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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 were a lot of questions around really what can the new administration do? 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 are 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 the 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, the 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 economic 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 are 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 to wear 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 expectation. 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.