Tucson Mortgages Home Loan News 9-21-2020

By Todd Abelson NMLS #180858 on .

Week of September 14th, 2020 in Review

Labor sector woes continue, as another 860,000 people filed for unemployment benefits for the first time during the week ending September 12. The number of people continuing to receive benefits remains in the multi-millions, as does the number of people receiving Pandemic Unemployment Assistance (PUA) Claims.

Despite the staggeringly high unemployment claims, the housing sector remains a bright spot in the economy. The National Association of Home Builders Housing Market Index, which is a real-time read on builder confidence, reached a new all-time high in September, rising from 78 to 83. All three components of the index (confidence in current sales, sales expectations in the next six months and buyer traffic) increased. Any reading above 50 on this index that goes from 1-100 signals expansion.

However, the spike in lumber prices since mid-April remains a concern, even though prices have since fallen from their peak levels.

Housing Starts and Building Permits did decline overall in August, but there’s more to the headline than meets the eye. The drop was all for multi-family units. Both Starts and Permits for single-family homes, which are greatly needed, increased from July to August and also higher when compared to August of last year.

Over in the manufacturing sector, the Empire State Index, which shows the health of the manufacturing sector in the New York region, was reported at 17.0, much higher than the 6.5 expected for September. Meanwhile, the Philadelphia Fed Index fell 2 points to 15, marking a third straight decline since June. However, any reading above zero does indicate improving conditions and the report beat expectations.

Retail Sales rose 0.6% in August, marking a third straight month of increases, but the pace of sales has slowed from earlier in the summer. This slowdown does correspond with millions of people also losing extended unemployment benefits last month as well.

Lastly, the Fed held its regularly scheduled meeting of the Federal Open Market Committee, with some important news in their Monetary Policy Statement regarding inflation. Find out more about what they said, and why it matters, below.

 

Initial Jobless Claims Remain at Staggering Levels

Another 860,000 people filed for unemployment benefits for the first time during the week ending September 12. While this figure has slightly improved from the readings above 1 million, it is still more than four times the number of claims that were being filed before the pandemic.

Continuing Claims, which measure people who continue to receive benefits after their initial claim is filed, totaled 12.6 million.

In addition to the regular unemployment benefit claims, there are 14.5 million people receiving Pandemic Unemployment Assistance (PUA). People can apply for PUA benefits when their regular unemployment benefits expire. PUA benefits are also for people like gig workers and contractors who usually would not be approved for unemployment benefits.

The total number of individuals receiving some type of unemployment benefit is at 29 million. By comparison, there were only 1.5 million people receiving benefits during the same week last year. While the Bureau of Labor Statistics reported that the unemployment rate was at 8.4% in August, the real unemployment rate in near real-time factoring everything in sadly has to be much higher.

 

Builder Confidence Reaches All-Time High

The National Association of Home Builders Housing Market Index, which is a real-time read on builder confidence, rose from 78 to 83 in September, which is a new all-time high.

The index is made up of three components and all three moved higher in September. Confidence in current sales jumped 4 points to 88, sales expectations in the next six months was up 6 points to 84 and buyer traffic rose 9 points to 73.

The NAHB said, “Single family construction is benefiting from low interest rates and a noticeable suburban shift in housing demand to suburbs, exurbs and rural markets as renters and buyers seek out more affordable, lower density markets.”

Also of note, lumber prices have jumped more than 170% since mid-April, adding more than $16,000 to the price of a typical new single-family home, according to the NAHB. Lumber producers shut down in March and April as the pandemic hit the US and did not expect to see the quick surge in housing demand that began in late May.

Ramping up production, while protecting workers with social distancing, was not easy and supply suffered. The fires on the west coast are adding to the concerns. Lumber prices have since fallen almost 40% from their peak so hopefully this will lend some relief if sustained.

 

Digging Deeper Into Housing Starts

Housing Starts were down 5% in August and while this headline might at first glance make it seem like this report was a miss, the drop was all in multi-family homes. What the housing market really needs is single-family homes, and single-family starts were up 4% in August and 12% year over year!

Building Permits, which are a good forward-looking indicator of Housing Starts, were down 1%. But again, the decline was all in multi-family units. Permits for single-family homes rose 6% from July to August and they’re up nearly 16% compared to August of last year. The bottom line is that housing continues to remain the bright spot in the economy.

 

The Latest Inflation Update From the Fed

The Fed met and, as expected, announced they would leave their benchmark Federal Funds Rate unchanged at zero. They also noted they don’t see a change happening until after 2023. It’s important to understand that the Fed Funds Rate and Mortgage Rates are completely different instruments. The Fed Funds Rate is an overnight rate that can be changed day to day, while a Mortgage Rate is in place for a longer time frame, such as 30 years.

The Fed also noted they will maintain an accommodative policy until their inflation target of 2% is reached. They elaborated slightly on their new “average inflation” methodology, saying that they would allow inflation to run moderately above 2% for “some time” so that inflation averages 2% over time. However, the projections from Fed members show that they don’t see inflation reaching 2% until 2023, with a projection of 1.5% in 2020, 1.7% in 2021 and 1.8% in 2022.

Why does this matter?

Inflation is the enemy of Bonds, especially long-term Bonds like Mortgage Bonds because inflation erodes the buying power of a Bond’s fixed coupon over time. Home loan rates are tied to Mortgage Bonds, and if Mortgage Bonds worsen or move lower as they often do when inflation heats up, home loan rates can move higher.

 

Home Hack of the Week

If you’ve ever had a dryer break with piles of laundry on deck, you know it’s an experience you don’t ever want to repeat. These tips from Apartment Therapy can help make sure your dryer stays in good working order for a long time.

Cleaning the lint filter after each load is one the quickest and easiest ways to make sure your dryer operates at maximum efficiency. In addition, you should also check the dryer exhaust at least once a month for any obstructions.

Once a quarter, rinse the lint catcher with mild detergent, which can help remove chemical buildup that can impede airflow. The start of a new season is a great reminder to take care of this.

