Mortgage interest rates remain well below 3%, with Freddie Mac's latest 30-year fixed-rate mortgage average coming in at 2.84%. While that's an increase from a week ago, it's still far below the 3.75% we saw last year at this time. Freddie Mac's Chief Economist Sam Khater notes that rates increased slightly due to the news about a potential COVID-19 vaccine, which buoyed markets. Khater added,  "Despite this rise, mortgage rates remain about a percentage point below a year ago and the low rate environment is supportive of both purchase and refinance demand. Heading into late fall, the housing market continues to grow and buttress the economy."

November is typically a month where purchase activity slows, especially during the year of a federal election, as we reported last week. This week, the Mortgage Bankers Association reported that mortgage applications for purchases decreased by 5% week-over-week on an unadjusted basis. That unadjusted number is still 16% higher than this time last year. Refinance activity jumped by 1% and remains a whopping 67% higher than a year ago. Overall, this is the sixth time in seven weeks that we've seen a decrease in the purchase market.

Joel Kan, the MBA's associate vice president of economic and industry forecasting, said, “Inadequate housing supply is putting upward pressure on home prices and is impacting affordability – especially for first-time buyers and lower-income buyers. The trend in larger average loan application sizes and growth in loan amounts points to the continued rise in home prices, as well as the strength in the upper end of the market."

This week the National Association of Realtors released its annual Profile of Home Buyers and Sellers. The data showed a significant shift in the driving forces behind homebuying in 2020 due to the coronavirus. According to the study, “Buyers who purchased after March were more likely to relocate to the suburbs and were more likely to pay more for that home – regardless of its location – paying an average of $339,400 compared to $270,000 for those who purchased before April.” 

It's also interesting to note that the average age of a buyer was 55. That's an all-time high. The average first-time buyer came in at 33 years old. The study also looked at deterrents for homebuyers and, not surprisingly, student loan debt is the main culprit. The NAR's study of more than 8,000 homebuyers showed 47% of them saying student loans made it difficult to save for a down payment. More than half of first-time homebuyers surveyed said student loans held them back from saving for a down payment. 

Read the full release from the NAR and check out the Mortgage Impact Podcast featuring NAR Vice President of Demographics and Behavioral Insights, Dr. Jessica Lautz. 

Covid-19 continues to drive Wall Street 

The news of a potential vaccine with a 90% efficacy rate spurred Wall Street to a huge opening to the week. The Dow Jones soared more than 800 points on Monday, hitting a record intraday high at one point. The S&P 500 finished up 1% on Monday with the Nasdaq falling 1.5% with Netflix, Zoom and Peloton leading the slide. Those stocks have garnered the nickname “stay-at-home stocks.” One reason they slid was directly due to the vaccine news. Investors got a little more confident that they could branch out into more risky, cyclical stocks that rely on economic recovery. 

The Dow's volatile week started when it nearly broke the 30,000 point mark on Monday. By Thursday afternoon it had shed 900 points with futures flat going into Friday morning. The 10-year Treasury note yield, which was trading at 0.758% on Nov. 6, hit a high of 0.977% on Nov. 11 before starting to dip back down Thursday. The 10-year note was trading at 0.886% early Friday morning. Dow futures were back up Friday morning with hope of a successful vaccine being the main driver. Keep in mind that typically, when the stock market is performing well, mortgage interest rates start to creep up. 

Of Note:

• The Labor Department reported 704,000 initial unemployment claims, which was well below what economists were expecting. However, as of Oct. 24 more than 21 million Americans are still claiming some sort of unemployment assistance from the federal government. 
• The consumer price index (CPI) released by the Bureau of Labor Statistics was unchanged in October, indicating continued low inflation. 
• It's interesting to note that grocery prices have risen by 4% annually as people cook at home instead of eating out. 
• Federal Reserve Chair Jerome Powell reiterated his concern for women who are out of the labor market not by choice, but by necessity, adding, “It's kids who are not getting the education they should be getting. It's small businesses with generations of intellectual capital that is being destroyed, and it's just workers who have been out of work for a long period of time and losing their connection to the labor force and losing the life that they had.”