Tucson Mortgages Home Loan News 8-3-2020

By Todd Abelson NMLS #180858 on .

Week of July 27th, 2020 in Review

Initial Jobless Claims rose for a second week in a row, as another 1.434 million people filed for unemployment benefits for the first time during the week ending July 25. This was about 12,000 claims higher than the previous week and reflects a pause in re-opening in some states and the exhaustion of Paycheck Protection Program (PPP) funds. Continuing claims, which measure people who continue to receive benefits, also increased.

The much-anticipated advanced or first look at second quarter GDP was reported at -32.9%. Though this was a little better than the -34.7% expected, it was the worst reading on record. Based on this decline, we will need to see a 50% gain in GDP to get back to where the economy was before the pandemic began.

There was some good news from the manufacturing sector as the Chicago PMI (which measures the health of manufacturing activity in that region) came in better than expected at 51.9. Readings above 50 indicate expansion while readings below 50 indicate contraction.

The housing sector delivered some positive news as well, with Pending Homes Sales up 16.6% in June after rising 44.3% in May. The report reflects signed contracts on existing homes in June, and a 16.6% gain speaks well for future existing sales. There was also an update from Case-Shiller on home appreciation, as detailed below.

The Fed’s favored measure of inflation, Personal Consumption Expenditures (PCE), showed that headline inflation increased 0.4% from May to June while also rising from 0.5% to 0.8% year over year. Core PCE, which strips out volatile food and energy prices, increased 0.2% in June while decreasing from 1.0% to 0.9% annually.

Core PCE is most important to the Fed and it is well below the Fed’s target of 2%. This does give the Fed cover to continue its asset purchases without the fear of inflation. More on last week’s Fed meeting and its statement regarding these purchases below. Also of note within the report, Personal Incomes fell 1.1% in June, while Personal Spending rose by 5.6%, marking a second straight month of increases.

 

Initial Jobless Claims Rise in the Latest Week

Another 1.434 million people filed for unemployment benefits for the first time during the week ending July 25, about 12,000 more than the previous week. This marked the second consecutive week of higher figures and reflects some states reclosing portions of their economy and the exhaustion of PPP funds. California (+249K), Florida (+87K) and New York (+85K) reported the largest gains.

Continuing claims, which measure people who continue to receive benefits, also increased from 16.79 million to 17.018 million.

In addition to the headline jobless claims figure, 830,000 Pandemic Unemployment Assistance (PUA) Claims were also filed in the latest week. PUA Claims represent people like gig workers and contractors who would not usually be approved for unemployment benefits. Continuing PUA Claims did improve slightly from 13.18 million to 12.4 million but are still extremely high.

All in all, the total amount of people receiving some type of benefits improved slightly from 31.8 million to 30.2 million. If we divide this total into the labor force of 160 million, there is likely a 19% unemployment rate. 

 

Two Updates from the Housing Sector

The latest Case-Shiller Home Price Index, which is considered the “gold standard” for appreciation, showed that home prices nationwide rose 4.5% on an annual basis in May. This was a drop from the 4.6% year-over-year reading in April.

The 20-city Index decreased from 3.9% in April to 3.7% in May but considering the adversity that the housing market has faced due to the pandemic, these are still very strong appreciation figures. Part of the reason for the strong gains is a lack of supply, as the Existing Home Sales report for June showed that inventory is down 18% when compared to the same time a year ago.

Regionally, price gains in Phoenix, Seattle and Tampa continued to be the strongest in the nation. Phoenix posted a 9% year-over-year price increase, followed by Seattle with a 6.8% increase and Tampa with a 6.0% increase. Price gains were smallest in Chicago, New York and San Francisco.

On the sales front, Pending Home Sales were up 16.6% in June after rising 44.3% in May, which was just above the expected 15% gain. On an annual basis, sales were up 6.3% when compared to June of last year, after being down 5.1% annually in May.

The Pending Home Sales report is an important one because it reflects how many signed contracts on existing homes there were in June. The 16.6% gain speaks well for future existing sales.

 

Fed Willing to Do Whatever It Takes

The Fed held their regularly scheduled Federal Open Market Committee meeting last week and of note, Fed Chair Jerome Powell said that the Fed would be willing to do whatever it takes to foster maximum employment in efforts to return to pre-pandemic levels.

Powell said the Fed will continue to buy assets, including Mortgage Backed Securities, at least at the current pace. The Fed also said they would be willing to do more if they thought it would help.

This is significant because the Fed’s current purchases have been a stabilizing force in the markets. The Bond market took the Fed’s remarks as a positive sign that the Fed is going to be buying Mortgage Bonds for a long time.

 

Family Hack of the Week

Pets love to be outside during the summer months but when temperatures rise, our four-legged friends can heat up quickly. It’s important to be aware of signs of overheating in your pets, which include excessive panting, increased heart rate, drooling, weakness, glazed eyes, vomiting or even unconsciousness.

If you’re ever concerned your pet is suffering from heat exhaustion, the Humane Society suggests following these do’s and don’ts.

If you’re away from home, move your pet into the shade so she can begin to cool off. If you’re at home, bring your pet inside, sit her in front of a fan and place a cool washcloth on her belly, ears, paws and neck. It’s important not to use cold water or a cold bath to help cool her off, as this could cause shock. Call your vet and ask for further advice on what to do next.

These safety tips will help your pets enjoy the summer sun safely!

 

What to Look for This Week

Monday brings news from the manufacturing sector, with the ISM Index reading for July. Then news on employment will dominate the headlines. The ADP employment report for July releases first on Wednesday. The latest Initial Jobless Claims will be reported as usual on Thursday, and we’ll be watching closely to see if claims rise for a third straight week. Friday brings the much-anticipated Bureau of Labor Statistics Jobs Report for July, which includes non-farm payrolls and the unemployment rate.

 

Technical Picture

The Fed continues to stabilize the markets with its ongoing purchases of Mortgage Backed Securities. Mortgage Bonds busted through resistance at 103.219 and broke above the next ceiling at 103.469 as well. Bonds are trading just below the next level of resistance at 103.70, which is the top of the recent rising trend line, so we must be on guard for a pullback from these high levels. Also keep in mind that Bonds are in overbought territory, so if there is a pullback it could be exacerbated. Yields on the 10-year broke beneath 0.54% and are now trading at 0.53%, which is another positive.

 

Todd Abelson - Tucson Mortgages

Tucson Mortgages Home Loan News 7-27-2020

By Todd Abelson NMLS #180858 on .

Week of July 20th, 2020 in Review

The economic calendar was relatively quiet, with unemployment numbers and housing reports dominating the headlines.

The news regarding jobless claims continues to reflect the pandemic’s ongoing impact on the labor sector, as another 1.416 million people filed for unemployment benefits for the first time during the week ending July 18. This was about 100,000 claims higher than last week’s number of 1.3 million first-time filers. Continuing claims, which measure people continuing to receive benefits, did improve significantly – at least, the headline figure did. There’s more to the story, as noted below.

A plethora of housing reports were also released, with June’s Existing Home Sales surging 20.7% from May, marking the largest one-month increase ever. Inventory of existing homes continues to remain a challenge for buyers, however, down 18.2% compared to June of last year. New Home Sales also rose much higher than expected in June, up 13.8% from May.

Lastly, the Federal Housing Finance Agency (FHFA) released their House Price Index, which measures home price appreciation on single-family homes with conforming loan amounts. While home prices fell 0.3% from April to May, they are still up 4.9% compared to May of last year.

 

Initial Jobless Claims Rise in Latest Week

Another 1.416 million people filed for unemployment benefits for the first time during the week ending July 18, an increase of about 100,000 people from the previous week’s number of 1.3 million. California (+292K), Florida (+105K) and Georgia (+120K) saw the largest gains.

Continuing claims improved significantly from 17.304 million to 16.197 million, but there is much more to this headline number because the Pandemic Unemployment Assistance (PUA) Claims are not captured.

PUA Claims reflect people like gig workers and contractors who usually would not be approved for unemployment benefits. These claims, again which are separate and in addition to the headline claims, totaled 975,000 in the latest week. Continuing PUA Claims did improve slightly from 14.2 million to 13.18 million but they are still significant.

