September 19, 2021

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Mortgage News

What does $1.9 trillion in stimulus mean for housing, mortgage?

The Biden government’s $ 1.9 trillion stimulus package has been legally signed and is already making itself felt across the US economy. While the markets have already priced in the historic level of federal spending in the form of higher interest rates, we are also seeing the first significant effects as emergency unemployment benefits increase and stimulus checks arrive in mailboxes.

But what does this spending mean for the real estate market and the mortgage industry? What can it do, apart from an environment with rising interest rates? Mortgage professionals Do you expect a stimulus package specifically designed to address the economic hardship that lower-income Americans felt disproportionately high during the pandemic? While the full effects of the package will be felt in the coming weeks and months, some experts shared their forecasts for the real estate market with MPA.

“Stimulus payments have just started to drain people’s bank accounts so I can see it spike in the next month or two,” said Kenon Chen, executive vice president of corporate strategy at Clear Capital. “The timing goes well with the seasonal buying season that starts before summer and the desire to have the remodeling projects completed and ready by the time school is out.”

Chen noted that the stimulus package could give homeowners with new equity in their properties a little more flexibility to upgrade their properties with refis or pay off expensive debts. These are ongoing trends already, but with the housing supply limited and the market already hot, many homeowners can use this incentive to solidify their financial bases and improve their homes.

For Henry Coffey, managing director of Wedbush Securities, the impact of the package is likely to be in the form of general consumer confidence in the economy. While he stated that this increased economic activity will drive government bond rates higher and mortgage rates higher, the package contains positive results for the real estate market as a whole. He believes that even if rising interest rates hurt affordability, there will be more than enough housing demand at the macro level to absorb these additional costs.

Much of the housing impact depends on how people spend their extra money, according to Coffey. When the majority of criminal tenants use their incentive to repay the rent, like Some studies have shown that this is likely to be the casethe impact on more affected multi-family units will be significant. The same goes for homeowners who have spent a year in forbearance.

Coffey also noted that he sees no inherent risk to the real estate market or the mortgage industry in this stimulus package. Rising interest rates are not inherently risky, and while some noise has been made about the impact on the deficit, Coffey highlighted what seems to be a government fact these days: when they’re in power, Republicans and Democrats don’t care about deficits.

On the lower end, Coffey believes the bill will put much-needed money into the economy to help cities and states deal with the rest of the pandemic. The bottom line is that a lot of money is invested in getting more shots into more guns. While additional stimulus checks will help, Coffey believes vaccinating families and getting kids back to school will make a meaningful change for the better.

Coffey believes that mortgage professionals preparing to navigate a post-stimulus market are already taking steps in the right direction.

“They are probably already there, focusing on buying money mortgages,” said Coffey. “You need to have a mortgage business that focuses on home ownership and home investment because the The refinancing market will cool down. But mortgage brokers get it, they are always one step ahead when it comes to how they plan their business. “