Lastly, it’s always a good idea to consider having the ducts professionally cleaned once a year to minimize fire hazard.

 

What to Look for This Week

Housing news will once again make headlines, as Existing Home Sales for August will be reported Tuesday with New Home Sales following on Thursday. The Federal Housing Finance Agency House Price Index for July will be released on Wednesday.

The latest Jobless Claims figures remain critical to monitor when they are reported as usual on Thursday. Ending the week on Friday, look for an update on Durable Goods Orders for August.

 

Technical Picture

The Fed continues to stabilize the markets with its ongoing purchases of Mortgage Backed Securities. Mortgage Bonds have been knocking on a dual ceiling of resistance, formed by the 25 and 50-day Moving Averages, but have failed to break above this level and have been pushed lower each time. If Bonds are unable to break above this ceiling, the natural direction and path of least resistance is lower. We will be monitoring this closely.

Todd Abelson - Tucson Mortgages

Tucson Mortgages Home Loan News 9-14-2020

By Todd Abelson NMLS #180858 on .

Week of September 7th, 2020 in Review

After the market closures on Monday in honor of the Labor Day holiday, the economic calendar was relatively quiet. But there were several important headlines regarding unemployment, inflation, and housing bidding wars.

Initial Jobless Claims remained below 1 million during the week ending September 5, as another 884,000 people filed for unemployment benefits for the first time. While on the surface this is a step in the right direction, the headline figure does not account for Pandemic Unemployment Assistance (PUA) Claims, which are an equally significant amount. In addition, Continuing Claims, which measure people who continue to receive benefits, increased by 93,000 to 13.4 million.

Inflation was also in the news, as both the Consumer Price Index and the Producer Price Index (which measures inflation at the wholesale level) showed that inflation was on the rise in August. Rising inflation is always important to monitor, as it can have an impact on fixed investments like Mortgage Bonds. More about why this is significant below.

Despite the challenges many businesses are facing, optimism among small businesses was also on the rise in August. The National Federation of Independent Business Small Business Optimism Index increased 1.4 points to 100.2, which was higher than expectations of 98.9.

Lastly, evidence of low supply and high demand continues in the housing market. For the fourth consecutive month, over half of home offers from Redfin faced a bidding war, with 54.5% of homes sold in a bidding war in August. This was a slight drop from 57.3% in July, but still a significant amount.

 

Looking Beneath the Headlines on Jobless Claims

Another 884,000 people filed for unemployment benefits for the first time during the week ending September 5, which was unchanged from the previous week. California (+237K), Texas (+66K) and New York (+65K) reported the largest gains. However, Continuing Claims, which measure people who continue to receive benefits, increased by 93,000 to 13.4 million.

While the media has celebrated the fact that Initial Jobless Claims are under 1 million, it’s important to take a step back and ask: Are things really getting better?

The headline jobless claims figures do not count Pandemic Unemployment Assistance (PUA) Claims. People can apply for PUA benefits when regular unemployment benefits expire. PUA benefits are also for people like gig workers and contractors who usually would not be approved for unemployment benefits.

Initial PUA Claims, which again are separate and in addition to the headline figures, totaled 839,000 in the latest week. Continuing PUA Claims increased by 1 million after increasing by 2.6 million in the previous week.

Given that it’s September, it’s possible many people are applying for PUA benefits because their regular benefits have expired. If this is the case, we’re not really seeing an improvement in unemployment, but rather a transfer of people from regular to PUA benefits.

All in all, the total number of people receiving some type of benefits is around 29 million, which would bring the real-time estimate of the unemployment rate to around 17%.

 

Inflation Heats Up

Inflation was on the rise in August at both the wholesale and consumer levels. The wholesale-measuring Producer Price Index (PPI) showed that headline PPI increased 0.3% in August from July, which was slightly higher than the 0.2% expected. On a year over year basis, headline PPI increased from -0.4% to -0.2%. Core PPI, which strips out volatile food and energy prices, was up 0.4% in August and increased from 0.3% to 0.6% year over year.

The more closely watched Consumer Price Index (CPI) came in at 0.4% in August, while the year over year reading increased from 1.0% to 1.3%. The Core reading, which again strips out food and energy prices, also increased by 0.4% month over month and the year over year reading increased from 1.6% to 1.7%. Within the report, rents are rising 2.9% across the US, which is down from 3.1%. The medical care index rose 4.5% from last year.

Inflation has been rising sharply, especially on a month over month basis. If we saw 0.4% inflation each month, it would equate to a 5% inflation rate. For now, the year over year Core CPI reading is 1.7%, but it’s the hottest it’s been in 6 months. This rate could continue to rise, especially as the economy opens back up. Demand is likely to come much faster than supply, as we know supply chains have been compromised. If that were to occur, rates can rise.

Remember, inflation is the arch enemy of fixed investments like Mortgage Bonds because it reduces their value. Home loan rates are inversely tied to Mortgage Bonds, and as Bonds worsen or move lower, home loan rates can rise. Though many factors impact the markets, this is why it’s always important to keep an eye on inflation headlines.

 

Small Business Optimism Rises in August

The National Federation of Independent Business Small Business Optimism Index rose 1.4 points in August to 100.2. Plans to hire, positions not able to fill, and plans to increase inventory all rose, while capital spending plans were unchanged. Current compensation rose 3 points to a 5-month high, but future compensation plans were unchanged.

The NFIB’s chief economist, Bill Dunkelberg, said, “Small businesses are working hard to recover from the state shutdowns and effects of COVID. We are seeing areas of improvement in the small business economy, as job openings and plans to hire are increasing, but many small businesses are still struggling and are uncertain about what the future will hold.”

 

Home Hack of the Week

Fall is fast approaching. Tick these easy seasonal maintenance items off your to do list, then sit back and enjoy the season.

Schedule a service call to make sure your furnace, chimney and fireplace are in working order so they’ll be ready when you need them.

Test your smoke and carbon monoxide detector batteries and be sure to always keep extra batteries on hand.

Add weatherstripping and door sweeps to any drafty areas to keep your heating bill low.