All told, the total number of people receiving some type of benefits improved slightly from 32 million to 31.8 million. Based on the total number of people receiving benefits, divided into the labor force of 160 million, there is likely a 20% unemployment rate.

 

Home Sales Surge in June

The National Association of REALTORS (NAR) reported that sales of existing homes jumped 20.7% in June, which was the largest one-month jump ever, albeit still slightly beneath expectations. The report measures closings in the month of June and likely represents buyers shopping for homes in April and May.

Sales were down 11.3% year over year, but this is a big improvement from the -27% annual reading we saw in May’s report. First-time home buyers made up 35% of home sales, up from 34%.

Inventory remains tight, as there were only 1.57 million units for sale, down 18.2% when compared to June of last year. The median home price was reported at $295,300, up 3.5% year over year.

“The sales recovery is strong, as buyers were eager to purchase homes and properties that they had been eyeing during the shutdown,” said Lawrence Yun, NAR’s chief economist. “This revitalization looks to be sustainable for many months ahead as long as mortgage rates remain low and job gains continue.”

Meanwhile, New Home Sales, which measure signed contracts on new homes, also came in strong, up 13.8% from May to June. This was much stronger than the 4% gain anticipated. Sales are now up 7% when compared to June of last year, which is quite an impressive amount especially given the pandemic.

The median new home price increased 5.8% year over year to $329,300, while the majority of homes that sold were between $200,000 and $300,000.

An Update on Home Appreciation

There was news on home appreciation from the Federal Housing Finance Agency House Price Index, which measures home price appreciation on single-family homes with conforming loan amounts.

Home prices fell 0.3% from April to May, but they are still up 4.9% compared to May of last year. However, May’s 4.9% year-over-year reading is a bit lower than the reported 5.5% annual gain in April and 5.9% in March.

 

 

 

 

 

Family Hack of the Week

Looking for some new ways to keep your kids entertained throughout the remaining hazy days of summer? Here are two outdoor craft ideas that are sure to be a hit.

 

Everyone loves tie-dye, and now you can up the ante beyond t-shirts and sweatshirts by tie-dyeing old beach towels or a blanket. Once they’ve dried, extend the fun by planning a picnic outing where you can put them to good use.

 

Pool noodles are for more than swimming pools – they can double as paint brushes. First, lay easel paper flat, placing rocks along the edges and corners so the paper doesn’t blow away or move. Next, add washable paint to large bowls. Your kids can then dip the ends of the pool noodles into the paint and start creating their masterpieces.

 

Enjoy the warm weather with these fun and creative outdoor crafts!

 

What to Look for This Week

The last week of July brings a full slate of economic data, beginning Monday with Durable Goods Orders for June. We’ll get a sense of how consumers are feeling with July’s Consumer Confidence reading on Tuesday, plus there’s housing news with May’s Case-Shiller Home Price Index. June’s Pending Home Sales figures follow on Wednesday.

Wednesday also brings the statement from the latest Federal Open Market Committee meeting, which always has the potential to move the markets.

On Thursday, all eyes will be watching for the latest Initial Jobless Claims numbers, along with the first look at Gross Domestic Product for the second quarter. The market is expecting -35% GDP in the second quarter, following -5% in the first quarter.

Finally, on Friday we’ll get an update on the Fed’s favorite inflation reading with June’s Personal Consumption Expenditures. Also look for June’s Personal Income and Personal Spending figures along with July’s Consumer Sentiment Index and Chicago PMI (which measures manufacturing in that region).

We’ll also keep an eye on rising tensions between the U.S. and China, as well as details regarding a new stimulus package throughout the week.

 

Technical Picture

The Fed’s ongoing purchases of Mortgage Backed Securities remain a stabilizing force in the markets, though they did cut back their purchases last week from $4.4 billion to $3.4 billion per day. Mortgage Bonds have been trading sideways over the past two weeks, testing overhead resistance a few times but failing to break through. Every time the 103.219 ceiling was tested, or close to being tested, Bonds have been pushed lower. Mortgage Bonds remain in the middle of a wide range between the aforementioned ceiling and support at the 25-day Moving Average, meaning they are susceptible to price swings.

 

Tucson Mortgages Home Loan News 7-20-2020

By Todd Abelson NMLS #180858 on .

Week of July 13th, 2020 in Review

The pandemic’s impact on unemployment continues, as another 1.3 million people filed for unemployment benefits for the first time during the week ending July 11. While continuing claims did improve significantly from the previous week, the headline numbers may not be telling the whole story, as highlighted below.

Over in the housing sector, confidence among builders was on the rise in July, per the National Association of Home Builders Housing Market Index, which increased 14 points to 72. Housing Starts and Building Permits also improved from May to June, with significant increases in both for single family homes.

June’s Consumer Price Index showed that consumer inflation rose after three previous months of declines, but the overall trend is that inflation remains tame. Meanwhile, Retail Sales came in stronger than expected last month while May’s figure was also revised higher.

There was also some good news from the manufacturing sector, as July’s Empire State Index showed that manufacturing activity in the New York region rose from essentially flat to 17.2. This is a big improvement from the -48 reading just two months ago. Meanwhile, the Philadelphia Fed Index showed a modest slowdown for manufacturing in that region in July, after a large expansion in June. However, July’s reading was higher than expected.

Lastly, there was also some positive news from the National Federation of Independent Business, as their small business optimism index for June increased to the best level since February. The NFIB chief economist, Bill Dunkelberg, said “Small businesses are navigating the various federal and state policies in order to reopen their business and they are doing their best to adjust their business decisions accordingly. We’re starting to see positive signs of increased consumer spending, but there is still much work to be done to get back to pre-crisis levels.”

 

Digger Deeper Into Unemployment Figures

Another 1.3 million people filed for unemployment benefits for the first time during the week ending July 11, coming in slightly higher than expectations of 1.288 million new claims. Pennsylvania (+209K), California (+127K) and Illinois (+57K) reported the largest gains. Continuing claims, which measure people continuing to receive benefits, improved significantly from 18.06 million to 17.338 million.

But … are things really improving?

There are also PUA or Pandemic Unemployment Assistance Claims that are not captured in the headline figure, and those totaled 928,000 in the latest week. Continuing PUA Claims are now above 15 million, which is significant!

This makes the total number of people receiving some type of benefit around 32 million, meaning it’s possible that the unemployment rate is really over 20%. Because of this, unfortunately, it doesn’t appear that the situation is improving in any meaningful way when we look at the amount of people who are receiving benefits.

 

Home Builders Feeling Optimistic

The NAHB Housing Market Index, which is a real time gauge of builder confidence, increased 14 points, rising from 58 in June to 72 in July. All three components of the index increased, with current sales rising 16 points to 79 and sales expectations up 7 points to 75. It was especially encouraging to see buyer traffic jump 15 points to 58, moving from contraction territory (below 50) to expansion (above 50).

Housing Starts, which measure the start of construction on new homes, rose 17.3% in June. This was in line with estimates and a nice move higher. Housing Starts are now down only 4% on an annual basis, which is significantly improved from down 23% in the previous report. The gain was pretty much all in starts on single-family homes, which were up 17.2%.

Building Permits also saw an improvement from May to June, up 2.1%, though they are down 2.5% when compared to June of last year. Permits for single family homes also saw a big jump in June, up 11.8% from May.

 

The Latest on Consumer Inflation and Retail Sales

The Consumer Price Index (CPI), which measures inflation on the consumer level, came in at 0.6% in the month of June. While this increase ended three months of declines, the overall trend is that inflation remains tame. Of note, gasoline prices rose 12.3% in June, which was a big reason for the overall gain in inflation. The year-over-year reading increased from 0.1% to 0.6%.

Core CPI, which strips out food and energy prices, increased by 0.2% from May to June, while the annual reading remained stable at 1.2%. Within the reports, rents are rising 3.2% across the US, which is down from 3.5%.

There was some good news for retailers as sales increased by 7.5% in June, better than the expected 5.2% gain, while May’s sales figure was revised higher by 0.5% to 18.2%. Sales at clothing and accessory stores shut up a whopping 105.1% in June, while sales at electronics and appliance stores, and furniture and home furnishing stores also saw nice gains.

