Insignia Mortgage

The March 2021 jobs report was massive with 916,000 new jobs created last month. Unemployment fell to 6%. Challenges remain as long-term unemployment remains elevated and is a top concern of Fed policymakers. Bonds edged higher in light trading as the stock market was closed in observation of Good Friday. Bonds were also pressured this week by the announcement of a major infrastructure spending package. The plan has both pros and cons, and to date, both the bond and equity m...arkets have responded well to the new plans to upgrade the United States which also includes corporate tax increases. As this plan makes its way through Congress, we do expect to see more volatility in the public markets expressing bond traders’ concerns about the size of the government’s balance sheet. Equity markets don’t like tax increases on corporate earnings nor the potential for higher interest rates. The S&P 500 surpassed the 4,000 milestone and economic activity continues to improve as vaccinations take hold and life starts to return to normal. Air travel and hotel bookings are an upswing. Consumer confidence and business confidence also are improving. Home sales remain strong but the overall housing market is under some pressure. Supply has been limited, and tat has driven up prices. Large traditional lenders remain very rigid in underwriting, but we’ve also seen the return of alternative loan programs including one-year tax return loans, W-2 only, and bank statement loans. Also in the mix now, CFDI programs are helping borrowers purchase or refinance debt. Rates remain attractive, fueling much activity. To help cool off speculation, Fannie Mae and Freddie Mac have added additional hits to disincentivize second home and investment home transactions to reinforce their focus on primary homeownership. The fallout of that benefits independent brokers like Insignia and our clients because we have access to lenders who are eager to lend to good borrowers at attractive rates who want to buy second homes and investment properties. https://www.insigniamortgage.com/market-commentary-04-02-21/

The bond market did not respond well to Fed Chairman Powell’s recent comments, especially when it came to letting inflation run hot. For those of us who follow the gyrations of the bond market daily, inflation has historically been the arch-enemy of bonds as higher inflation reduces the real return on bond investments. The idea of encouraging inflation to run hot and above the traditional 2% threshold is novel. Bond traders remain skeptical as the 10-year Treasury reaches lev...els last seen pre-pandemic. Bonds are also under pressure by the Fed’s announcement that the temporary change to the supplementary leverage ratio will run off at the end of March and also that banks will be required to lift reserve requirements. This news has added additional pressure on bond yields as banks are large holders of these instruments and now must sell them to raise capital. Further muddying the waters is the threat of new lockdowns in Europe and India (which creates some uncertainty on the future path of the virus and could create havoc for all investable markets) as the virus surges in those areas and vaccinations have not been delivered in nearly the same capacity as in the U.S. Also, let’s not forget the increase in oil prices, lumber, oil, and commodities, all of which support the inflations argument, while the U.S. economy is improving. The Philly Fed Manufacturing Index also soared, which is yet another positive indicator that the economy is on the mend. As we have written about previously, long-duration growth/tech equities are most at risk in a rising rate environment as are speculative investments, which are priced much higher based on a very low discount rate. We are watching how equities and bond yields react as the pandemic becomes less of a problem. An unexpected housing boom was a welcome surprise during the pandemic year and was spurred on by a rise in equities paired with low-interest rates. However, as rates move higher, monthly mortgage payments will increase, potentially cooling both purchases and refinances. Keep in mind that the 10-year Treasury is still well below 2% and that while we are off the bottoms, interest rates are still very low historically. https://www.insigniamortgage.com/market-commentary-3-26-21/

