A year ago, when the calendar first turned to 2020, it’s a fair bet that no one could see what was coming, or know-how profoundly one little germ could change our lives. The coronavirus outbreak, epidemic and then pandemic upended everything across the globe, and even as we strive for a semblance of normalcy, it’s not done yet just yet. You may have noticed the normally-packed live celebrations of the change of year in cities around the world were thinner, remotely generated and socially-distanced. “On January 1, 2021, for the first time ever, hindsight will actually be 2020”, according to a popular internet meme, and there’s little doubt that many people will be happy to see it go.

We can’t know the future, though. Some unexpected something(s) will of course occur in 2021, whether they happen on an individual or intimate basis, or to select groups of folks or even all of us collectively. Housing markets — homeowners and homebuyers alike — are one such collective, and neither could have expected the profound changes and opportunities that arose last year. Even though rates were already pretty low by historical standards when the year 2020 began, they have firmed up a little from their annual low as the year came to a close. With a record-long economic expansion entering its 11th year, a cessation of trade wars that tempered growth and growth picking up speed, odds then favored somewhat firmer rates, but the virus had other ideas.

With one country after another closing, and uncertainty and risks skyrocketing, investors got spooked and came to a point of selling everything to move to cash; interest rates spiked, financial markets became unhinged and central banks across the world moved into emergency positions, slashing rates, buying bonds and opening up new lending and market-support facilities, moving to liquefy every market and be the buyer of last resort for a range of assets if need be. The market panic was quelled, and a depression likely averted. Lockdowns ensured that the economies of many countries would fall into record-setting recession for a time, only to quickly (if partially) emerge.

As they did, unprecedented opportunities arose for homeowners. For those in difficult straits, and with the experience of at least some lessons learned in the last housing bust, a nearly instant forbearance program for homeowners was released, and without even the burden of proof of hardship. Millions signed up; a core of the most troubled homeowners (numbering about 2.8 million) yet remain in forbearance. For others who experienced no payment troubles, opportunities to refinance at record low rates — multiple times — appeared. Freddie Mac’s formal all-time low for a conforming 30-year (3.31%) FRM was touched in mid-April, broken by the end of the month a new record low was set in 17 weeks since then, falling to as low 2.66% near the end of the year.

Potential homebuyers took notice, too. The year began with an early start on the spring homebuying season with a solid winter showing for sales, but that came to a relative standstill in March through May, only to revive with vigor and then some as the economy re-opened through the summer. The delayed action of the spring market was joined by additional demand from second-home buyers looking to escape to remote locations, away from virus and strife, and by buyers who could now work remotely and so no longer felt constricted by proximity to center-city workspaces. With competition for houses fierce and existing home prices rising sharply, it’s also likely that some demand has been “advanced” from the coming year in order to grab a home before costs increased further.

With the existing home market tight and expensive, and possibly with commuting to work far less of a concern, sales of new homes also enjoyed a strong period during the mid-part of 2020, but sales are settling back to a very solid (if less frenetic) trend as the year turns. Before a pandemic dip last spring, sales of new homes had been in a 10-year uptrend, and seem poised to return to that kind of steady, solid (if unspectacular) improvement now that the pandemic distortion in sales has cycled through.

Existing home sales have started to cool a bit from heady annualized levels too, although that’s to be expected as the winter months kick in. The spring-bumped-into-summer housing season has passed, and while there is still plenty of demand there is little supply to be had, and even fewer homes are put up for sale once the onset of the extended holiday (and then winter) season begins. The National Association of Realtors Pending Home Sales Index contracted again in November, declining by 2.6%, a third consecutive decline. Compared to a year ago, though, contract signings are still some 16.4% higher, and if we weigh this change against sales levels last December/January, it looks like this will translate into a 6.25 million (or so) annualized rate of sale. October’s 6.86 million (annual) was the recent peak, and sales are likely to continue to cool somewhat until the next spring cycle kicks up again.

As we look ahead to the coming year there is reason for optimism, what with ever-expanding inoculation (hopefully) allowing for greater freedoms for schooling, travel, entertainment and socialization. Should things work out as hoped, portions of the economy here and elsewhere across the globe that have been severely curtailed could start to re-engage again in a more meaningful way, re-igniting employment gains. Economic stimulus for businesses should help keep at least some of them alive and viable until this happens, while new cash distributed as checks this winter will be available for spending as soon as opportunities arise. Faster growth seems likely in 2021, and will come at a time when the Federal Reserve remains committed to a low-and-liquid stance for monetary policy (although they may need to re-think this sooner than they presently expect).

Overall, for our part, we’re hopeful about the prospects for the year ahead, even it if may be a while yet before seeing someone maskless doesn’t elicit a response. May great things lie ahead for you and yours in the coming year, and happy new year to you all.

Mortgage Market information provided by Jon Aucutt, Main Street Bank
31780 Telegraph Road, Suite 100
Bingham Farms, Michigan 48025
jaucutt@msbmi.com