 

Family Hack of the Week

Summer is prime time for picnics! These simple tips are the perfect set up for a relaxing day with loved ones.

Keep your food and drinks cooler longer by filling plastic storage bags with water and freezing them the night before. The large chunks of ice will last longer than smaller cubes.

Keep it simple by bringing things that aren’t too heavy to carry, especially if your perfect picnic spot involves a hike or long walk to get there. Also, plan your menu well so you won’t have a lot left to carry back with you. Don’t forget the trash bags.

Save yourself an unexpected hike back to the car by placing things like napkins, cutlery, hand sanitizer and bug spray in selable plastic bags and taping them to the inside top of your cooler.

Last, don’t let ants ruin the party. Put a plastic container under each picnic table leg and fill with water to help prevent them from crawling up the table.

 

What to Look for This Week

The second half of the week heats up with key housing reports. First up, the Federal Housing Finance Agency’s House Price Index for May and June’s Existing Home Sales will be released on Wednesday, followed by June’s New Home Sales on Friday. And as usual, weekly Initial and Continuing Jobless Claims will be important to monitor when the latest figures are reported on Thursday.

 

Technical Picture

The Fed’s ongoing purchases of Mortgage Backed Securities remain a stabilizing force in the markets. Mortgage Bonds continue to trade in the middle of the range between support at the 25-day Moving Average and overhead resistance at 103.219. This is a wide range, which means there can be significant price fluctuations as we have seen over the past week. However, there is also a rising trend line that Bonds are attempting to remain above, which should provide some near support.

 

Tucson Mortgages Home Loan News 7-6-2020

By Todd Abelson NMLS #180858 on .

Week of June 29th, 2020 in Review

The July 4 holiday provided plenty of fireworks around the country, as did last week’s busy economic calendar. All eyes were on the labor sector, as three key reports were released.

First up, the ADP Employment Report showed 2.37 million job gains in the private sector during the month of June. Though this was lower than anticipated, May’s report was revised to the positive, moving from a net job loss to job gains. The more-closely watched Bureau of Labor Statistics report showed 4.8 million job gains in June, beating expectations of 2.9 million job creations. The Unemployment Rate decreased from 13.3% to 11.1%, though this figure would have been 12.1% without the classification error noted below.

The latest weekly Initial Jobless Claims showed that another 1.427 million people filed for benefits for the first time during the week ending June 27. While this was in line with expectations, it’s still a startling number to digest.

Housing was in the news as well, as May’s Pending Home Sales saw a huge rebound while home prices continued to appreciate in April per the Case Shiller Home Price Index.

Also of note, the ISM Index, which measures the health of the manufacturing sector in the US, came in at 52.6 for the month of June, which was above expectations of 49.0. However, manufacturing in the Chicago region saw just a slight rebound in June, per the Chicago PMI, after hitting a 38-year low in May.

Lastly, the minutes from the Fed’s meeting on June 9-10 were released and they showed discussion around Forward Guidance, Asset Purchases, and Yield Curve Control. Participants voiced concern over the prospect of Yield Curve Control and adoption seems unlikely at this time. Fed officials also noted that the fiscal help provided by Congress ‘might prove to be insufficient.’

 

June’s Employment Reports Show Job Gains

Both the ADP and BLS employment reports showed job gains in June. First in on Wednesday was the ADP Employment Report, which revealed that there was a gain of 2.37 million jobs in the private sector. While this was less than the expected 3 million job gains for June, May’s figure was revised higher from 2.76 million job losses to 3.065 million job gains.

Hospitality industry workers saw the biggest gain, with 961,000 hires, which makes sense as more states began re-opening. Small businesses overall also added 937,000 jobs.

The more-closely anticipated Bureau of Labor Statistics report came out on Thursday, a day earlier than usual due to the market closures on Friday, and it showed that there were 4.8 million job gains in June. This was much stronger than the 2.9 million expected.

There are two reports within the Jobs Report, and there is a fundamental difference between them. The Business Survey is where the headline job number comes from and it’s based predominately on modeling.

The Household Survey, where the Unemployment Rate comes from, is done by actual phone calls to 60,000 homes. It also has a job loss or creation component, meaning it may be more reflective of actual job numbers – and it came in slightly higher than the headline number, showing 4.94 million job gains.

The Unemployment Rate decreased from 13.3% to 11.1%, which was stronger than expectations of 12.3%. What explains the decrease? While there were 4.94 million job gains, 1.7 million people entered the labor force, which is why we saw the unemployment rate decrease.

It’s important to note that there has been a misclassification error where people were classified as absent from work for other reasons and not marked as unemployed on temporary layoff when they should have been. Without this error, the unemployment rate would have been 1% higher or 12.1%.

The all in U6 Unemployment Rate, which includes total unemployed, plus all persons marginally attached to the labor force, plus total employed part time for economic reasons, decreased from 21.2% to 18%.

Average hourly earnings decreased from 6.7% to 5%, while average weekly earnings decreased from 7.7% to 5.3%. Part of the reason for the weekly decrease was a decline in hours worked of .2.

 

Initial Jobless Claims Remain High

Another 1.427 million people filed for unemployment benefits for the first time during the week ending June 27. While this figure was in line with expectations, it is still staggering to think about. California (+279K), Georgia (+115K) and Texas (+96K) reported the largest gains.

Continuing claims, which measure people continuing to receive benefits, have been persistent and were little changed at 19.29 million.

When we factor in the amount of new and continuing claims and the number of people in the labor force, we estimate that the real-time unemployment rate is around 15%. And when we try to estimate how many new jobs the Paycheck Protection Program has temporarily created, we think that the unemployment rate could be about 3% higher or closer to 18% without it. This figure correlates more closely with the all in U6 number as noted above.

 

Pending Home Sales Sets Record 

Pending Home Sales, which measures signed contracts on existing homes, bounced back strongly in May, rising 44.3%. This was the highest month-over-month gain on record. But, before we start celebrating, keep in mind that April’s reading fell by 22% and March saw a decline of 21%.

In addition, for perspective, the index level of 99.6 compares with 111.4 in February and 108.9 in January. So, although recovery is underway, sales are still down 5.1% year over year.

The National Association of REALTORS’ chief economist, Lawrence Yun, said, “This has been a spectacular recovery for contract signings, and goes to show the resiliency of American consumers and their evergreen desire for homeownership.” He also noted that, “This bounce back also speaks to how the housing sector could lead the way for a broader economic recovery.”

 

A Quick Note Regarding Home Appreciation

The Case-Shiller Home Price Index, which is considered the “gold standard” for appreciation, was released for April. Of its various indexes, two are especially important to note.

First, the National Index, which covers all nine U.S. Census divisions, reported a 4.7% annual gain in April, which was an increase from 4.6% in March. Meanwhile, the 20-city Index increased from 3.9% in March to 4% in April on a year-over-year basis. Phoenix, Seattle and Minneapolis reported the highest year-over-year gains.

 

Family Hack of the Week

Barbecue season is in full swing, but your grill can do far more than perfect your favorite proteins. These easy tips for grilling fruit from the folks at Spruce Eats make for a healthy and delicious summertime dessert.

Plums are delicious over the grill, as the cut sides will caramelize thanks to the fruit’s natural sugars. After cleaning and oiling your grill’s cooking grate, heat it to medium high. Rinse and dry plums, and then cut them in half and remove the pits. Next, place the plums on a baking tray and brush with oil or melted butter. Once your grill is hot, place plums cut-side down, cover and cook for about 5 minutes until heated-through.

And if you prefer peaches or nectarines, they’re equally delightful on the grill. Simply follow the above steps. You can also brush these with honey as you’re grilling them.

Lastly, don’t forget to serve with a sprinkle of cinnamon and a generous scoop of your favorite vanilla ice cream.

 

What to Look for This Week

After the fireworks from last week, this week’s calendar is relatively quiet. The main highlight will be the latest weekly jobless claims figures when they’re reported on Thursday. We’ll also get a read on wholesale inflation for June via the Producer Price Index on Friday. And there will be a 10-year and 30-year Treasury Auction that could impact the markets, depending on participation.