Drain all outdoor faucets and disconnect garden hoses from outside spigots to help keep water from freezing and prevent burst pipes.

Seal cracks in your concrete driveway or patio to prevent water from seeping in, which can then freeze, expand and cause the crack to grow. Fixing small cracks before temperatures fall can help prevent more expensive repairs down the road.

 

What to Look for This Week

We’ll get a double dose of manufacturing news, starting Tuesday with the Empire State Index’s update on September activity in the New York region. The Philadelphia Fed Index follows Thursday.

On Wednesday, the latest Retail Sales figures for August will be reported and we’ll get a read on builder confidence with the National Association of Home Builder’s Housing Market Index for September. Plus, the Statement from the two-day meeting of the Federal Open Market Committee will be released, which always has the power to move the markets.

Finally, Thursday will bring the latest weekly Jobless Claims figures, as well as an update on Housing Starts and Building Permits for August.

 

Technical Picture

The Fed continues to stabilize the markets with its ongoing purchases of Mortgage Backed Securities. After trading in a narrowing range between the 25 and 50-day Moving Averages, Mortgage Bonds are right at their 25-day Moving Average. If we see a solid break above the 25-day Moving Average, there is significant upside potential. Support is also nearby at the 50-day Moving Average, now that the range has gotten so tight. A breakout is coming one way or the other, so stay tuned.

 

Todd Abelson - Tucson Mortgages

Tucson Mortgages Home Loan News 9-8-2020

By Todd Abelson NMLS #180858 on .

Week of August 31st, 2020 in Review

The labor sector dominated headlines last week, as several important reports were released. First in on Wednesday was the ADP Employment report, which measures private sector payrolls. August brought a gain of 428,000 jobs, less than half of the 900,000 expected. However, July’s figure was revised higher.

On Friday, the highly-anticipated Jobs Report from the Bureau of Labor Statistics (BLS) showed that 1.4 million jobs were created in August, which was in line with expectations. The unemployment rate also improved, but there is more to that story due to the misclassification error, as explained below.

Meanwhile, another 881,000 people filed for unemployment benefits for the first time during the week ending August 29. This was 130,000 fewer than the previous week, while the number of Continuing Claims, measuring people who continue to receive benefits, also fell by 1.2 million to 13.3 million. While these latest numbers are an improvement, they still represent a staggering number of people. They also do not account for Pandemic Unemployment Assistance Claims, which greatly add to the unemployment figures overall.

Lastly, over in the housing sector, home prices continued to appreciate in July per CoreLogic’s Home Price Index report. But perhaps the biggest headline is the change in their forecast for appreciation for the coming year. Read on for more about this.

 

August Jobs Report a Step in the Right Direction

The Bureau of Labor Statistics reported that there were 1.4 million new jobs created in August, which was in line with expectations. 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. The Household Survey also has a job loss or creation component, meaning it may be more reflective of actual job numbers, and the Household Survey showed that there were 3.76 million job gains in August (as compared to the 1.4 million job gains in the Business Survey).

The Unemployment Rate decreased from 10.2% to 8.4%, which was much stronger than expectations of 9.9%. While the Household Survey showed there were 3.8 million job gains, the labor force increased by 1 million people, which is a good thing and means more people are being counted among it. Because there were so many more job creations than the increase in the labor force, the unemployment rate improved significantly.

It is important to note, however, 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 0.7% higher or 9.1%.

Looking deeper into the numbers, 238,000 of the job gains in the headline job number were temporary 2020 Census workers. Without those jobs, the unemployment rate would be 1.5% higher at 9.9%. Adding in the misclassification error, it would be 10.6%.

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 16.5% to 14.2%.

Average hourly earnings increased 4.7% year over year, down slightly from 4.8%, while average weekly earnings, which we focus on more, rose by 5.3%, down from 5.4%.

All in all, this report is a positive step in the right direction for the labor sector, but we still have a long way to go to return to pre-pandemic levels.

 

Private Payrolls Show Slow Recovery

The ADP Employment Report showed that there was a gain of 428,000 new jobs in the private sector in August. While this is positive news at face value, it was less than half of the 900,000 new jobs expected. July’s report was revised higher by 45,000 new jobs, from 167,000 to 212,000.

Leisure and hospitality led with 129,000 new jobs while education and health services contributed 100,000 and professional and business services grew by 66,000. Construction also added 28,000 and manufacturing was up 9,000 new jobs.

Overall, small businesses (1-49 employees) added 52,000 jobs, midsized businesses (50-499 employees) added 79,000 and large businesses (500 or more employees) added 298,000.

After losing 19.7 million jobs in March and April we’ve gotten back a total of about 8.5 million. Ahu Yildirmaz, vice president and co-head of the ADP Research Institute, said, “The August job postings demonstrate a slow recovery. Job gains are minimal, and businesses across all sizes and sectors have yet to come close to their pre-COVID employment levels.”

 

Digging Deeper into Jobless Claims Figures

The latest jobless claims report showed that another 881,000 people filed for unemployment benefits for the first time during the week ending August 29. This was 130,000 fewer than the previous week with California (+236K), New York (+63K) and Texas (+57K) reporting the largest gains. The number of Continuing Claims, measuring people who continue to receive benefits, also improved by 1.2 million to 13.3 million.

While these latest numbers are an improvement, they still represent a staggering number of people and there is more than meets the eye.

There are Pandemic Unemployment Assistance (PUA) Claims that are not captured

in the headline figures. People can apply for this when regular unemployment benefits expire. They’re also for people who usually would not be approved for unemployment benefits, like gig workers and contractors. These Initial PUA Claims totaled 759,000 in the latest week while Continuing PUA Claims increased by 2.6 million to 13.6 million.

Given that it’s September, people could be falling off regular benefits and applying for PUA benefits, and if that’s the case it means we are not really seeing an improvement in unemployment. All in all, the total number of people receiving some type of benefits is around 28 million, which would bring the real-time estimate of the unemployment rate to around 18%.

