WHAT DROPPING MORTGAGE RATES MEAN FOR SAN DIEGO REAL ESTATE
Lower monthly price of home could make purchase easier for some buyers
Worries about coronavirus have hammered stocks and sent investors fleeing to the safety of U.S. government debt.
And that might be good news if you’re looking for a mortgage.
Mortgage rates have plummeted in recent days, possibly making a home in the expensive San Diego market more affordable.
The rate for a 30-year, fixedrate mortgage was 3.19 percent Wednesday morning, said
Mortgage News Daily. That’s at, or near, the lowest level since Freddie Mac started recording rates in 1972.
The lower rate makes the monthly cost of a medianpriced home in San Diego County — $585,000 in January — about $367 less than it did a year ago when rates were closer to 4.56 percent. That is assuming 20 percent down and factors in monthly home insurance and taxes.
Fears over the coronavirus have already indirectly lowered interest rates, and the Federal
Reserve cut a key benchmark rate this week. Both could continue to push rates lower. However, there is little consensus about what this could mean for the already hot housing market in San Diego.
Alan Gin, an economist at the University of San Diego, said lower interest rates make the monthly price of a home cheaper, but that doesn’t al
•
A drop in interest rates in response to the coronavirus outbreak is adding urgency to a hiring spree across the mortgage industry.
Executives at four of the nation’s 15 biggest mortgage lenders, already gearing up for a busy 2020, anticipate hiring thousands of employees this year to keep up with what they expect to be a flood of demand for purchase loans and refinancings.
Lenders are zipping through applications so fast that some expect to blow past origination records they set just last year. At Quicken Loans, the nation’s largest mortgage lender, Monday was the busiest day for mortgage applications in the company’s 35-year history, said Chief Executive Officer Jay Farner. Michigan-based United Wholesale Mortgage, meanwhile, approved $2.5 billion of preliminary loans, a single-day record for the company, according to Alex Elezaj, its chief strategy officer.
The drop in rates, coming as Treasury yields plunge, is taxing an industry that was operating near capacity and setting off a battle for talent. Eric Mitchell, an executive at Michigan-based Gold Star Mortgage Financial, is luring underwriters with signing bonuses and the chance to make big money, assuming they’re willing to work long hours.
“If you’re not making a $1 million this year as a loan officer, you’re grossly incompetent,” Mitchell said. “’I tell them, ‘We’re not working 40 hours a week, kiss your families goodbye.’”
Fears that the virus outbreak will stall growth have hammered stocks and raised fears of a recession. The Federal Reserve on Tuesday slashed its benchmark rate by half a percentage point in its first emergency move since 2008. And with the Treasury yields that guide mortgage rates sliding, loan officers juggling a mountain of refinancing applications, which soared last week to the highest level since May 2013.
Quicken expects to hire a few hundred new employees a month this year. United Wholesale Mortgage, a division of United Shore Financial Services and the nation’s third-largest home lender, plans to hire another 2,000 people in 2020 after it doubled in size last year to roughly 5,400 employees, Elezaj said.
Underwriters there have been clocking overtime hours over the past few days, he said, in part to keep the company’s average mortgage processing time to about 12 days. In just three months, the company is on track to originate nearly half as many mortgages as it did all of last year.
Sanjiv Das, CEO of Texas-based Caliber Home Loans, the nation’s seventhlargest mortgage lender, said his company nearly doubled its call center staff over the past six months and anticipates hiring at least 25 percent more loan officers and back-office workers in the coming months to handle the coming surge in mortgage applications.
Jpmorgan Chase & Co. is also responding. The bank told home-equity staff last week that half of the team would be transferred to mortgages to keep up with demand, according to an internal memo seen by Bloomberg News.
The mortgage industry, riding a roller coaster over the past few years, has been forced into cycles of hiring and firing. Companies shed employees in 2018 as borrowing costs for 30-year loans spiked to almost 5 percent, killing off the lucrative refinancing business and causing a mini-slump in home sales.
But 2019 was a banner year, as trade wars and signs of a global economic slowdown resulted in cheaper financing. And just as rates were drifting up again this winter, the coronavirus struck.
Many remain cautious after the slowdown in 2018 and are unsure how quickly the latest crisis will resolve itself. They’re keeping rates relatively high compared to bond market yields to choke off business.
There’s also a major caveat to the current rate plunge: A global recession would be bad for business, particularly if the outbreak stalls wage growth and consumer confidence.
“If we have a sharp reduction in trade and economic activity, you will start to see people not qualify for a mortgage,” said Michael Jones, chief financial officer of Thrive Mortgage in Georgetown, Texas. “That is the biggest risk right now.”
For many, there’s never been a better time to borrow. Donny Schulze, a Hauppauge, N.y.-based loan officer for Embrace Home Loans Inc., said one of his clients on Monday locked a 2.75 percent interest rate on a Federal Housing Administration-insured 30-year mortgage. The borrower’s down payment was just 3.5 percent. That was a day before the yield on the 10-year Treasury plunged below 1 percent for the first time ever. Other firms were also booking loans below 3 percent, mortgage executives said. Interest rates for the typical 30-year mortgage should fall below 3.25 percent and remain there for the rest of the year, said Mike Patterson, chief operating officer at New Jersey-based Freedom Mortgage Corp. Mortgage investors were privately discussing on Tuesday how to price a new Ginnie Mae 30-year fixed-rate mortgage security that would yield just 2 percent, a first, Patterson said.
“So-called currentcoupon bonds guide loan rates, which means investors would be expecting lenders to package into securities mortgages with rates below 3 percent.
Schulze is advising some of his customers to wait before agreeing to rates being offered now, telling them that 30-year mortgage rates could drop to 2.5 percent.“there’s not a lot telling me that rates will move up,” Patterson said.
Nasiripour and Gopal write for Bloomberg News.