 

Technical Picture

The Fed’s ongoing purchases of Mortgage Backed Securities continue to add stability to the markets. Mortgage Bonds are trading in a range between support at the 25-day Moving Average and overhead resistance at 104.281. Bonds did test this resistance level last Tuesday but were pushed lower. However, they held their own in the face of the strong Jobs report from the BLS on Thursday and did not react negatively.

 

Tucson Mortgages Home Loan News 6-29-2020

By Todd Abelson NMLS #180858 on .

Week of June 22nd, 2020 in Review

More people filed for unemployment than expected during the week ending June 20, with first-time filers totaling another 1.48 million people. This was higher than estimates and still reflects an estimated 16% unemployment rate.

The housing sector was also in the news, with sales of existing homes declining slightly more than expected from April to May. New Home Sales, meanwhile, increased 16.6% in May, though April’s figure was revised lower. There is an easy explanation for the difference between the two reports, as detailed below.

Inventory remains tight for both new and existing homes, which should be supportive of home prices.

Speaking of home prices, the FHFA (Federal Housing Finance Agency) released their House Price Index, which measures home price appreciation on single-family homes with conforming loan amounts. Home prices rose 0.2% in April and 5.5% year over year, down from 5.9% in the previous report.

Lastly, the final reading for first quarter GDP came in at the third worst reading ever, with second quarter’s reading expected to be much worse. There was some positive news, though, as orders for Durable Goods (which reflects new orders placed with domestic manufacturers for delivery of factory hard goods) were up 15.8% in May, which was much stronger than the 0.0% expected and also higher than the prior month’s -17.2% reading. And the Fed’s favorite inflation measure, Personal Consumption Expenditures, showed that inflation remained tame in May.

 

The Latest on Unemployment

Another 1.48 million people filed for unemployment benefits for the first time during the week ending June 20, which was 100,000 more people than anticipated. California (+287K), Georgia (+124K) and New York (+90K) saw the largest gains.

Continuing claims, which measure people continuing to receive benefits, decreased by only 77,000 to 19.5 million people. This figure is backwards looking, so when we add the following two weeks of initial claims, there are roughly 22.5 million individuals receiving benefits. Note that this does not include anyone who returned to work within the last week.

If we factor in a similar number of people who returned to work from the previous week’s report, we estimate the unemployment rate to be around 16%. Although there has been a slight improvement in weekly claims, 1.48 million is still a huge number of people who have lost their jobs and are new filers for benefits.

 

The Skinny on May Home Sales

Existing Home Sales decreased by 9.7% from April to May, slightly worse than the 8.8% decline that was expected. Sales were also 26.6% lower when compared to May of last year.

Inventory remained tight with only 1.55 million units for sale in May. While this was 18.8% lower year over year, the number was 6.2% above the levels seen in April. At the current pace of sales, this represents a 4.8-month supply, below the 6-month level that’s considered normal. Low inventory should be supportive of prices, especially with demand remaining strong as evidenced by purchase application volume.

The median home price was reported at $284,600, up 2.3% year over year. Single family sales were down 9.4% from April to May. Condos, however, saw a much bigger drop of 12.8% and a whopping 41% decline from a year ago, confirming that people are looking for standalone homes. First time home buyers made up 34% of home sales.

Lawrence Yun, NAR’s chief economist, explained, “Sales completed in May reflect contract signings in March and April – during the strictest times of the pandemic lock down and hence the cyclical low point. Home sales will surely rise in the upcoming months with the economy reopening, and could even surpass one-year-ago figures in the second half of the year.”

Meanwhile, sales of new homes rose 16.6% in May, much higher than the 1.6% increase that was expected. Sales were also up 12.7% when compared to May of last year. It should be noted that April’s sales figure was revised lower from 623,000 to 580,000, but even without the revision sales in May were up 8.5%.

Inventory of new homes on the market also remains tight, decreasing from 325,000 to 318,000, while the median new home price increased 4.9% to $317,900.

You may be wondering why sales of existing homes were down significantly while sales of new homes had a nice rebound. The answer is partly due to what each report is measuring. As noted above, May’s Existing Home Sales report measured closings in May, meaning those buyers were home shopping in March and April – the worst time for the pandemic.

May’s New Home Sales report, on the other hand, measures contracts that were signed in May by people out shopping for homes throughout that month. The increase in states opening in May plus the high demand for housing helps explain the difference between the two reports.

 

The Scoop on GDP

The final or third look at first quarter GDP was reported at -5%, which was unchanged from the second reading and the third worst reading ever. Remember this is for the first quarter. The second quarter of 2020 will likely be much worse, with economists forecasting a much bigger GDP drop of around 30%.

Meanwhile, the International Monetary Fund projected global growth to be -4.9% in 2020, which is a drop of 2% from their previous forecast in April. Though the IMF projects a rebound of 5.4% in 2021, that will not recoup the loss that’s expected in 2020 because the recovery will be starting from a lower level.

The IMF said that $10.7 trillion in fiscal measures have been announced worldwide to fight the pandemic. As a result, global public debt is expected to reach an all-time high, exceeding 101% of GDP in 2020-21. That’s 19 percentage points above a year ago. This increase in global debt slows down the velocity of money and has a downward pressure on rates.

 

A Quick Update on Inflation

Personal Consumption Expenditures, the Fed’s favored measure of inflation, showed that inflation remains tame, as headline inflation increased 0.1% in May and fell from 0.6% to 0.5% year over year. The Core rate, which strips out volatile food and energy prices, also increased 0.1% in May and remained at 1.0% year over year.

Also of note, personal incomes fell 4.2% in May. Spending, meanwhile, increased by 8.2%, which was likely due to more states opening and the availability of places for people to actually spend money.

 

Family Hack of the Week

Sparklers are especially popular over the July 4th holiday and can be fun for kids to watch. But they can also be dangerous if they’re not handled correctly. Here are some important safety tips to keep in mind from the folks at Good Housekeeping.

First, to prevent a large burst of sparks, only light one sparkler at a time. Also, don’t pass already-lit sparklers as burns can occur while someone reaches for one.

Remind your children not to toss or wave their sparkler, to avoid hurting anyone nearby who may be hit by an errant spark. Also, it’s best for kids to remain standing while holding sparklers. Wearing closed-toe shoes is also recommended.

Lastly, since the sparkler sticks can remain hot long after the flame has burned out, it’s best to dispose of them in a bucket of water.

 

What to Look for This Week

The holiday-shortened week is jam packed with a wide range of reports. Housing news kicks off the week with May’s Pending Home Sales on Monday and the Case-Shiller Home Price Index for April on Tuesday. We’ll also get a read on June manufacturing numbers via the Chicago PMI on Tuesday and the ISM Index on Wednesday.

It’s also a busy week for the labor sector, as the ADP Employment numbers for June will be released Wednesday, while the latest weekly Initial Jobless Claims will be reported as usual on Thursday. The Bureau of Labor Statistics Jobs Report for June will also be delivered Thursday instead of its usual Friday release, as all markets will be closed on Friday in observance of the Independence Day holiday.

 

Technical Picture

The Fed continues to stabilize the markets with their ongoing purchases of Mortgage Backed Securities. After trading in a tight range between support at their 25-day Moving Average and resistance at their 50-day Moving Average, Mortgage Bonds were finally able to break free and move convincingly above their 50-day. Meanwhile, the 10-year Treasury broke beneath its 50-day Moving Average, with additional room to improve.

 

 

Tucson Mortgages Home Loan News 6-15-2020

By Todd Abelson NMLS #180858 on .

Week of June 8th, 2020 in Review

Unemployment remains a sobering reality for millions of people across the country, as another 1.5 million people filed claims for the first time during the week ending June 6. While this was a decline from the previous week, it does point to a staggering 16.7% unemployment rate, when considering the number of new claims, continuing claims and the amount of people in the labor force.

The Fed held their regularly scheduled Federal Open Market Committee meeting and as expected kept the benchmark Fed Funds Rate at zero. The Fed noted that they expect very little inflation this year, which is typically a good sign for home loan rates, but they also had some sobering forecasts for GDP and unemployment, as noted below.

Right on cue, the Consumer and Producer Price Indexes for May confirmed inflation remains tame due to the lack of pricing pressure.