 

Home Prices Continue to Appreciate

Research firm CoreLogic released their Home Price Index report for July, showing that home prices increased 1.2% during the month and 5.5% when compared to July of last year.

But perhaps the biggest headline is in their forecasts, where they have said home prices will rise 0.1% in August and 0.6% in the year going forward. This is a big revision to their annual forecast from two months ago, where they estimated a 6.6% drop in the year going forward, which they revised to a 1% drop last month.

While a 0.6% gain is a big change, it is possible appreciation could be even stronger. The housing market has been hot and homes have been appreciating at a very solid level, mainly due to strong demand and tight supply.

Builders are going to have a tough time keeping up with demand because in the beginning of the Covid-19 crisis, they slowed production in anticipation of a slow housing market. When the housing sector outperformed expectations, there was much more demand than supply, causing lumber prices to spike.

What’s more, even though inflation is currently low, when the economy does come back full swing, demand for housing will return much faster than supply. This can cause a sharp rise in inflation and is something we have to monitor, especially since the Fed has mentioned they would allow inflation to run hotter for periods of time.

 

Family Hack of the Week

The start of the school year is the perfect time for an extra special treat. And this easy recipe for Chocolate Ganache is sure to please kids and adults alike.

First, chop up some hazelnuts or your favorite nut and set these aside. Then pour 1 cup of heavy cream into a saucepan and heat gently over medium. Place 8 ounces of bittersweet chocolate into a bowl. When the cream has started to form bubbles around the edge of the saucepan (hot but not simmering or boiling), pour it over the chocolate and whisk until you have a smooth consistency and the cream and chocolate are incorporated.

Spoon generous lashings over your ice cream of choice, sprinkle on the nuts and enjoy.

What to Look for This Week

After the market closures on Monday in honor of the Labor Day holiday, the economic calendar is relatively quiet. On Tuesday we’ll get an update on how small businesses are feeling with the NFIB Small Business Optimism Index while Thursday brings the latest news on weekly and continuing Jobless Claims. Inflation will also make headlines, with the wholesale-measuring Producer Price Index for August releasing on Thursday, followed by the Consumer Price Index on Friday.

 

Technical Picture

The Fed continues to stabilize the markets with its ongoing purchases of Mortgage Backed Securities. Mortgage Bonds have fallen below support at their 25-day Moving Average. They are currently in a range between the 25-day Moving Average, which has now become a ceiling of resistance, and support at the 50-day Moving Average.

 

Todd Abelson - Tucson Mortgages

Tucson Mortgages Home Loan News 8-31-2020

By Todd Abelson NMLS #180858 on .

Week of August 24th, 2020 in Review

Initial Jobless Claims remained in the millions for the second straight week, as another 1 million people filed for unemployment benefits for the first time during the week ending August 22. This was a decline of 98,000 new claims from the previous week. The number of people continuing to receive benefits also declined by 223,000 to 14.5 million. Though these declines are a move in the right direction, unemployment levels are still staggeringly high.

Home sales continue to be a bright spot, as both New and Pending Home Sales came in stronger than expected in July. Sales of new homes were up 14% from June to July and a whopping 36% higher when compared to July of last year, the Commerce Department reported. Pending Home Sales, which represents signed contracts on existing homes, increased by 5.9% from June to July.

Meanwhile, home prices also continue to appreciate. The Case-Shiller Home Price Index, which is considered the “gold standard” for appreciation, showed a 4.3% annual gain in home prices in June nationwide. This was unchanged from the annual gain reported for May. The Federal Housing Finance Agency (FHFA) House Price Index, which measures home price appreciation on single-family homes with conforming loan amounts, also revealed that home prices were up in June.

The preliminary or second look at second quarter GDP came in at -31.7%. Though this was a slight improvement from the first look of -32.9%, it is still extremely weak and reflective of the economic shutdowns during the initial height of the pandemic. Economists do expect a big bounce back in GDP for the third quarter. Relatedly, Durable Goods Orders (which are orders for items that last three years or more) were better than expected in July, which factors into third quarter GDP estimates.

The Fed’s favorite inflation measure, Personal Consumption Expenditures (PCE), was also released last week, showing that headline inflation increased 0.3% from June to July and 1% year over year. Core PCE, which strips out volatile food and energy prices, also increased 0.3% from June to July and 1.3% compared to July of last year. Personal Income and Personal Spending were also better than expected in July.

Lastly, speaking of the Fed, they made headlines with an important announcement on inflation. Find out what they said, and why it’s significant, below.

 

Initial Jobless Claims Remain at 1 Million

Another 1 million people filed for unemployment benefits for the first time during the week ending August 22, which was 98,000 fewer claims than the previous week. Continuing claims, representing people who continue to receive benefits, also improved by 223,000 to 14.5 million.

Pandemic Unemployment Assistance (PUA) Claims filed by people like gig workers and contractors who are not typically approved for unemployment benefits totaled 608,000 in the latest week. Continuing PUA Claims improved by 252,000 to 11 million. These figures are in addition to the headline numbers.

All in all, the total number of people receiving some type of benefits is around 28 million, which would bring the real-time estimate of the unemployment rate north of 16.5%.

 

New and Pending Home Sales Beat Expectations

New Home Sales, which measures signed contracts on new homes, were up 14% in July, which was much stronger than the small gain that was expected. Sales are now up 36% when compared to July of last year. However, there were only 299,000 new homes for sale at the end of July, which represents a 4-month supply of homes, showing that inventory remains very tight.

The median sales price of new homes sold increased 7.2% when compared to July of last year to $330,600. It’s important to note that this is not appreciation but instead means half the homes sold above and half below this figure. In other words, more higher-priced homes sold when compared to the same time last year.

In addition, about 60% of the homes sold were above $300,000, which is a shift from June’s report where the majority were between $200,000 to $300,000. This is why we saw the median sales price rise so sharply.

The encouraging news is that affordability is still good thanks to low home loan rates and homes appreciating at a good clip, as evidenced by the FHFA and Case-Shiller reports detailed below.

