2007-2008 with the Great Recession. And so, you see these swings up and down. And especially if you look at 2007-2008, you can see it really swung down. Right? This was the Great Recession. This is when we saw economic activity really retract. We saw a lot of lives destroyed economically. And so, it was a really tough time.

And then the next chart, if you were to move forward, is taking that same data and now overlaying it with COVID—everything we've dealt with COVID. And so now all of a sudden, those big swings that you saw really, really start to shrink. Because what we're dealing with COVID is the amount of retraction we saw within the economy was over 30 percent. You know, the Great Recession, the biggest swing it was I think it was around eight percent. So COVID was 30 percent. Now, COVID may not last as long as the Great Recession. And we've done some smart things in terms of dropping rates, creating forbearance programs. There's been a lot of stimulus that's come in right away. So, I think we've dealt with it a lot better. But in terms of the amount of change, it's unprecedented. I mean, greater than the Great Depression. You know, the Great Depression was longer. But this in terms of the percent change in economic activity is unprecedented. So, I just want to give my hats off to everyone who's had to deal with this, our politicians, economists, the Federal Reserve. Everyone's just done a great job, because when you look at it in the context of everything in the history of this country for the last 50 years, it's unprecedented.

Alexis: Yeah, definitely. And I think, I mean, it makes me feel a little bit more sane and we have gone through so much this year and how we've handled it a lot differently. And, yeah, it's just it's very cool to see that perspective of how it's gone now versus then. So, thanks for that insight.

Jason: Yeah, I think it's important for people to remember context. Right? Like you're in the middle of something you think it's going to last forever and it's like, it's not. But look, in the context of what you've had to deal with. And so we, as much as we want to know what's going to happen next quarter or are interest rates going to go up and we have some of these dialogues, one of the things you need to remember is that for the last 40 years of our life, interest rates have really just done nothing but go down. Yeah, there have been years where they've gone up a year or two, but for the most part, interest rates just go down and down. And that's just the sign of things probably to come. So, yeah, you know 2021 rates are probably going to stay low. 2022, we don't know. Rates might go up a little bit, we don't really know. But by and large, rates keep going down. People don't need to worry that suddenly tomorrow rates are going to go to eight percent. I know they're in the kind of the twos right now, but just take things in the context that we're not going to see any huge swings in rates and we have dealt with a lot.

Alexis: Yeah, definitely. Well, those are all my questions for today. I think this was a great update. And I just want to thank you for taking the time with me today.

Jason: Absolutely. I hope you have a great rest of your week. If I don't see everyone before the holidays, happy holidays and we'll see you next year.

Alexis: All right. Bye Jason!

Jason: Bye everyone!


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