New Year-New Goals-New Business
Jan. 14th, 2021— New World Mortgage’s Branch Manager Luz Lluncor hosted the first Freddie Mac Partner Workshop Series Virtual Event. Guest Speakers included Bill Lowman, CEO of American Pacific Mortgage, Leonard Kiefer, Ph.D., Macro Housing Econ Senior Director and Deputy Chief Economist, Economic and Housing Research, Freddie Mac.
Luz is a veteran in the industry. With 21 years of serving the South East Los Angeles area, she continues to be a passionate advocate for homeownership lending in our communities. She kicked off the virtual educational series by expressing her gratitude for the opportunity of hosting an event that brought Freddie Mac and American Pacific Mortgage to our area and informed the public about the current economic situation and developments in the housing and mortgage industry. With more than 100 people attending the event, and positive feedback that our team received, we are thrilled to continue to bring these educational events, helping our partners, clients, and communities thrive in 2021.
Freddie Mac’s very own Leonard Kiefer shared his analysis of the past year and projections for the upcoming year
After an eventful and surprisingly solid year in the housing market, we are now a few weeks into 2021, and all eyes are on Quarter 1 projections. The critical question at this moment is if this intense housing market is going to be able to sustain itself. As a professional forecaster Kiefer is well aware that we might be up for some surprises, but the key themes that will continue to emerge and drive the housing market into 2021 and beyond, are COVID 19 and its effect on socioeconomic factors.
Since the pandemic hit about ten months ago and the loss of about 20 million jobs, the economy has been in a state of slow recovery. The most challenging part is yet to come, as the world is still getting adjusted to the effects of a changing labor market. On the road to recovery, we hope that the out roll of vaccines will be successful, allowing businesses to re-open and the economy continues to improve.
The recovery of the housing market has been strong, and specifically the owned market of single-family homes. We see a growing demand for housing, as people are looking for more space and getting away from condensed areas. The millennial generation coming to an age of wanting to become homeowners will continue to push the Single Family Residence market to accelerate into the second half of 2021. The key driver for recovery and projections into 2021 is the low mortgage interest rate, which was 2.65% on January 7th, the lowest recorded reading since 1971. The decline of the interest rates over the year 2020 has been a significant factor in accelerating the housing market's growth. Still, the jump in rates over the last week to 2.79% on January 14th shows us that the market can be volatile. We expect the rates to rise a bit but maintain around the 3% level, nowhere close to the 5% interest rate of 2018.
Another dimension is the home price growth, driven by people competing for low inventory. Los Angeles' Metro area is running below the US, which has house prices rise to a growth rate of about 10%. Organizations like Freddie Mac are looking for different solutions to help this rising demand, like renovations or new homes. As long as we see low supply and high demand for houses, we will continue to see house prices rise. This trajectory is somewhat of a concern, as a correction of the market will occur at some point, but this is not close to the market yearly value inclines of about 30% we saw in 2004-05. For now, there will be a lot of momentum in the housing market, and we need the right products and services to keep up with the demand.
Bill Lowman, CEO, American Pacific Mortgage: “Focus on community based approach is a strategic business decision.”
American Pacific Mortgage’s CEO, Bill Lowman started of by taking some time to pass on his thoughts and prayers to the Los Angeles communities, suffering from the challenges of COVID 19, before thanking host and branch manager Luz Lluncor for the invitation at this event, and her 13 years of serving the community as a division of American Pacific Mortgage (APM).
APM is a direct mortgage lender, and closed over 22 billion dollars in loan volume in 2020, which takes them into the top 15 of mortgage lenders in the United States. A reason why the wider audience has not heard of APM might be because the chosen business model, as they work with local branches, like New World Mortgage (NWM), that know their markets and can best serve their communities. Having that local support and outreach is more important to APM than having a recognizable name. “We provide loan products, resources, and services for about 200 branches in the USA.”
While switching to the topic of Thriving and Staying educated in 2021, Bill first spent some time on 2020, which was the most eventful year of his 35+ year career in the mortgage industry. COVID has and will continue to have a significant impact on the mortgage industry. Looking back at the on and off again rhythm caused by Stay at Home orders on our borrowers' employment status has been a considerable challenge. In that case, a branch-like NWM has a significant advantage in their market place, as it is more challenging to determine the employment situation of a borrower from a distance. It is also convenient for our borrowers to work with a trusted local lender that can verify the employment and make sure you qualify for the loan that fits them best.
Forbearance, which was part of the Cares Act, is another topic that significantly impacted the industry. It allowed borrowers to forgo payments and created chaos, but the overall impact was not as bad as the industry initially feared. Currently, about 5% of all mortgage loans are in forbearance nationally, but at APM, only 1%, and at NWM, only two loans went into forbearance last year. Working with a trusted local lender does not just protect the mortgage bank, but by working with the borrowers and making sure they get into the right program at the right time, it is in their best interest as well.
From the economic forecasts, it looks like the short-term interest rates will show volatility like you typically see around chaotic world events. For the long term vision of the next two years, the mortgage rates will maintain steady around the 3% range, which is positive for affordability and the first time buyers market.
We project a decrease regarding the mortgage volume, mainly due to the refi business's saturation, which was about 65% of the mortgage business in 2020. An expected 5-10 % increase for the purchase market is excellent for our real estate partners and the economy in general. Overall, in this upcoming year, we'll see some unique opportunities emerge. We are grateful for Freddie Mac, who provides us with existing products you should ask your lender about after this event, like House Possible, Borrow Smart, Choice Home, and Choice Renovation. With Freddie Mac, APM will continue to bring unique solutions that help underserved communities make homeownership a reality.
Want to join our next event? Follow us on Instagram for more details! @newworldmortgage