Pending Home Sales, which measures signed contracts on existing homes in July, were up 5.9% from June to July and were also 15.5% higher than July of last year, per the National Association of REALTORS. NAR’s chief economist Lawrence Yun said, “If 20% more homes were on the market, we would have 20% more sales, because demand is that high.” Yun also noted that, “Home sellers are seeing their homes go under contract in record time, with nine new contracts for every 10 new listings.”

All in all, housing continues to be a bright spot in the economy in this unprecedented year.

 

The Latest Home Appreciation Figures

The latest Case-Shiller Home Price Index, which is considered the “gold standard” for appreciation, showed that nationally there was a 4.3% annual gain in June. This was unchanged from the gain reported for May.

The 20-city Index rose 3.5% year over year. While this was a tick down from the 3.6% annual figure reported for May, this is still a very strong appreciation figure. Regionally, price gains in Phoenix (+9%), Seattle (+6.5%) and Tampa (+5.9%) were the strongest, while price gains were smallest in Chicago, New York and San Francisco.

The Federal Housing Finance Agency (FHFA) also released their House Price Index, which measures home price appreciation on single-family homes with conforming loan amounts. Home prices rose 0.9% in June and are up 5.7% compared to June of last year. This was a big improvement from the 4.9% annual appreciation reported for May.

 

Fed Sings a Different Inflation Tune

At the virtual Jackson Hole symposium, Fed Chair Jerome Powell stated that the Fed is willing to allow inflation to run hotter than normal to support the labor market and economy. He explained a policy of “average inflation targeting,” which means the Fed will allow inflation to run moderately above its 2% goal for some time following periods it has run below that objective. However, the Fed was very ambiguous because they did not mention the timeframe for calculating average inflation of 2%.

Why does this policy change matter?

Remember inflation erodes a Bond’s fixed rate of return. In other words, rising inflation can cause Bonds to worsen or lose value. This includes Mortgage Bonds, to which home loan rates are inversely tied. When Mortgage Bonds move lower, be it due to rising inflation or other reasons, home loan rates move higher.

The Fed’s favorite inflation measure, Personal Consumption Expenditures, was also released last week, showing that headline inflation increased 0.3% from June to July and 1% year over year.

Core PCE, which strips out food and energy prices and is what the Fed focuses on, also increased 0.3% from June to July and 1.3% compared to July of last year. This is still well below the Fed’s long-range target of 2%.

It will be interesting to see when the Fed starts the clock on the “average inflation” measure. If it were to start today, they would need to let inflation run to 2.7% to average 2%. The bottom line is that any increases in inflation will be important to monitor in the months ahead.

 

Home Hack of the Week

Getting organized at the start of the school year is always important. A great tool that can help is a family command center and creating one is easy thanks to these tips from Real Simple.

First, decide what you want to include. A calendar, corkboard to pin important items, a dry erase board, bins to organize key papers for each family member, hooks for spare car and house keys, bins or hooks for backpacks, and Mason jars to hold pens and pencils are great staples.

Next, choose a high traffic area like a wall in your mudroom, entryway or kitchen that everyone will see and feel compelled to keep tidy.

Your command center is also the perfect place to plan out your weekly meals and grocery list. You can also add your personal flair and make it fun and decorative. Inspiring quotes, favorite family photos or wall art can give the area visual appeal.

Finally, at the end of each week, purge all items that you no longer need so it’s easier to stay on top of the highest priorities for the following week.

What to Look for This Week

This week will be all about the labor sector, starting Wednesday with the ADP Employment Report, which will give us a read on private sector payrolls for August. Thursday brings the latest weekly Initial Jobless Claims while Friday we’ll see the highly anticipated Bureau of Labor Statistics Jobs Report for August, 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 have bounced off support at 102.766 and are back in a range between support at their 50-day Moving Average and overhead resistance at their 25-day Moving Average.

 

Todd Abelson - Tucson Mortgages

Tucson Mortgages Home Loan News 8-24-2020

By Todd Abelson NMLS #180858 on .

Week of August 17th, 2020 in Review

Initial Jobless Claims topped 1 million once again, as the week ending August 15 saw another 1.1 million people file for unemployment benefits for the first time. This was higher than the previous week’s first-time filers. While the number of people continuing to receive benefits did decrease, it remains just shy of 15 million people.

The housing sector continues to show signs of strength, as builder confidence in August matched a record high from 1998 per the National Association of Home Builders Housing Market Index. Housing Starts and Building Permits also rose sharply from June to July. The supply of home does remain low and is a challenge for buyers across the country, though this is supportive of home prices. The impact of the rising cost of lumber will also be something that’s important to monitor in the months ahead.

Sales of existing homes also came in hot, rising 25% in July per the National Association of REALTORS. This was the largest one month jump ever. The report also affirmed that inventory remains a challenge, with the number of homes for sale 21% lower than last July.

The manufacturing sector missed expectations in two key regions in August, however. In New York, the Empire State Index was reported at 3.7 versus expectations of 17 while the Philadelphia Fed Index was reported at 17.2 for August, which was also below expectations of 21.5

Lastly, the minutes from the Fed’s July 28-29 meeting were released, with an important note regarding yield curve controls as explained below.

 

Initial Jobless Claims Move Above 1 Million Again

Initial Jobless Claims moved higher in the latest week, as another 1.1 million people filed for unemployment benefits for the first time during the week ending August 15. This was 135,000 more than the previous week. California (+201K), Florida (+66K) and New York (+62K) reported the largest gains.

However, Continuing Claims improved by 636,000 to 14.8 million people continuing to receive benefits.

Pandemic Unemployment Assistance (PUA) Claims totaled 543,000 in the latest week. These claims are not captured in the headline figure and represent people like gig workers and contractors who usually would not be approved for unemployment benefits.

Continuing PUA Claims worsened by 500,000 to 11.2 million.

All in all, the total number of people receiving some type of benefits is around 28 million, which would bring the real-time estimate of the unemployment rate north of 17%.

