This feature originally appeared in the June issue of MReport.
Joe Tyrrell serves as the COO for Ellie Mae and oversees technology, product strategy, product management, and business and corporate development efforts involving the Ellie Mae Digital Lending Platform. He has been with Ellie Mae since 2002 and previously was the EVP of Corporate Strategy, SVP of Corporate Strategy, and SVP of Client Management and Business Development.
During a recent interview, Tyrrell spoke about the current refinance boom and if prospective millennial buyers could be “spooked” out of the market.
How long can the originations sector be bolstered by the refinance market?
It’s amazing to see what’s happening. We’re tracking applications on a daily basis and just when you think things are going to tail off, you see an additional spike. Originally, we thought the refinances would probably last through the first quarter and be replaced by what was expected to be a pretty strong purchase market.
What’s been going on globally with the pandemic, we’re seeing that the purchase market is likely to get pushed deeper into the year. Although, we still expect that there will be a purchase market—probably not during April, May, or June, but it will more likely shift to June, July, and August timeframe, provided things start to improve and curves start to get flat relative to COVID-19.
What’s been surprising is just to see how strong this refi market has been and the potential for it to have a second wave. What we’ve been tracking very closely is the interest rate environment and seeing how consumers are taking advantage of it.
Certainly, we have seen a lot of them take advantage of the lower rates, but there’s still a possibility that we could see a 30-year fixed rate down at 3%, or even slightly below that. Last year, across our platform, when you look at the loans closed last year, 75% of them had an interest rate of 3.75% or higher. If we continue to see the rates stay as low as they are, or even get down to a 3% flatrate, we’re going to see the second wave of people who are going to take advantage of a 75-basis point spread between what their current payment versus what it could be.
In today’s environment, where everybody is really looking at how they lower their ongoing monthly costs—their mortgage payment is the biggest one that they have, so that sort of a rate spread could create a second wave of refinances.
Will we see a surge of millennial homebuyers during 2020?
The current millennial population is a really interesting one because this is the first time that they have really experienced any sort of concern with pursuing homeownership. With what’s happening right now with COVID-19, is a number of millennials might be a little spooked over what’s been happening.
Not so much from the housing market, but more around the impact the pandemic is having on their ability to stay employed. While some millennials may think about jumping into homeownership, some may say they’re going to wait another year and let this whole thing settle down.
The other impact likely was, for the first time in a long time, we were very hopeful that we were going to start to see supply catch up to where the demand was. Of course, with a lot of states and regions deeming construction as non-essential, we’re starting to see a lot of those construction projects put on pause.
We’re tracking it very closely through our millennial tracker. Right now, we’re still seeing strong interest from the millennials, in fact, we’re actually seeing them jump into the refinance opportunities even though some of them just purchased in the last few years. The one concern would be for the true first-time homebuyer millennial and whether or not this COVID-19 pandemic is really going to force them to sit on the sidelines just to make sure they feel good before they enter into the obligation of homeownership.