According to the Bureau of Economic Research, the US economy was already declining

and we were already in a recession towards the end of February, before the pandemic began. While COVID-19 has accelerated the decline, this could also hopefully mean we will come out of this downturn faster as well.

Lastly, on a positive note, small businesses were feeling more optimistic about the future in May, per the National Federation of Independent Business small business optimism index, which increased from 90.9 to 94.4. Plans to hire, capital spending and plans to increase inventory all rose, as did those who expect a better economy and higher sales. NFIB’s Chief Economist Bill Dunkelberg said, “It’s still uncertain when consumers will feel comfortable returning to small businesses and begin spending again, but owners are taking the necessary precautions to reopen safely.”

 

Initial Jobless Claims Remain in the Millions

Another 1.5 million individuals filed for unemployment benefits for the first time during the week ending June 6, which was in line with estimates. California (+258K), Georgia (+134K) and Florida (+110K) once again posted the largest gains.

Continuing claims, which measure people continuing to receive benefits, decreased by 339,000 to 20.9 million. This figure is backwards looking, so when we add the following two weeks of initial claims, there are now roughly 25 million individuals receiving benefits.

When we factor in the number of new claims, continuing claims and the amount of people in the labor force, we estimate there to be a 16.7% unemployment rate currently. This figure is close to the Bureau of Labor Statistics number that was reported in the May Jobs report released on June 5 when taking the misclassification into account. Remember that the BLS unemployment rate was reported at 13.3%. However, without the misclassification error, they said that the unemployment rate would have been 3% higher, or 16.3%.

In addition, when we try to estimate how many new jobs the Paycheck Protection Program has temporarily created, we think that the unemployment rate could be closer to 20% without it.

 

The Fed Sings a Sobering Tune

Fed members held their two-day Federal Open Market Committee meeting Tuesday and Wednesday and left the benchmark Fed Funds Rate unchanged at zero. The Fed also said that they expect the Fed Funds Rate to remain at zero through 2022, with Fed Chairman Jerome Powell saying, “We’re not even thinking about raising rates.”

The Fed also noted that they will continue to purchase Mortgage Backed Securities and Treasuries at current levels, meaning they don’t plan to taper those purchases any further.

However, the Fed’s forecasts were a bit eye-opening and led to a sell-off in stocks on Thursday. They projected a decline of 6.5% in GDP this year, followed by a 5% gain in 2021 and 3.5% gain in 2022. Note that if GDP does drop as predicted in 2020, we really need to see an 8% gain to make it all back.

The Fed’s unemployment rate forecasts were also somber, calling for 10% in 2020, 7% in 2021 and 5% in 2022 … meaning that unemployment may stick around longer than many expect.

Lastly, the Fed predicts there to be no inflation in 2020, around 1.5% in 2021 and less than 2% in 2022. While this points to a slow economy, it is a good sign for lower home loan rates because inflation reduces the value of fixed investments. This includes the Mortgage Bonds to which home loan rates are tied.

 

Speaking of Inflation

Inflation on the consumer level came in at -0.1% in the month of May per the Consumer Price Index while the year over year reading decreased from 0.3% to 0.1%. Core inflation, which strips out food and energy prices, dropped by 0.1% from April to May and from 1.4% to 1.2% when compared to May of last year. Again, this data speaks to a soft economy with no pricing pressure.

Within the report, it’s interesting to note that rents of a primary residence dropped from 3.7% to 3.5%, showing that there is less demand and a lack of pricing pressure for rents. This makes sense with people moving out of city living and into the suburbs, which data in the HousingWire survey noted below also confirms.

Meanwhile, the Producer Price Index (PPI), which measures wholesale inflation, was up 0.4% in May, higher than the expected 0.1% estimate. On an annual basis, PPI came in at -0.8%, which was better than the expected -1.1% loss. The 12-month reading in negative territory again speaks to the lack of inflation we’ve been seeing. Core PPI, which strips out food and energy prices, did decrease by 0.1% from April to May and from 0.6% to 0.3% annually, which was in line with estimates.

 

Of Note in Housing…

CoreLogic’s Home Equity Report for the first quarter of 2020 shows that homeowners gained 6.5% in equity the past year. What’s more, the average homeowner has gained $106,000 since the first quarter of 2010. Negative equity has also significantly improved, down from 26% in 2010 to 3% in 2020.

In addition, a HousingWire article showed that 26.1% of renters surveyed with leases expiring in the next six months said they are likely to renew their lease, 35.9% are likely not to renew and 38% are somewhat likely or not sure at the moment.

Renters who pay more than $1,750 a month are the least likely to renew at just 18.7%, while 41.6% said they are not likely to renew. This data speaks to the shift from city life to the suburbs that people are considering, and it may continue to fuel demand for housing.

Family Hack of the Week

This year, Father’s Day is June 21. While the types of celebrations that are possible may vary widely around the country with differing stages of stay at home orders in place, these ideas from Good Housekeeping can make for a perfect celebration anywhere.

Start the day off right by cooking a hearty brunch for dad with all his favorites. And you can never go wrong with baking your dad’s favorite dessert for later in the day.

Plan a family game or movie night where everyone steps away from their phones and screens and enjoys fun time together. Drive-in movies have also become popular in many cities and can provide a fun and safe night out.

If your dad loves to learn new things, consider signing him up for an online class. Many universities offer free or low-cost classes or consider sites like MasterClass that provide classes from some of the most successful people in sports, writing, the arts and more.

For the travel-loving dad, consider a day of virtual “travel” via free online tours of museums and other famous sites all around the world.

Lastly, if your dad is missing his favorite sports team, many past games are available to stream. Create a marathon of winning games from his favorite teams that he can enjoy.

 

What to Look for This Week

This week brings a look at data across a wide spectrum of the economy. In the housing sector, the National Association of Home Builders Housing Market Index for June releases Tuesday, followed by May’s Housing Starts and Building Permits Wednesday. Tuesday also brings Retail Sales data for May. We’ll get an update on manufacturing in the New York region with the Empire State Index for June on Monday, followed by the Philadelphia Fed Index on Thursday. Last, but certainly not least, the latest weekly Initial Jobless Claims remains critical to monitor when it releases as usual on Thursday.

 

Technical Picture

The Fed’s ongoing purchases of Mortgage Backed Securities continue to stabilize the markets and, as noted above, they are planning to continue these purchases at current levels. Mortgage Bonds were able to shift direction and rebound last week, breaking above both their 25-day and 50-day Moving Averages. They ended the week trading just support at the 50-day Moving Average.

 

Tucson Mortgages Home Loan News 6-8-2020

By Todd Abelson NMLS #180858 on .

Week of June 1st, 2020 in Review

The labor sector dominated the headlines as the ADP and Bureau of Labor Statistics Jobs Reports for May were released. First up on Wednesday, the ADP Report showed 2.76 million job losses in the private sector during the month of May. While this remains a devastating number, it was also significantly better than expectations, which we explain in more detail below.

But it was Friday that brought the big surprise as the BLS reported 2.5 million job gains in May! That’s right, gains not losses. In addition, the Unemployment Rate decreased from 14.7% to 13.3% in May, which was much stronger than expectations of nearly 20%.

Meanwhile, the latest weekly Initial Jobless Claims showed that 1.877 million people filed for unemployment for the first time during the week ending May 30. This was in line with estimates and a decline from the previous week. However, the number of continuing claims, which reflect people continuing to receive benefits, did increase.

In housing news, CoreLogic’s Home Price Index Appreciation report showed that home prices rose from March to April and when compared to April of last year. However, forecasts for May are for an annual decline in prices.

Lastly, the National Association of REALTORS reported that 65% of people who attended an open house within the last year would do so now without hesitation. This speaks to buyers feeling a bit bolder and may support demand.

 

Huge Surprise in May Jobs Report

There were 2.5 million job gains in May, per the Bureau of Labor Statistics. Given that the market was expecting 7.7 million job losses, Friday’s report was nearly a 10 million swing from what was anticipated.

The BLS explained, “These improvements in the labor market reflected a limited resumption of economic activity that had been curtailed in March and April due to the coronavirus pandemic and efforts to contain it. In May, employment rose sharply in leisure and hospitality, construction, education and health services, and retail trade.”

It’s important to note that there are two reports within the Jobs Report – and there is a fundamental difference between them.