 

Builder Confidence Ties Record High

Builder confidence has been on the rise in August, per the National Association of Home Builders Housing Market Index. This real-time read on builder confidence rose from 72 to 78 in August, matching the record high from 1998. Readings over 50 are considered positive.

All three components of the index were higher as well. Confidence in current sales conditions jumped 6 points to 84, sales expectations in the next six months was up by 3 points to 78, and buyer traffic rose 8 points to 65, which is also a record high.

NAHB’s chief economist, Robert Dietz, said, “Single family construction is benefiting from low interest rates and a noticeable suburban shift in housing demand to suburbs, exurbs and rural markets as renters and buyers seek out more affordable, lower density markets.”

One thing to keep an eye on is lumber prices, which have more than doubled since mid-April. These cost increases could lead to higher home prices in the fall and dampen some of the momentum in the housing sector.

 

Housing Starts Heat Up

Housing Starts were also on the rise in July, up 22.6% from June and coming in 23.4% higher when compared to last July. Though the gain was mostly in Multifamily Starts, Single-Family Starts were up a solid 8.2%.

Building Permits, a sign of future construction, were up 18.8% from June to July and up 9.4% when compared to July of last year. Almost the entire gain was comprised of permits for single family homes, which rose 17% from June to July.

Even with the increase in Housing Starts and Building Permits, supply remains extremely tight. And since builders were not putting up homes due to the pandemic, it may be challenging for them to keep up with the demand.

According to Freddie Mac, the housing market would need to add 1.6 million single family housing units per year to keep up with the demand. Add to this the price increase in building materials like lumber as mentioned above, it’s likely we are going to continue to see a big imbalance between supply and demand – and this will be supportive of home prices.

 

Existing Home Sales Also Soar

Existing Home Sales, which measures closings on existing homes, were up 25% in July per the National Association of REALTORS. Because these are closings, they likely represent buyers shopping for homes in May and June. This was the largest one month jump ever and comes off the heels of June’s strong report that showed sales were up 20%. First-time home buyers made up 35% of home sales, up from 34% in June.

 

Inventory remained tight, as there were only 1.5 million units for sale in July, which is down 21% compared to July of 2019. But even with this low level of inventory, sales are still up 9% year over year.

The median home price was reported at $304,100, up 8.5% versus the same time last year. Remember, this is not appreciation. Half the homes sold above and half below this number.

NAR’s chief economist, Lawrence Yun, noted, “The housing market is well past the recovery phase and is now booming with higher home sales compared to the pre-pandemic days. With the sizable shift in remote work, current homeowners are looking for larger homes and this will lead to a secondary level of demand even into 2021.”

 

Of Note From the Fed

The minutes from the Fed’s July 28-29 meeting were released and of particular note, the Fed said yield curve controls are offering only modest benefits. Many participants judged that yield caps and targets were not warranted in the current environment but should remain an option that the Federal Open Market Committee could reassess in the future if circumstances changed markedly.

The Bond market did not react well to this news upon its release because it was thought previously that the Fed was entertaining the idea of setting yield curve controls. This means the Fed would keep buying Mortgage Backed Securities (MBS) and Treasuries until they reached those target levels.

The bottom line is that the Fed is still buying MBS every day to the tune of $5 to $7 billion, which is helping to keep rates low. But they are not going to set targets on where yields should be.

 

Home Hack of the Week

Nobody wants to replace an appliance sooner than necessary. These simple maintenance tips from Real Simple can help you give your fridge a long shelf life.

You can help prevent cool air from seeping out by making sure seals are clean and free of food particles. Clean them quarterly using a toothbrush dipped in a solution of water and baking soda.

Keeping your fridge full helps keep the temperature low, as the food absorbs the warm air that comes in when the door is open. Be sure to set your fridge temperature from 37 to 40 degrees Fahrenheit and keep your freezer at 0 degrees or follow the manufacturer’s recommendation.

Place a level on top of your fridge to check that your fridge is even. An uneven fridge may not close properly, which could strain the motor and cause condensation.

Lastly, refreshing the ice regularly can both prevent ice buildup and keep ice from absorbing food odors. An open box of baking soda can also help keep your fridge smelling fresh.

 

What to Look for This Week

This week’s calendar is filled with news across many sectors of the economy. Tuesday brings more housing news, with July’s New Home Sales and the Case-Shiller Home Price Index for June. July’s Pending Home Sales follows on Thursday.

We’ll also get a read on how consumers are feeling this month, with the Consumer Confidence Index on Tuesday and the Consumer Sentiment Index on Friday.

Wednesday will bring news on July’s Durable Goods Orders while Thursday we’ll see the latest Initial Jobless Claims and the revised reading for second quarter GDP.

Ending the week on Friday, look for the Fed’s favored inflation measure, Personal Consumption Expenditures, along with Personal Income and Personal Spending for July.

 

Technical Picture

The Fed continues to stabilize the market with its ongoing purchases of Mortgage Backed Securities. Mortgage Bonds have been flirting with support at the 25-day Moving Average and if they do break beneath and remain below this level, the next floor of support is roughly 40bp lower.

 

Todd Abelson - Tucson Mortgages

Tucson Mortgages Home Loan News 8-17-2020

By Todd Abelson NMLS #180858 on .

Week of August 10th, 2020 in Review

Initial Jobless Claims were under 1 million for the first time since mid-March, as the week ending August 8 saw another 963,000 people file for unemployment benefits for the first time. The number of people continuing to receive benefits also decreased. While these improvements are certainly a step in the right direction, there could be a caveat to them as highlighted below.

Inflation grew hotter in July at both the consumer and wholesale levels. The Producer Price Index (PPI), which measures wholesale inflation, and the Consumer Price Index (CPI) both increased 0.6% from June to July – with PPI’s reading more than double what forecasters had predicted. The Core readings, which strip out volatile food and energy prices, also increased on both a monthly and annual basis. Despite the increases, inflation remains tame overall.

Retail Sales were also on the rise, up 1.2% from June to July. Removing automobiles, sales were up 1.9%. June’s sales figures were also revised a bit higher as well. Overall, the report was stronger than expected but it will be important to see how the reduced additional unemployment benefits impacts retail sales going forward.

