Mortgage originators need to disregard conventional wisdom and prepare for a refinance market this year as the 10-year Treasury yield could come close to its lowest level ever, said Barry Habib, CEO of MBS Highway.
Habib spoke at the Regional Conference of Mortgage Bankers Associations on Wednesday before the Federal Reserve made its announcement that it was not hiking rates. At the session he said he did not expect the Fed to act now, but he was predicting it could raise short-term rates in June.
If that happened, spooked stock investors would pull their money from the equity market and put it into bonds like the 10-year Treasury. The rate on the 10-year Treasury would decline as a result and since that instrument affects pricing of the 30-year fixed rate mortgage, that rate would decline as well.
Habib is predicting that rates on the 30-year mortgage could then fall as low as 3%.
It's quite a contrarian stance. The most recent Mortgage Bankers Association
Habib made a similarly
His firm, MBS Highway, is a provider of real-time stock and bond market information and analytics for lenders.
Habib also said the next president is likely to preside over a bear market and recession. He wondered why anyone would seek the job.
He called the prospect of a bear market "a double-edged sword." Rates would reach the lowest point ever and the mortgage industry would be sustained by fresh refinance activity, he said. Home value appreciation would continue but at a slower pace than currently. However, people would be less confident in the economy.
The housing market is very healthy with low inventory and demand likely to increase as millennials become homebuyers, he said. The indicators such as full employment and inflation are signs that the Fed should have raised rates this week. However it couldn't because the rest of the world is cutting interest rates or going to negative interest rates, he said. Raising rates also would make the dollar stronger, driving up the cost of exports.
