Tucson Mortgages Home Loan News 12-28-2020

By Todd Abelson NMLS #180858 on .

Week of December 21st, 2020 in Review

The spike in COVID cases continues to impact businesses and employees around the country, as another 803,000 people filed for unemployment benefits for the first time during the week ending December 19. However, this was a decline of 89,000 from the previous week. The number of people continuing to receive benefits also declined but remains at a staggering 5.3 million.

In the housing sector, sales of both new and existing homes fell from October to November, but both were much higher compared to November of last year, up nearly 21% and 26% respectively. Low inventory remains the biggest challenge for buyers, with inventory of existing homes reaching a record-low of just a 2.3 months’ supply, while just a 4.1 months’ supply of new homes were available.

This lack of supply has helped home prices appreciate. Prices for single-family homes with conforming loan amounts were up 1.5% from September to October and 10.2% annually per the Federal Housing Finance Agency (FHFA). The housing sector has been a bright spot in our economy this year.

Inflation remains tame as the Fed’s favored measure of inflation, Personal Consumption Expenditures (PCE), was flat in November and fell from 1.2% to 1.1% year over year.

Core PCE, which strips out volatile food and energy prices and is the Fed’s real focus, was also flat in November and remained stable at 1.4% on an annual basis. Remember inflation reduces the value of fixed investments like Mortgage Bonds. Since home loan rates are tied to Mortgage Bonds, it’s always important to keep a look out for news that inflation is on the rise.

The final estimate of third quarter Gross Domestic Product (GDP) came in at 33.4% on an annualized basis, which was slightly higher than the 33.1% expected. While this was a solid rise, remember that it follows a 31.4% drop in the second quarter. GDP would have to increase 50% to make back what was lost. And with the recent spike in COVID cases, fourth quarter GDP may not be as strong as was hoped.

Lastly, after months of negotiation, Congress passed a $900 billion stimulus deal. Read on below for some highlights of what’s included.

 

Initial Jobless Claims Decline in Latest Week

Another 803,000 people filed for unemployment benefits for the first time during the week ending December 19, which was a decline of 89,000 from the previous week. Continuing Claims, which measures people who continue to receive benefits, also decreased by 170,000 to 5.3 million.

In addition, it’s important to note that people can file for Pandemic Emergency Unemployment Compensation (PEUC) once their regular benefits expire, which extends their benefits for another 13 weeks. These claims remained relatively stable in the latest week but are still at elevated levels.

Despite the weekly decline that was reported, the bottom line is that we are not seeing any real improvement in unemployment claims as 19 million people are still receiving some type of benefits.

 

Record Low Housing Inventory Remains a Challenge

Existing Home Sales, which measures closings on existing homes, were down 2.5% from October to November, which was in line with expectations. However, sales were up nearly 26% compared to November of last year.

Low inventory remains the biggest challenge for buyers, as there were only 1.28 million homes for sale. This is down 9% from October and a whopping 22% annually. Unsold inventory is at just a 2.3 months’ supply, which is a record low.

As a result, homes sold quickly in November as they averaged just 21 days on the market and 73% of them sold in under 30 days. The other 27% were probably not priced realistically.

The median home price was $310,800, up 14.6% compared to November of last year. Remember this is not the same as appreciation. The median home price simply means half of the homes sold were above and half were below that price. In November, sales on the lower end of the market were flat to lower, but sales for homes above $750,000 are up 85% year over year. This is why the median home price moved higher.

Also of note, the number of first-time homebuyers remained stable at 32%, even with the stiff competition for homes on the lower end.

Sales of new homes also declined 11% from October to November, which was lower than expectations. However, given the downward revision to October’s sales figures, sales in November were really down 16%.

On an annual basis, however, sales are up 20.8% compared to November of last year even with the big drop in inventory – which is down 13.4% year over year! Part of the reason inventory is so low is the lack of building during the beginning of the pandemic.

Quite simply, if there were more homes for sale there would be more sales.

The median new home price increased to $335,300, up 2.2% year over year. Again, this measures the middle-priced home that sold, not appreciation.

 

Home Price Appreciation Remains Strong

The Federal Housing Finance Agency (FHFA) released their House Price Index, which measures home price appreciation on single-family homes with conforming loan amounts. Home prices rose 1.5% from September to October and are up 10.2% year over year, which is even higher than the 9% annual reading in the previous report.

Note that while you can have a million-dollar home with a conforming loan amount, the report most likely reflects lower-priced homes, where supply is tightest and demand is strongest. This is why the annual appreciation data was even stronger than Case-Shiller’s Home Price Index.

 

Key Elements of the Stimulus Bill

After months of negotiation, Congress passed a $900 billion stimulus deal, which among other things includes direct payments of $600 to individuals who earn up to $75,000 and couples filing jointly who make up to $150,000. The bill adds another $600 for every child.

The bill will add a $300 federal unemployment supplement through mid-March and extends programs making freelancers and gig workers eligible for benefits. It also puts $284 billion into Paycheck Protection Program small business loans.

The bill also extends the federal eviction moratorium through January 31 and funds $25 billion in rental assistance.

 

Family Hack of the Week

Ringing in the New Year may look a bit different this year, but that doesn’t mean you can’t have fun with family and friends virtually. These ideas from Parade will help you enjoy a memorable evening with loved ones.

Virtual game nights have become popular this year, with old favorites like Charades, scavenger hunts and trivia options great for video chat along with tons of online games to choose from.

Netflix and movie parties are another great option, and with all the ghoulish events of 2020, a zombie apocalypse theme could be a fun choice. Everyone can get creative with makeup and food to match the entertainment, with contests for best zombie walk, makeup and more.

A karaoke party is a great choice for music lovers. You can make a playlist of the best songs from the year, or the songs you want to represent 2021.

If you’ve spent the past year learning new skills like many people, consider hosting a virtual talent show for friends and family to showcase any artistic or musical hobbies you’ve learned this year.

Lastly, after the year we’ve had, everyone can use a little pampering. Ring in the new year with a virtual spa night, filled with face masks, mani-pedis and more.

 

What to Look for This Week

The last week of 2020 brings some important housing data. First in on Tuesday, the S&P Case-Shiller report will give us a read on how home prices appreciated in October. November’s Pending Home Sales follows Wednesday.

Also on Wednesday, we’ll get an update on manufacturing this month in the Chicago region via the Chicago PMI, while Thursday will bring the latest Jobless Claims figures.

All markets will be closed Friday in honor of New Year’s Day.

 

Technical Picture

The Fed’s ongoing purchases of Mortgage Backed Securities continues to provide stability to the markets. Mortgage Bonds have moved higher from support at their 50-day Moving Average and are trading in a range between this support and the ceiling of resistance at their 25-day Moving Average.

 

Todd Abelson - Tucson Mortgages