The National Federation of Independent Business released its Small Business Optimism Index, which fell 1.8 points to 98.8 in July. Of note, reports of expected better business conditions in the next six months declined 14 points to a net 25%. NFIB’s Chief Economist Bill Dunkelberg said, “This summer has been challenging for many small business owners who are working hard to keep their doors open and remain in business.” He also added that, “Small business represents nearly half of the GDP and this month we saw a dip in optimism. There is still plenty of work to be done to get businesses back to pre-crisis numbers.”

Redfin released a survey showing that 56% of single-family homes for sale faced competition, followed by 54% of townhomes and 42% of condos. This reflects the tight inventory noted in recent New and Existing Home Sales reports.

Lastly, the Federal Housing Finance Agency made headlines, announcing a new fee. Find out more about what this means below.

Initial Jobless Claims Fall Below 1 Million

Another 963,000 people filed for unemployment benefits for the first time during the week ending August 8. This was 228,000 claims less than the previous week and the first reading under 1 million since mid-March. Continuing claims, which count people who continue to receive benefits, improved by 604,000 to 15.5 million. California (+213K), New York (+52K) and Texas (+51K) reported the largest gains.

First-time Pandemic Unemployment Assistance (PUA) Claims totaled 488,000 in the latest week. These claims are not captured in the headline figure and they represent people like gig workers and contractors who usually would not be approved for unemployment benefits. Continuing PUA Claims improved by 2.2 million to 10.7 million people continuing to receive benefits.

All in all, the total number of people receiving some type of benefits is around 28.2 million, which is an improvement of about 3 million. Note that this figure is delayed 3 weeks and given the improvement we’ve seen, the unemployment rate is likely
around 15% based on our calculations.

However, there is something important to keep in mind when looking at this data. While the improvement in jobless claims appears great on the surface, remember that the additional $600 in unemployment benefits expired recently. While we certainly hope that the decreasing number of unemployment claims is a result of people finding work, it is possible that some of the improvement is from people who are incented to return to work due to the expiration of additional benefits. We will certainly gain more clarity in the weeks to come.

Inflation Hotter Than Expected … But Still Tame
The Producer Price Index (PPI), which measures inflation at the wholesale level, increased 0.6% from June to July. This monthly increase was double what forecasters expected. On an annual basis, PPI increased from -0.8% to -0.4%. Core PPI, which strips out volatile food and energy prices, was up 0.5% in July and increased from 0.1% to 0.3% year over year.

July’s Consumer Price Index (CPI) came in at 0.6%, matching the increase seen in June. On an annual basis, consumer prices increased from 0.6% to 1%, which is a level that reflects inflation remaining in check. Higher gas prices certainly contributed to the monthly increase in consumer inflation, but they are still lower when compared to last year, weighing on the annual figure.

Core CPI, which also strips out food and energy prices, increased by 0.6% from June to July, while rising from 1.2% to 1.6% when compared to July of last year. Of note within the reports, rents have risen 3.1% across the country while the medical care index rose 5% over the last year.

The bottom line is that inflation remains well below the Federal Reserve’s 2% target, and the pandemic will likely keep it low in the immediate months ahead.

The Latest From the Federal Housing Finance Agency
The FHFA announced that they would be assessing a 0.5% fee on refinances for loans sold to Fannie Mae and Freddie Mac after September 1. Their stated reasoning was, “In light of market and economic uncertainty resulting in higher risk and costs incurred by Fannie Mae, we are implementing a new loan-level price adjustment.”

This is a fee that will ultimately impact consumers who are refinancing as noted above, though it will not impact purchase loans – at least for the time being.

Family Hack of the Week
There’s nothing worse than being in the middle of a recipe only to realize you’re missing an ingredient – especially if your kids are growing hungrier by the minute. If you ever find yourself in a pinch, a pinch of these easy substitutions can help.

If you’re missing allspice, mix cinnamon with a dash of nutmeg. If you need cinnamon, try nutmeg or allspice, but only 1/4 of the amount.

Basil, oregano and thyme can be interchanged with each other, while cilantro and parsley can also be swapped with great results.

You can make your own Italian seasoning by blending basil, oregano, rosemary and ground red pepper. And if you need 1 teaspoon of poultry seasoning, mix 3/4 teaspoon sage plus 1/4 teaspoon blend of thyme, savory, rosemary, black pepper and marjoram.

Save the day, and your meal, with these quick substitutions!

What to Look for This Week
Housing reports highlight this week’s busy economic calendar, starting on Monday with August’s National Association of Home Builders Housing Market Index, which gives us a real-time read on builder confidence. Tuesday brings Housing Starts and Building Permits for July, while Friday will give us an update on July’s Existing Home Sales.

There will also be an update from the manufacturing sector on Monday with August’s Empire State Index, which reflects manufacturing activity in the New York region. August’s Philadelphia Fed Index follows on Thursday.

The minutes from the Fed’s meeting in late July will be released on Wednesday.

And finally, the latest Initial Jobless Claims figures remain critical to monitor when they are released as usual on Thursday.

Technical Picture
The Fed’s ongoing purchases of Mortgage Backed Securities continues to stabilize the markets. After falling from recent highs, Mortgage Bonds are trading in a wide range between support at 102.765, which is the low from August 12, and overhead resistance at the 25-day Moving Average.

 

Todd Abelson - Tucson Mortgages

Tucson Mortgages Home Loan News 8-10-2020

By Todd Abelson NMLS #180858 on .

Week of August 3rd, 2020 in Review

Last week was all about the labor sector, as two key employment reports for July were released. In the private sector, job creations slowed significantly in July per the ADP Employment Report, with only 167,000 new jobs added last month. However, there was a bright spot with June’s figures revised sharply higher.

Meanwhile, the highly-anticipated Jobs Report from the Bureau of Labor Statistics (BLS) showed that there were 1.8 million job gains in July, which was better than expected. The report also showed that the unemployment rate improved. However, the headline numbers don’t tell the whole story, as detailed below.