The Business Survey, where the headline job number comes from, is based predominantly on modeling. The Household Survey, where the Unemployment Rate comes from, is done by actual phone calls to 60,000 homes. The Household Survey also has a job loss or creation component, meaning it may be more reflective of actual job numbers – and it came in even higher than the headline number, showing 3.84 million job gains.

The Unemployment Rate decreased from 14.7% to 13.3%, which was much stronger than expectations of nearly 20%. While there were 3.84 million job gains per the Household Survey, 1.58 million people entered the labor force, which is why we saw the unemployment rate decrease.

The all in U6 Unemployment Rate, which includes total unemployed, plus all persons marginally attached to the labor force, plus total employed part-time for economic reasons, decreased from 22.8% to 21.2%.

Lastly, average hourly earnings decreased from 7.9% to 6.7%, while average weekly earnings increased from 7.4% to 7.7%. Part of the reason for the weekly increase was an increase in hours worked of 0.5 hours.

 

ADP Employment Report Beats Expectations

The ADP Employment Report, which measures nonfarm private sector employment, showed that there were 2.76 million job losses in the month of May.

While this is still a staggering number of job losses, it was much better than the 8.75 million losses that were expected. Additionally, April’s figure was revised higher by 679K, lowering the job loss total from 20.236 million to 19.6 million.

While we are in unprecedented times and the margin for error is likely extremely high, it’s important to consider how ADP beat expectations by so much.

The answer likely has to do with the number of individuals who returned to work in May. By looking at Continuing Jobless Claims that are reported each Thursday, we know that 4 million people returned to work in just one week. And because continuing claims are backward looking by two weeks, we don’t know exactly how many people returned to work in the entire month of May yet. It’s possible that there were 7 to 8 million people who returned to their jobs, which would explain why there were only 2.76 million job losses instead of the expected 8.75 million.

 

Weekly Initial Jobless Claims Fall Below 2 Million

Another 1.877 million individuals filed for unemployment benefits for the first time during the week ending May 30. This amount met estimates and was a decrease from first-time filings in the previous week. California (+230K), Florida (+206K) and Georgia (+148K) posted the largest gains. Interestingly, the number of continuing claims, which measure people who continue to

receive benefits, increased by 650K to 21.5 million. This is quite a change from the previous report, which showed a 4 million decrease in continuing claims as people returned to work. One possible reason is that many people are making more money on unemployment than they were while working. We have seen estimates that 40% of workers are making more, some almost double, on unemployment benefits, impacting the incentive to return to work.

 

Home Prices Continued to Rise in April

The latest CoreLogic Home Price Index Appreciation report showed that home prices rose 1.4% from March to April. Washington (5.7%), Las Vegas (5.4%), and San Diego (5.3%) led the gains. Home prices were also up 5.4% when compared to April of last year, which is up from the 4.5% annual increase seen in the previous report.

CoreLogic forecasts that home prices will rise 0.3% from April to May, but they do expect prices to fall 1.3% in the year going forward. If this proves accurate, it would be the first decline in their data in 9 years.

 

Home Hack of the Week

The official start of summer is just a few weeks away. These quick and easy seasonal tips will ensure your family is safe and home is ready as the temperatures rise.

Your air conditioner is the last thing you want to fail when you really need it. If you haven’t scheduled a service call for your unit yet this year, now is the perfect time to do so.

Clean your ceiling fans with a damp rag to make sure they don’t spread any allergens when you’re ready to use them. Also, make sure they’re set to spin counterclockwise to provide cool air during the summer months.

Check playgrounds and other outdoor sports equipment for any cracks or warping that may have occurred during the winter months. Double check fences as well for any rotten or sagging areas. If you have an electric fence for pets, check the batteries.

Keep your garage safe for kids and pets by storing gasoline for your lawnmower or grill, paint and any other chemicals out of their reach.

Last, check and replace any outdoor light bulbs, especially around your porch and deck if your family enjoys spending time outside in the warm evenings. As an added bonus, consider adding string lights for both extra light and ambiance.

 

What to Look for This Week

The latest weekly Initial Jobless Claims remains critical to watch when it releases as usual on Thursday. Also important are 10-year note and 30-year bond auctions and the Fed’s regularly scheduled two-day meeting that will culminate with their statement on Wednesday. Inflation will also be in the news, with May’s Consumer Price Index coming Wednesday and the wholesale-measuring Producer Price Index on Thursday.

 

Technical Picture

The Fed’s ongoing purchases of Mortgage Backed Securities have kept the markets fairly stable. Mortgage Bonds were due for a breakout from the tight range they had been in between their 25- and 50-day Moving Averages, and that breakout came to the downside. They ended the week trading in a wide range between support at the 100-day Moving Average and overhead resistance at the 25-day Moving Average.

 

Tucson Mortgages Home Loan News 6-1-2020

By Todd Abelson NMLS #180858 on .

Week of May 25th, 2020 in Review

Initial Jobless Claims remain in the millions, as another 2.123 million people filed for unemployment for the first time during the week ending May 23. While the number of first-time filers has declined in recent weeks, the latest figure now means that the total number of initial jobless claims filed since the pandemic began is just shy of a staggering 41 million. There was also an important data point to note in the number of continuing claims that were filed, as explained below.

As expected, the Fed’s favorite inflation measure, Personal Consumption Expenditures, showed that inflation declined in April due to the lack of pricing pressure. Meanwhile, the preliminary or second look at first quarter GDP was reported at -5%, down from the first estimate of -4.8% and the third worst reading ever. Not surprisingly, the early estimates for second quarter are much worse, with expectations for a contraction of 34%, with a 15% bounce back in the third quarter – which would still leave GDP negative if that proves accurate.

And that is the real question: Will we see a rebound in the third quarter if and as the economy opens, and by how much?

Housing news brought a surprise, as New Home Sales for April showed an increase rather than the expected decrease. Pending Home Sales, however, were down almost 22% in April, far below estimates.

Home appreciation figures were also released for March, and while the data is not fully reflective of the current environment, it provides some important and positive takeaways that are detailed below.

Lastly, President Trump held a news conference on Friday and while there was some uncertainty about what he might say regarding China, he did leave the Phase One Trade Deal with China intact.

 

Continuing Jobless Claims Provide Key Update

Initial jobless claims remain in the millions, with 2.123 million people filing unemployment claims for the first time during the week ending May 23. While this was just slightly above estimates of 2.1 million, it was a decline from the previous week. Since the pandemic began, nearly 41 million people have filed for unemployment.

Perhaps the most important number within the report was continuing claims, which measure people who continue to receive benefits. This figure dropped from nearly 25 million to 21 million, meaning 4 million people returned to work as states have started to reopen.

Factoring in the number of new claims, continuing claims and the labor force, we estimate the unemployment rate is currently 14.8%. If we try to estimate how many new jobs the Paycheck Protection Program has temporarily created, we think that the unemployment rate could be closer to 18% without it.

 

New Home Sales Surprise 

April New Home Sales, which measure signed contracts on new homes, were up 0.6% versus the 22% drop that was expected. However, sales are 6.2% lower when compared to April of last year.

The median home price was reported at $309,900, a decrease from $339,000 that was reported in March. Note that this does not mean that home prices were necessarily lower, but that lower priced offerings were put on the market.

Inventory remains a challenge, as there were 325,000 new homes for sale, which was slightly lower than March’s number of 333,000. For comparison’s sake, there were 1.47 million existing homes for sale at the end of April, down 20% from last year and a whopping 34% lower than April 2015.

Meanwhile, Pending Home Sales, which measure signed contracts on existing homes and are a good leading indicator for Existing Home Sales, were down almost 22% in April. This was well worse than the estimates of a 15% decline. Pending Home Sales are now 34% lower than April of last year.

However, the National Association of REALTORS® did upgrade their 2020 forecast, with NAR’s chief economist, Lawrence Yun, saying, “Given the surprising resiliency of the housing market in the midst of the pandemic, the outlook for the remainder of the year has been upgraded for both home sales and prices, with home sales to decline by only 11% in 2020 with the median home price projected to increase by 4%.”