Massive Stimulus Package Pushes Bond Yields Up: Interest rates are rising. This should not come as a surprise given the combination of new factors. Increased vaccinations are lighting a fire of greater economic activity and lowering unemployment. There’s the new massive $1.9 trillion stimulus package. Prices are on the rise for basic goods such as food, lumber, gasoline, and more. Assets such as equities, real estate, and Bitcoin have been soaring to record highs. But that is... the type of inflation everyone loves. Consumer inflation, the everyday rise of the price of goods and services, is the greater concern. Personally, I was astonished the other day when I went to the market. Prices have certainly risen to the point where I took notice. It is hard to square the massive government spending against extraordinary low interest rates, especially as the world recovers from Covid-19. Something will have to give and it is probable that investors will demand higher yields for buying our debt. Should rates grind higher, expect a cooling of long-duration growth stocks. It may also affect high-priced real estate, and speculative plays on crypto-currency. Perhaps many homeowners are also thinking the same thing as purchases, rates, and term refinances roar on. Especially interesting is the rise in cash-out refinances. Cashing out of your home with an interest rate below inflation is a wonderful thing as you ensure paying off debt with inflating dollars. There is a point not too far from where we are trading where higher interest rates will cool off the mortgage market, as well as, limit how high home prices can go. For the moment, with the 10-year Treasury trading at 1.61%, interest rates are still highly accommodative. Be prepared for a quick move to 2.000% on the 10-year Treasury if rates steady above 1.600%. We are actively watching the bond market; we do our very best to navigate borrowers during this very volatile time. The bond market sure appears to want to test Fed policy and challenge some of the exuberance in the equity market. With rates in a rising channel, for those actively looking to buy or considering refinancing, there is no time like the present. These are the opinions of the author. For financial advice, please talk to your CPA or financial professional. https://www.insigniamortgage.com/market-commentary-3-12-21/

Rising bond yields which continue to move higher and they touched above 1.61% after a stronger than expected February jobs report remains a major concern on Wall Street. Tech stocks that have especially benefited from 0% interest rates have gotten taken to the woodshed this week before reserving in late Friday trading. Discounting cash flows at zero percent favor high beta long-duration growth stocks. As mortgage originators, why do we care, you may ask? The reason is that t...he stock market is the wealth engine of America and for the everyday person, equity market gains are typically the down payment source for first-time home purchases, along with gift funds from parents, and step-up purchases. These major swings may hurt the spring buying season if the markets plunge lower or become increasingly volatile. The jobs report was a good one. While there is much more to do, beaten-down industries such as hospitality and leisure saw a marketable improvement in hiring. With vaccination deployment finding its way into all of our communities, better days are ahead. Unemployment fell to 6.20% and the labor force participation rate was 61.40%, unchanged. A move higher in interest rates should not be a surprise with an improving jobs picture, major fiscal stimulus on the way, and hopes for a return to normal on the horizon. Pent-up demand should lead to an upswing in GDP and put additional pressure on wages. Commodities are also signaling inflation is on the way. Real estate should serve as a buffer should inflation rise more than anticipated. Keeping all of this in perspective, interest rates are still accommodative. Still, keep an eye on a break-out higher to 1.75% on the 10-year Treasury as go time for those still not ready to purchase or who are watching the market for an optimal time to refinance. https://www.insigniamortgage.com/market-commentary-3-5-21/

Much to the delight of borrowers, unprecedented levels of quantitive easing by central banks have pushed yields to zero or below in response to the global pandemic. This has helped many larger businesses and qualified households to recapitalize their balance sheets and lower monthly debt service. Residential single-family homes have also been a great asset class to own or borrow against as prices across the country have risen. Retail, office, and hospitality assets in major c...ities have been less fortunate. With news today that the FDA has approved the Covid-19 vaccines, it will be interesting to see how these industries shake out. So many small business owners are on the brink of failure. Government stimulus will be needed to keep these businesses going until the vaccine makes its way through our society. However, with so much money sloshing around, the riskiest assets have soared partly due to the Robinhood investing class moving their favorite stocks higher, partly due to safer assets such as government-guaranteed bonds, high-quality corporate bonds, and CD’s offering paltry interest rates. Equities do feel expensive but nothing says that stocks can’t move higher. TINA (There Is No Alternative) comes to mind as investors, pension administrators, and hedge funds need to put money to work somewhere. A quote from Warren Buffet is apropos in today’s market, Price is what you pay, value is what you get. No one thought housing would be as robust as it has been back in the dark days of March of 2020. A quick response by the Fed and Treasury (amongst other central banks) drove interest rates down and helped many potential home buyers needing more space or working remotely move off the sidelines and into new homes. Loan volume has been intense as banks and non-banks price aggressively try to win business. Our local community banks and credit unions, which are where Insignia Mortgage places our more complex loans, have worked hand in hand with our borrowers to facilitate successful transactions. Our lenders are offering attractive rates and terms for our self-employed borrowers, real estate investors, and foreign nationals. Interest-only and cashout loans are readily available. https://www.insigniamortgage.com/market-commentary-12-11-20/