The latest Initial Jobless Claims showed that another 1.2 million people filed for unemployment for the first time during the week ending August 1, which was the first decline we’ve seen in several weeks. Continuing claims also improved in the latest week, but the figures still remain astonishingly high.

CoreLogic’s latest Home Price Index Appreciation report showed that home prices rose 1.0% from May to June and 4.9% when compared to June of last year. The annual gain was also up from the 4.1% year-over-year appreciation reported in May’s report. Perhaps most significant is the improvement in the forecast for home prices in the year ahead, which is noted below.

And there was some positive news from the manufacturing sector, as the ISM Index, which measures the health of US manufacturing, came in at 54.2 for the month of July, which was above expectations of 53.5. While production remains below pre-pandemic levels, readings above 50 do indicate growth.

 

Digging Deeper into July Jobs Reports

Both the ADP and BLS Jobs Reports for July had some important details to note behind the headline figures. First in on Wednesday was the ADP Employment report, which showed a gain of only 167,000 jobs in the private sector. This was much lower than the 2 million new jobs that were expected. However, June’s report had a huge revision from 2.4 million to 4.3 million jobs created in that month.

The more-closely anticipated BLS report showed that there were 1.8 million job gains in July, which was stronger than the 1.5 million that was 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.

Week of August 3rd, 2020 in Review

Last week was all about the labor sector, as two key employment reports for July were released. In the private sector, job creations slowed significantly in July per the ADP Employment Report, with only 167,000 new jobs added last month. However, there was a bright spot with June’s figures revised sharply higher.

Meanwhile, the highly-anticipated Jobs Report from the Bureau of Labor Statistics (BLS) showed that there were 1.8 million job gains in July, which was better than expected. The report also showed that the unemployment rate improved. However, the headline numbers don’t tell the whole story, as detailed below.

The latest Initial Jobless Claims showed that another 1.2 million people filed for unemployment for the first time during the week ending August 1, which was the first decline we’ve seen in several weeks. Continuing claims also improved in the latest week, but the figures still remain astonishingly high.

CoreLogic’s latest Home Price Index Appreciation report showed that home prices rose 1.0% from May to June and 4.9% when compared to June of last year. The annual gain was also up from the 4.1% year-over-year appreciation reported in May’s report. Perhaps most significant is the improvement in the forecast for home prices in the year ahead, which is noted below.

And there was some positive news from the manufacturing sector, as the ISM Index, which measures the health of US manufacturing, came in at 54.2 for the month of July, which was above expectations of 53.5. While production remains below pre-pandemic levels, readings above 50 do indicate growth.

 

Digging Deeper into July Jobs Reports

Both the ADP and BLS Jobs Reports for July had some important details to note behind the headline figures. First in on Wednesday was the ADP Employment report, which showed a gain of only 167,000 jobs in the private sector. This was much lower than the 2 million new jobs that were expected. However, June’s report had a huge revision from 2.4 million to 4.3 million jobs created in that month.

The more-closely anticipated BLS report showed that there were 1.8 million job gains in July, which was stronger than the 1.5 million that was 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.

Continuing claims, which measure people who continue to receive benefits, also improved in the latest week by 844,000 to 16.1 million.

Pandemic Unemployment Assistance Claims (PUA), which are not captured in the headline figure, totaled 656,000 in the latest week. These claims are filed by people like gig workers and contractors who would not usually be approved for unemployment benefits. Continuing PUA Claims improved 70,000 to 13 million.

All in all, the total number of people receiving some type of benefit is likely over 30 million, which is still very high and would point to a much higher unemployment rate than what we are seeing reported, as noted above.

 

Promising Change to Forecast for Home Price Appreciation

Home prices rose 1.0% from May to June and 4.9% when compared to June of last year, per CoreLogic’s Home Price Index Appreciation report. The annual reading was up from May’s 4.1% annual increase. The states with the highest annual increases were Idaho (10.5%), Montana (9.8%), Missouri (8.5%) and Arizona (8.5%).

However, the big story was the forecast, as CoreLogic projects that home prices will increase 0.1% from June to July and they expect prices to fall 1.0% in the year going forward. Their annual forecast increased significantly from a negative 6.6% in the next 12 months.

CoreLogic noted that last month’s HPI Forecast of a 6.6% home price decline through May 2021 has been revised as projected unemployment rates through 2020 showed improvement. The recent rebound of home sales suggests the pandemic did not derail home buyers, who continue to be motivated by historically low mortgage rates. This, coupled with the declining supply of homes for sale, could shield home price growth from the impacts of the current economic uncertainty.

 

Family Hack of the Week

Staying hydrated is so important when the temperatures soar. Here’s a simple recipe to help you beat the heat and keep your family smiling and cool.

First, make a simple syrup by adding 1/4 cup water and 1/4 cup sugar to a saucepan over medium heat. Bring to a boil and simmer until the sugar is dissolved. Then remove from heat, add 1 tablespoon of fresh mint and steep for 15 minutes.

Next, chop up a honeydew and add it to a blender, along with 2 cups of cold water, 4 teaspoons of lime juice and 2 tablespoons of the simple syrup. Blend and then strain through a mesh sieve.

Serve over ice, garnish with fresh mint, and sit back, relax and enjoy!

 

What to Look for This Week

We’ll get an update on July inflation this week, first on Tuesday with the Producer Price Index, which measures wholesale inflation. The Consumer Price Index follows on Wednesday.

Tuesday also brings the latest news from the National Federation of Independent Business with their small business optimism index for July, while Friday will show us how retailers fared in July with the Retail Sales report.

Finally, the latest jobless claims figures remain important to monitor when they are released as usual on Thursday.

 

Technical Picture

The Fed continues to stabilize the markets with its ongoing purchases of Mortgage Backed Securities. Mortgage Bonds challenged overhead resistance at 103.688 but were pushed lower. Bonds are in a wide range with support almost 40bp beneath present levels.

 

 

 

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.