Yun also noted, “While coronavirus mitigation efforts have disrupted contract signings, the real estate industry is ‘hot’ in affordable price points with the wide prevalence of bidding wars for the limited inventory.”

 

Home Appreciation Shows Housing Market Strength

The Case-Shiller Home Price Index (considered the “gold standard” for appreciation) and Federal Housing Finance Agency (FHFA) House Price Index showed that home appreciation remained strong in March.

Case-Shiller’s National Index, which covers all nine U.S. Census divisions, reported a 4.4% annual gain in March, which was an increase from 4.2% in February. In fact, in the months’ prior, annual appreciation increased from 3.2% in November, to 3.7% in December, to 3.9% in January, before reaching the levels noted for February and March.

Meanwhile, Case-Shiller’s 20-city Index increased from 3.5% in February to 3.9% in March on an annual basis. Phoenix led the way with an 8.2% year-over-year price increase, followed by Seattle (+6.9%) and Charlotte (+5.8%).

On that same note, the FHFA House Price Index, which measures home price appreciation on single-family homes with conforming loan amounts, showed that home prices rose 0.1% in March and 5.9% year over year.

While the data for both indexes is for March and does not reflect the period we are in now, it shows two important things to keep in mind. First, the housing market was really accelerating prior to the pandemic. Second, there is a big cushion for housing on an annual basis.

 

Inflation Declines in April

As expected, inflation fell in April due to the continuing lack of pricing pressure. Personal Consumption Expenditures, which is the Fed’s favorite measure of inflation, dropped 0.5% in April while also falling from 1.3% to 0.5% year over year. The Core rate, which strips out volatile food and energy prices, dropped 0.4% in April and fell from 1.7% to 1.0% year over year.

Personal incomes were up 10.5%, which is likely due to the disproportionate amount of lower income earners who were laid off. This coincides with the big surge we saw in average hourly and weekly earnings last month.

Spending was down 13.6%, partly due to people who want to stockpile cash because of uncertainty and to a lack of options with many areas of the country on lockdown in April. As a result, the savings rate reached an all-time high of 33%.

 

Family Hack of the Week

Many high school and college seniors have long imagined the moment they could move their tassels and toss their caps to celebrate their graduation with friends and family. Sadly, those ceremonies have been canceled for so many grads around the country.

If you’re planning a virtual graduation party to mark the occasion, be it on Zoom, Google Hangouts or a similar platform, these tips from our friends at Real Simple can help you achieve that festive feeling.

Deck your yard or patio with graduation lawn signs and balloons. You could include the colors of your grad’s current school, as well as colors of the college your high school senior has chosen.

Make a playlist of songs to celebrate your grad for ambient music in the background.

Create a celebratory menu of your grad’s favorite and easy-to-prepare foods so your friends and family can share the meal together and toast your graduate during the call.

Lastly, as an added bonus, ask your friends and family to record and send you a short video tribute to your grad before the party that you can play for everyone to see. These will also become great mementoes your grad can cherish forever.

 

Tucson Mortgages Home Loan News 5-25-2020

By Todd Abelson NMLS #180858 on .

Week of May 18th, 2020 in Review

Professionals around the country continue to feel the lasting impact of the COVID-19 pandemic, as another 2.44 million people filed for unemployment during the week ending May 16. While the number of new claims has declined in recent weeks, the total amount remains staggering.

In housing news, the National Association of Home Builders released its Housing Market Index, which is a real-time read on builder confidence. While all components of the index (including present conditions, future expectations and prospective buyer traffic) improved from April to May, the figures are still understandably and significantly lower than they were in March.

Reports also showed that Housing Starts and Building Permits both plunged from March to April, as did sales of existing homes.

Fed chair Jerome Powell was in the news, appearing on 60 Minutes and testifying in front of the Senate. Of note, he said on 60 Minutes that the economy could shrink upwards of 30% in the second quarter. However, he does not see the economy entering another depression and he believes the US will get to “an even better place” than it was before the coronavirus hit, and that it “won’t take that long.”

Powell also testified that the Fed is “committed to using our full range of tools to support the economy in this challenging time even as we recognize that these actions are only a part of a broader public sector response.” He also said, not surprisingly, that rates will stay at zero “until we are confident that the economy has weathered recent events and is on track to achieve our maximum employment and price stability goals.”

Lastly, there was some promising information at the start of the week from Moderna regarding its vaccine trials, as 45 participants produced COVID-19 antibodies. This is especially significant, given that 52% of small businesses in a recent survey said that they fear they would be out of business in 6 months or less if restrictions to reopen continue. Stocks responded favorably when the news was first reported and we will continue to monitor this story.

 

Unemployment Woes Continue

Another 2.44 million people filed for unemployment for the first time during the week ending May 16, which was in line with estimates. California (+246K), New York (+226K) and Florida (+224K) saw the largest gains.

Factoring in the number of new claims, continuing claims, and the amount of people in the labor force, we estimate that the unemployment rate is around 21.5%. However, when we estimate the number of new jobs the Paycheck Protection Program has temporarily created, we think that the unemployment rate could be closer to 24.7% without it.

 

April Existing Home Sales Plummet

The latest Existing Home Sales report, which measures closings in April and likely represents buyers shopping for homes in February and March, showed that sales decreased by 17.8% from March to April. This was the largest monthly drop since July 2010 when the home buyer tax credit, a federal stimulus resulting from the subprime mortgage crash, expired. Sales were also 17.2% lower when compared to April of last year.

The median home price was reported at $286,800, up 7.4% year over year. Single family sales were down 16.9% compared to March, but condos saw a much bigger drop of 26.4%. This could start to show the migration from cities into suburbs.

Inventory was much tighter and remains a concern, as there were only 1.47 million units for sale in April, down 1.3% from March and a whopping 19.7% lower than last April.

At the current pace of sales, this represents a 4.1-month supply and is the lowest April supply figure on record. This should be very supportive of prices, especially with demand remaining strong as evidenced by purchase application volume.

As NAR’s chief economist Lawrence Yun explained, “Record-low mortgage rates are likely to remain in place for the rest of the year, and will be the key factor driving housing demand as state economies steadily reopen. Still, more listings and increased home construction will be needed to tame price growth.”

 

And Speaking of Home Construction …

The National Association of Home Builders released its Housing Market Index, which is a real-time read on builder confidence, for the month of May. While the reading increased to 37 from 30 in April, it is just over half the 72 reading that was reported in March.

Diving deeper into the survey’s components, confidence in present conditions rose 6 points to 42 from April, versus 79 in March. Future expectations were up 10 points from April to 46, as compared with 75 in March, while prospective buyer traffic rose to 21 from 13 after reaching 56 in March. Keep in mind that 50 is the baseline, meaning anything above 50 signals expansion while below means contraction.

The NAHB said, “The fact that most states classified housing as an essential business during this crisis helped to keep many residential construction workers on the job, and this is reflected in our latest builder survey.” Also, “Low interest rates are helping to sustain demand.”

There is a caveat to all of this, though, namely, “High unemployment and supply side challenges including builder loan access and building material availability are near term limiting factors.”

Home construction figures were also released for April, with Housing Starts down 30% from March, the biggest percentage decline on record. Specifically, starts for single family homes dropped 25%. Building Permits, which are a sign of future construction, plunged 21% with single family permits down 24%.

While we can likely expect housing – the “economic driver” – to slow, the lack of supply as noted above will be supportive of home prices.

 

FHFA Update on Home Forbearance

The Federal Housing Finance Agency has announced that Fannie Mae and Freddie Mac borrowers in forbearance can apply for refinancing and new purchase mortgages once their loans are current. The policy waives a previous mandatory wait of 12 months, which will allow faster access to record-low rates.

According to the FHFA, borrowers are eligible to refi or purchase a new home if they are current on their mortgage in forbearance but continued to make mortgage payments or reinstated their mortgage. Borrowers are eligible to refinance or buy a new home three months after their forbearance ends and they have made three consecutive payments under their repayment plan, payment deferral option or loan modification.

“Homeowners who are in COVID-19 forbearance, but continue to make their mortgage payment, will not be penalized,” said FHFA Director Mark Calabria. “Today’s action allows homeowners to access record low mortgage rates and keeps the mortgage market functioning as efficiently as possible.”

