Why are Reverse Mortgages Surging Despite Economic Uncertainty?
"If we have the attitude that it’s going to be a great day it usually is."–Catherine Pulsifier
Which do we choke? Inflation or possibly the nation’s fragile economic recovery? That’s a question the Federal Reserve’s Federal Open Market Committee is grappling with as consumer prices soar and global shortages of goods worsen. CNBC reports, “A number of participants suggested that if the economy continued to make rapid progress toward the Committee’s goals, it might be appropriate at some point in upcoming meetings to begin discussing a plan for adjusting the pace of asset purchases,” the meeting summary said.” What’s worrisome is the nation’s economy to put it plainly is uneven. The committee’s next meeting is scheduled for June 15-16th.
We have much to be thankful for in this upside-down economic cycle. While the nation’s GDP is surging, albeit when compared to last year’s economic shutdown, our economic recovery is facing some strong headwinds. Yet despite these challenges we thrive.
Businesses reopening and seeking to hire staff after the pandemic shutdowns often find themselves competing with the federal government for employees that thanks to a $300 per week unemployment supplement. The National Federal of Independent businesses found 44% of small businesses had jobs they couldn’t fill. That’s a record high. The Biden administration’s solution?
To urge businesses to raise their pay to compete with or exceed the Fed’s supplemental bonus. The bottom line is employers competing with the federal government for workers serves only to postpone the economic recovery needed for the Federal Reserve to hike rates. That could spell big trouble for the American consumer and good news for homebuyers and reverse mortgage lenders.
Another paradoxical outcome is despite a fragile economy and surging inflation home values may hold their record values or even appreciate thanks to a historical shortage of housing inventory and meager new construction In fact, single housing starts plunged more than 13% last month compared with March according to the U.S. Census. A crash or reset of home values that I and many others anticipated may have to wait until the cost of building materials normalize and inventory is substantially expanded.
The likely outcome is that reverse mortgage lenders will continue to see ideal market conditions despite inflation and nagging unemployment. High home values and low-interest rates continue to push HECM endorsement volume, much of that thanks to a record number of HECM-to-HECM refinances. How much have endorsement volumes improved year-to-year? This chart compares endorsements from Feb 2019 to April 2020 to February 2020 April 2021. Much of that growth can be attributed to refinances. In fact, in March nearly half or 48% of all FHA case numbers assigned to new HECM applications were for HECM-to-HECM refinances.
Interested in Refinancing?
If your home has appreciated in value let's take a look at the details to see how you can get more cash by refinancing your loan to take advantage of a tax-free income stream with many retirement benefits.
Arrange a complimentary, individualized review with Cynthia to find out if you qualify for a Refinance.