The December jobs report reflected an economic slow-down, which was no surprise given the spike in the virus around the country and the shelter-in-place orders that have displaced many small businesses. The slowing jobs picture also supports more stimulus and with a democratically-controlled government, there is no doubt the printing presses will be ramping up. The combination of massive stimulus and very low interest rates has created asset inflation (think stock market an...d home prices). A rise in asset values has been a great benefit to the economy and has had positive effects on spending and sentiment during these most challenging times. However, while asset inflation has boosted 401ks and home values, wage and price inflation are becoming more of a concern as inflation expectations are rising and could create tensions in the financial markets. We think this is not of immediate worry, but massive money printing does have repercussions, and if inflation runs hot, it could disrupt the equity markets and real estate markets. The 10-year Treasury breached 1% and touched the highest levels since last March. Rising rates hurt affordability for home buyers and also make riskier assets less attractive. Don’t get us wrong as 1% 10-year Treasury is still very attractive; it still does not discount how far bond rates have moved off their lows. Should inflation continue to trend up, rates could move up quickly and banks will be quick to reprice. We are recommending to our clients to move while interest rates remain ultra-attractive. https://www.insigniamortgage.com/market-commentary-1-8-21/

Insignia co-founder and principal Damon Germanides was featured recently on the MPA Power Originator blog sharing his tips for how he became an over $200MM annual originator. https://www.insigniamortgage.com/damon-germanides-featured/

As we approach Christmas, rising hopes of a stimulus package continue to circulate. The fiscal stimulus which Fed Chair Powell alluded to in his post-Fed meeting statements will be key to carrying our economy through a tough winter and rising Covid cases. The hope is that the uptake of the newly approved vaccines and resulting herd immunity will speed a return to normalcy by June 2021. The Fed has all but guaranteed zero interest rates through at least 2022. All of this is be...ing done to keep our economy going. We applaud the swiftness of government action during this major crisis after having experienced the 2008 housing crisis. Transfer payments from the government this time around have kept the consumer-based economy grinding through a very unusual time and have probably kept our economy from falling off a cliff. The Fed sees better days ahead with projected 2021 economic growth of 4.50% and unemployment falling to 5%. With the Fed holding interest rates at zero and a huge government debt load, there has been little consumer price inflation, but asset prices have soared. It was not expected that household savings would rise during this time. The combination of low rates, swift action by the Fed to backstop the financial markets, and the work-at-home trend has pushed forward housing demand, especially for single-family homes in more suburban areas. Housing plays a huge role in our economy in normal times, but during this pandemic, it has been a crucial provider of employment and consumption. Ultimately, our focus is on how Fed policy and economic activity affects interest rates. For the moment, the clear path of no rate hikes will keep interest rates low. Banks will compete for yield and we expect to see more lending options into 2021 as bank and non-bank lenders try to differentiate themselves from one another. This is a great time to be a broker who can match a borrower with the right fitting lender. Insignia Mortgage continues to focus on more opaque borrowers who require more attention and a deeper dive into their financials. Our lenders are eager to close deals and are offering no-limit cash-outs, bank statement only loan programs, interest-only, and loans to real estate investors and foreign nationals. https://www.insigniamortgage.com/market-commentary-12-18-20/