 

Home Hack of the Week

With the start of summer less than a month away, spending time in your garden may be high on your to-do list. Here’s a great checklist you can follow from the folks at Better Homes & Gardens.

Bird feeders are no exception when it comes to needing a spring clean. If you haven’t done so already, wash and refill yours with fresh seeds for the season.

As your spring bulbs continue to flower, take note of any empty spots in which you may want to plant additional bulbs in the fall.

Annuals are great for providing pops of color throughout your yard as well as in containers on your front porch or back deck. Check local garden centers for the best options for your area and soil type. Fresh layers of mulch around your plants can also help minimize weeding over the summer.

Lastly, take a word of advice from moms and don’t forget your veggies. Tomatoes, peppers and herbs are great choices as the weather starts to warm in earnest.

 

What to Look for This Week

After the Monday market closures in honor of the Memorial Day holiday, the rest of the week is jam-packed with reports. Tuesday brings several key housing updates, including the Case-Shiller and FHFA home price indexes for March and New Home Sales for April, plus May Consumer Confidence.

The latest weekly Initial Jobless Claims will be critical to watch on Thursday, while April Durable Goods and the second estimate for 1Q GDP will provide important updates on the economy. Friday brings a wide range of news, including the final Consumer Sentiment numbers and manufacturing highlights via the Chicago PMI for May, and the Fed’s favorite measure of inflation, Personal Consumption Expenditures, along with Personal Income and Spending for April.

 

Technical Picture

The Fed continues to purchase Mortgage Backed Securities in line with its goal of stabilizing the markets. After falling below support at the 50-day Moving Average at the start of the week, MBS were able to rally and now continue to trade in the middle of a 53bp range between the aforementioned support and overhead resistance at the 25-day Moving Average.

The 10-year is in a similar position, being squeezed in a range between its 25 and 50-day Moving Averages, though it has been moving lower and testing the 25-day. This is related to the negative stochastic crossover on the stochastic chart. If Treasury yields break beneath the 25-day, we may see Mortgage Bonds move higher and follow suit.

 

Tucson Mortgages Home Loan News 5-18-2020

By Todd Abelson NMLS #180858 on .

Week of May 11th, 2020 in Review

The pandemic continues to impact all areas of the economy, wreaking havoc especially in the labor sector as another 2.98 million people filed for unemployment for the first time during the week ending May 9.

Meanwhile, inflation was on the decline in April at both the consumer and wholesale levels, which was expected due to the lack of pricing pressure. Retail sales also dropped 16.4% from March to April, making it the worst report on record.

Not surprisingly, optimism among small businesses fell in April per the National Federation of Independent Business’ index. Plans to hire and capital spending both declined from March, while future and current compensation plans were slashed in half. The bright spot was that those who expect a better economy jumped from 5% to 29%.

Consumer Sentiment did also rise from April to May, coming in at 73.7 and above expectations, due in part to stimulus checks from the CARES act improving people’s finances, noted Richard Curtin, chief economist for the Surveys of Consumers.

Manufacturing in the New York area improved as well from April to May but is still very weak.

Of note in housing news, the Mortgage Bankers Association reported that as of May 3, 7.91% of mortgages are now in forbearance, up from 7.54% the prior week.

Lastly, Fed Chair Jerome Powell gave some somber remarks on Wednesday, saying that the path ahead is uncertain and significant risk remains to our recovery. He noted that 40% of households earning under $40,000 lost their jobs in March alone and said additional relief may be needed in the near term. Powell vowed that the Fed will use all its tools to aid in our recovery, though he did say that the Fed was not considering negative rates for its benchmark Fed Funds Rate, which the Fed cut to zero in March.

 

Initial Jobless Claims Remain in the Millions

Another nearly 3 million people filed for unemployment for the first time during the week ending May 9, with Connecticut (+299K), Georgia (+241K) and Florida (+222K) reporting the biggest increases. While the total number is a decrease from the 3.17 million claims filed during the previous week, the amount was about 500,000 claims higher than anticipated.

When we factor in the number of new claims, the number of continuing claims (which increased by about 460K to 22.8 million) and the amount of people in the labor force, we estimate that the unemployment rate is around 19.4%. And if we try to estimate how many new jobs the Paycheck Protection Program has temporarily created, we think that the unemployment rate could be closer to 22.6% without it.

The bottom line is that while initial jobless claims are slowing, they remain at unbelievably high levels, especially given that we were averaging 200K new weekly initial jobless claims prior to the pandemic.

 

Inflation Declines in April

As expected, inflation fell in April due to the lack of pricing pressure. April’s Consumer Price Index (CPI), which measures consumer inflation, came in at -0.8% while dropping from 1.5% to 0.3% on an annual basis. A big part of the decline was due to oil prices, which have dropped significantly. The monthly drop was the largest decline since the Great Recession in 2008 and marked the second straight monthly decrease.

The Core reading, which strips out volatile food and energy prices, dropped by 0.4% from March to April and from 2.1% to 1.4% when compared to April of last year.

On the wholesale level, the Producer Price Index (PPI) was down 1.3%, which was worse than the expected 0.5% decrease. PPI also moved lower from 0.7% to -1.2% year over year, which was worse than expectations. Core PPI, which strips out food and energy prices, also decreased by 0.3%, which again was worse than expectations, while the annual rate dropped from 1.4% to 0.6%.

 

Retail Sales and Manufacturing Update

Retail sales tumbled over 16% in April, worse than the 12% drop predicted and coming in as the worst report on record. While online retail sales rose 8.4%, everything else fell precipitously.

Clothing stores were hit especially hard, showing a -78.8% plunge in sales, while sales at electronics and appliance stores (-60.6%), furniture and home furnishing stores (-58.7%) and sporting goods stores (-38%) were also impacted in a big way. Bars and restaurants also saw a -29.5% drop in sales, as did gasoline stations (-28.8%), with people on the roads less.

The control group, which takes out autos, gasoline and building materials, showed that retail sales fell by 15.3% overall, three times the estimate. We will see how these figures change in the coming months as states begin to reopen.

The May Empire State Manufacturing Index, which measures manufacturing activity in the New York area, rose to -48.5 from -78.2. This was better than estimates of -60 but still very weak. Of note, the 6-month outlook did recover to 29.2 from 7.0 on the obvious hopes that the situation can’t get any worse as things reopen and factories can turn the lights back on.

 

Home Hack of the Week

Many people have been eating at home more than normal in recent months, and if that’s true for you, now is a great time to inspect your fridge to make sure it’s running efficiently. Here are some simple maintenance tips to help, courtesy of our friends at Real Simple.

Make sure seals are clean and free from food particles. Clean them once every few months using a toothbrush dipped in a solution of water and baking soda.

Empty your ice bins once a month to prevent ice build-up and keep ice from absorbing food odors. An open box of baking soda in both the fridge and freezer will also help absorb strong odors and keep your fridge smelling fresh. Be sure to replace the water filter as soon as the sensor alerts you.

Check that your fridge is level by placing a level on top and adjusting the feet if needed. An uneven fridge may not close properly, which can both strain the motor and cause condensation.

Typical ideal temperatures for your fridge range from 37 to 40 degrees Fahrenheit and 0 degrees for your freezer, or check your owner’s manual for the manufacturer’s recommendation. The manual should also include instructions for vacuuming the condenser coils if they have become clogged or dusty.

 

What to Look for This Week

Housing data will dominate the headlines throughout the week, as the NAHB Housing Market Index for May releases on Monday, followed by April’s Housing Starts and Building Permits on Tuesday and Existing Home Sales on Thursday. Weekly Initial Jobless Claims remain critical to monitor when the report also releases Thursday, as usual.

The Bond market will close early at 2:00 pm ET Friday, ahead of the Memorial Day weekend, while Stocks will be open for a full trading session.

 

Technical Picture

The Fed continues to purchase Mortgage Backed Securities in line with its goal of stabilizing the markets. MBS have been trading in the middle of a wide range between support at the 50-day Moving Average and overhead resistance at the 25-day Moving Average. While there may be some volatility within this range, it shouldn’t be too extreme until either the ceiling or floor are tested. The 10-year is trading at 0.64% and we will be watching to see if it moves lower towards the all-time low of 0.31%.