Key Highlights

  • Q4 2020 data from Federal Reserve Bank of New York on household finances shows how housing boom turbocharged economic recovery
  • Specter of K-shaped recovery looms large

2020 COVID Housing Boom More than “Just Superlative”

The Federal Reserve Bank of New York released its Q4 2020 report on household debt and credit this last week. This report indicates that

  • Mortgage originations hit nearly $1.2T in Q4 2020, the highest quarterly volume in the New York Fed’s history
  • Highest mortgage debt refinancing since 2003
  • Highest purchase mortgages since 2006
  • First-time buyers took on more debt than ever
  • Repeat- and second-home buyers took on highest mortgage debt in more than decade
  • Homeowners withdrew $182B in home equity in 2020, an average of some $27,000 per household
  • Those choosing not to take out home equity cash saved average of $200/month on mortgage payments
  • Home equity gains increased +10%, according to CoreLogic, for collective gain of +$1T
  • Median credit score higher than in over a decade with +70% of newly originated mortgages going to buyers with credit scores higher than 760

Hundreds of Billions of Dollars of Newfound Cash to Continue Leaving a Mark on Economy

No doubt that some of that “newfound” cash streamed into the financial markets, thus lifting stock prices (and Bitcoin) to unprecedented highs into 2021.  Some of that cash went towards purchasing goods such as appliances and cars.

2020 Housing Boom Shifted Ground in US Economy Going Forward into 2021

According to the Federal Reserve Bank of New York, there are only two open questions in our 2021 economy.  One, how many buyers may be locked out from homeownership due to constantly rising home prices?  And two, what will happen when forbearances end for federally backed mortgages and student loan payments?

Other than that, according to Bloomberg, the 2020 COVID housing boom has set up the US economy “for a recovery that could be unlike anything in recent memory.”

 

Thanks to Bloomberg, CoreLogic and the Federal Reserve Bank of New York.