A lackluster November jobs report sent both equities and bond yields higher. Why? With the economy losing steam due to a surge in Covid-19 cases, the markets are betting on more stimulus. Of particular concern is the Labor Force Participation Rate (LFPR), which dropped precipitously as people stopped looking for work. Therefore, the unemployment rate which clocked in at 6.7% is a bit misleading as more people give up looking for work. There is a growing concern for small busi...ness owners, especially those in retail, beauty, hotel, and hospitality in some areas which have been forced to shut their doors as Covid cases spike. The hope remains that Congress can work together to provide a lifeline to those hard-working business owners until vaccinations can be delivered. With still so much that can go wrong, why is the 10-year Treasury bond yields near 1% inflation? Unprecedented monetary and fiscal stimuli are starting to make some of our brightest financial experts worry about inflation. There are some signs that inflation is on the way. Wage inflation is moving higher. Groceries are more expensive. Housing prices have risen. These are all inflationary indicators. Whether or not inflation really breaks out is anyone’s guess. However, with interest rates still at historical lows, we are encouraging our clients to take advantage of the current rate environment as the odds of lower interest rates seems unlikely. Even if there is a major setback, there are no guarantee interest rates will move lower on bad economic or pandemic-related news. Central banks all over the world have printed money at unprecedented levels and by doing so have created tremendous levels of national debt. A small change in sentiment about the U.S. debt levels would lead to a move higher in interest rates quickly. Therefore, there is no time like the present to take advantage of lowering debt repayments by refinancing or locking in an ultra-low rate on a new home purchase. https://www.insigniamortgage.com/market-commentary-12-4-20/

The Dow hit 30,000 - Wow! Downside volatility continues to seep out of the market in response to ongoing positive vaccine news, cooling political concerns over a peaceful transfer of power, and strong consumer spending. Disruptive technology stocks also have been on a tear, however with nose bleed valuations. The meteoritic rise in U.S. equities should be taken with a grain of salt as the combination of QE forever, and zero interest rates have made equities the only game in t...own for the moment. Housing has benefited from this surge in the stock market as prospective buyers of homes have seen their 401ks and other accounts increase in value. People buy goods and services when they feel flush. Let us not forget the economy was humming along prior to this pandemic induced shutdown. The pandemic to date has seen some businesses do much better or think about how their operations could be streamlined (think work from home, less physical office space, new collaborative technologies), while customer-facing businesses have been hit hard. Our lowest-paid employees have seen the biggest loss. Thus, we have the need to provide transfer payments to these employees who want to work but are being told that they are not allowed. Not too much to say about interest rates, as they very appealing and many borrowers who can qualify for loans are taking advantage of historically low-interest rates. Low-interest rates have fueled a major but unexpected surge in housing. However, there are signs that the market may be cooling off, especially in high-end markets. With such low housing inventory available in desirable markets, there also appears to be a floor under housing price action. Insigna’s suite of lenders has a deep understanding of borrowers who are either self-employed, wealthy foreign buyers, or real estate investors, and they continue to make common-sense lending decisions on transactions. This is encouraging news given how difficult the lending market was back in March and April of this year. https://www.insigniamortgage.com/market-commentary-11-27-20/

Covid case counts and looming shutdowns continue to drag down the markets. Thankfully, positive vaccine news from Pfizer and Moderna has limited downside volatility. Interest rates continue to trade in a tight range. The Fed has made it clear that interest rates will remain low for the near future to combat the pandemic and to help grease the markets. Some might say in the face of so much uncertainty that the markets are fairly complacent. For example, take a peek at the VIX ...index, which measures expected near-term volatility. It’s trading in the low 20’s, indicating that for the moment, there's little risk of a market blow-up. All of that could change in the blink of an eye. We hope the VIX is right and that it's forecasting better days ahead. Home sales, both new and existing, remain on a tear. Who would have thought that a pandemic would drive home sales to levels not seen since 2005? Surging sales have been catalyzed by low interest rates, a demand for larger living spaces, and the growth of working from home for many professionals, freeing them up to move further from urban centers. With limited inventory, prices should remain intact even if the pandemic lingers for longer than anticipated. Fiscal stimulus is needed to bridge the gap to recovery. With businesses being shut down by the government again, there is only so much pain that they can endure before throwing in the towel. We hope Congress can work this out before the end of the year. Insignia’s suite of lenders continues to actively lend and make common-sense decisions. All types of loans remain available, including interest-only loans, loans with co-signors, investment property cash-out refinances, and jumbo loans for foreign nationals. Construction lending has rebounded, as well as bank bridge loans and an assortment of loan types for commercial properties. https://www.insigniamortgage.com/market-commentary-11-20-2/