US 30Y Fixed Mortgage Rates Tick Up To 2.79% As 10Y Treasury Yields Rise (Treasury Vol Remains Low As Yield Curve Steepens)

Freddie Mac’s 30-year mortgage survey rate ticked-up to 2.79% in the latest reading.

The US Treasury 10-year yield has been rising since August.

Treasury volatility remains low.

The US Treasury yield curve is steepening to around 100.

Here we go loop de loop. As interest rates rise.

Biden’s team explores ways to oust Fannie-Freddie regulator, Mark Calabria (replace with Wharton’s Susan Wachter?)

President-elect Joe Biden’s team has held preliminary talks on how it could oust Fannie Mae and Freddie Mac’s regulator (Mark Calabria), a move that would let the new administration fill a post that’s crucial to the mortgage market and its goal of boosting affordable housing.

One candidate the transition team is considering as a potential Calabria replacement is Susan Wachter, a professor at the University of Pennsylvania’s Wharton School of Business, said the people who asked not to be named in discussing private conversations.

Well, there are only so many options to increase affordable housing that are in the realm of reason: 1) increase loan-to-value ratios on purchase (insured mortgages) and 2) lower the credit score required. Fannie and Freddie already have a sizeable affordable housing mission. so short of shutting down Fannie and Freddie, and expanding the FHA (aka, SUPER HUD), Fannie and Freddie may be cajoled into expanding their affordable housing mission.

After the housing market crash (and ensuring financial crisis), lenders and government insurance companies reduced the mortgage originations by low credit score borrowers. Yet home prices started to grow again despite the lack of originations by low credit score borrowers. In fact, the FHFA purchase only home price index YoY is almost back to the housing bubble peak of 2005.

Something is missing from the above chart. Jay Brinkmann (former Chief Economist for the Mortgage Bankers Association) and Alex Pollock (R Street) disagree about what is missing from the chart. I think that the omitted variable is The Federal Reserve’s balance sheet (purchase of Treasuries and Agency Mortgage-backed Securities).

Home price growth corresponds to changes in The Fed’s balance sheet, particularly in surges in the balance sheet (QE3, Covid).

It’s also an historic imbalance of housing supply and demand, exacerbated by low interest rates helped by The Federal Reserve’s policies.

Granted, the demand is driven by historically low interest rates, but it’s also driven by demographics, as a large number of Millennials are reaching prime home buying age. (Thanks to Rick Sharga!)

Wharton’s Susan Wachter is likely the replacement for Cato’s Mark Calabria to be the US housing finance Mandarin.

U.S. Mortgage Rates Hit Another Record Low With 30-Year at 2.65% (Crazy Money Printing By Fed)

(Bloomberg) – Prashant Gopal – Mortgage rates in the U.S. started 2021 by setting another record low.

The average for a 30-year, fixed loan fell to 2.65%, down from 2.67% last week and the lowest in data going back 50 years, Freddie Mac said in a statement Thursday. It was the 17th record low since the coronavirus started roiling financial markets last March.

Of course, The Federal Reserve printing gobs of M2 money is helping.

In the words of the immortal Ron Swanson, “I want this night to get k-razy. Get me a shot of snake juice. I hear it has a dope aftertaste.”

The mortgage market after a shot of snake juice. And its dope aftertaste.

parks and recreation dancing GIF

On the other hand, Bankrate saw a slight up-tick in the 30Y mortgage rate.