The Mortgage Economic Review summarizes recent Key Economic Indicators, Data, and Events important to Mortgage and Real Estate Professionals.
Last year, at this time, the world was in the midst of the first Covid Lockdown and Economists were debating the “shape” of the US Covid Recovery: V, U, L, K. Would the recovery be V-shaped with a quick bounce back; U-shaped with a slower growth rate; L-shaped with a long drawn out recession; or K-shaped with some sectors bouncing back faster than others. In hindsight, it looks like we have a Vk Recovery (little k) – a quick bounce back for most sectors, with some sectors still suffering (like hospitality and travel). The combination of very accommodative Monetary Policy from a fast-acting Fed and massive Stimulus Packages from Uncle Sam spared the US Economy from a drawn-out recession and long recovery period. The big questions now are: when to stop the stimulus? When is enough enough? When is more not better?
Key Economic Data and Events in April 2021
- The Stock Markets set new record highs again: Dow 34,257, S&P 4,219, Nasdaq 14,2012
- The April FOMC Meeting concluded with no changes to Fed policy
- President Biden unveiled his $1.8T American Families Plan and tax increases to pay for it
- The Johnson & Johnson vaccine was suspended due to rare blood clots
- The Economy added 916,000 new jobs, with the Unemployment Rate at 6.0% in March
- The 10 year US Treasury yield traded between 1.73% and 1.57% in April
- Inflation edged higher – the CPI jumped 0.6% in March, up 2.6% YoY
- The 1Q2021 US GDP clocked in at a 6.4% annual growth rate
Interest Rates and Fed Watch
The latest FOMC Meeting ended April 28th and, as with the last few FOMC Meetings, there were no changes to Monetary Policy. The Fed reiterated that they will:
- Keep Interest Rates near zero with a Fed Funds Target range of 0.0% – 0.25%
- Continue buying Treasury and MBS Bonds “until substantial progress has been made”
- Not worry about Inflation (the Fed still thinks high Inflation is “transitory”)
- Provide an abundance of forward notice when they decide to change policy
The next FOMC meeting is on June 15th and 16th. Don’t expect Fed policy to change in 6 weeks.
Housing Market Data Released in April 2021
There was a lot of positive Housing Data released in April, especially Housing Starts and New Home Sales, which are crucial at this point. It’s good to see that Builders can ramp up production while grappling with shortages of lumber, labor, and land. Lumber is in short supply, and prices set a new record in April. There are conflicting views on what caused the lumber shortage. The consensus is that lumber producers underestimated how quickly home construction would recover from the lockdown and were caught off guard by the spike in demand. There are plenty of trees ready to be harvested, but can’t get them cut down, milled, and delivered to the lumber yards fast enough.
- Existing Home Sales (closed deals in March) fell 3.7% to an annual rate of 6,010,000 homes, up 12.3% in the last 12 months. The median price for all types of homes is $329,100 – up a whopping 17.2% from a year ago (that’s not a typo). The median Single-Family Home price is $334,500 and $289,000 for a Condo. 1st Time Buyers were 32%, Investors and 2nd Home Buyers 15%, Cash Buyers 23%. Homes were on the market for an average of 18 days, and 83% were on the market for less than a month. Currently, 1,070,000 homes are for sale, down 28.2% from 1,490,000 units a year ago.
- New Home Sales (signed contracts in March) rose 20.7% to a seasonally adjusted annual rate of 1,021,000 homes – up 66.8% YoY. The median New Home price is $330,800, and the average is $397,800. There are 307,000 New Homes for sale, which is a 3.6 month supply.
- Pending Home Sales Index (signed contracts in March) rose 1.9% to 111.3 from 110.3, down 23.3% YoY.
- Building Permits (issued in March) rose 2.7% to a seasonally adjusted annual rate of 1,766,000 units – up 30.2% YoY. Single-Family Permits rose 4.6% to an annual pace of 1,199,000 homes, up 33.6% YoY.
- Housing Starts (excavation began in March) rose 19.4% to an annual adjusted rate of 1,739,000 units – up 37.0% YoY. Single-Family Starts rose 15.3% to 1,238,000 homes – up 40.7% in the last 12 months.
- Housing Completions (completed in March) rose 16.6% to an annual adjusted rate of 1,580,000 units – up 23.4% YoY. Single-Family Completions rose 5.3% to 1,099,000 homes – up 21.2% in the last 12 months.
- S&P/Case-Shiller 20 City Home Price Index rose 1.2% in February, up 11.9% YoY.
- FHFA Home Price Index rose 0.9% in February, now up 12.2% YoY.
Labor Market Economic Data Released in April 2021
The Labor Market continues to get healthier as the Economy created 916,000 New Jobs in March. This Employment Data was much better than Economists expected (660,000 New Jobs). It’s interesting to look at where the New Jobs were created, especially Construction since we need more homes. In March, Construction added 110,000 new jobs, Manufacturing added 53,000, Government added 136,000 (includes Teachers returning to work). Hospitality & Leisure added the most – 280,000 New Jobs as Bars / Restaurants reopened. The next Jobs Report will be released Friday, May 7th.
- The Economy created 916,000 New Jobs during March and 379,000 in February
- The Unemployment Rate fell to 6.0% in March from 6.2% in February
- The Labor Force Participation Rate rose to 61.5% in March from 61.4% in February
- The Average Hourly Wage fell 0.1% in March, now up 4.2% YoY
Inflation Economic Data Released in April 2021
As widely expected – Inflation is accelerating – but it’s not as bad as it looks. The CPI surged 0.6% during March with a year-over-year increase of 2.6%. Although the jump in the Inflation Data looks alarming, it has not rattled the Fed. Fed Chairman Powell is sticking to his earlier statements that he expected higher Inflation and believes it is “transitory”. A lot of the CPI increase during March was due to energy prices, which were up 5.0%. Gasoline prices shot up 9.1% in March and are up 22.1% YoY. If you strip out the volatile food and energy price components, Core CPI is running at 1.6% in the last 12 months – which is still tame – so far.
- CPI rose 0.6%, now up 2.6% in the last 12 months
- Core CPI (ex-food & energy) rose 0.3%, up 1.6% in the last 12 months
- Owners’ Equivalent Rent rose 0.2%, up 2.0% YoY
- PPI rose 1.0%, up 4.2% in the last 12 months
- Core PPI (ex-food & energy) rose 0.7%, up 3.1% in the last 12 months
GDP Economic Data Released in April 2021
The 1st estimate of 1st Quarter 2021 US GDP showed the Economy grew at a 6.4% annualized rate, a little less than what Economists expected. The Economy is roaring back, and 2nd quarter GDP will be even higher as more people travel and additional services reopen. Inventories fell 2.64% due to strong demand for goods, while supply chain bottlenecks hindered production and delivery. Residential investments (homes) rose 10.8%, Exports fell 1.1%, and Imports rose 5.7%. The year is just beginning, and Consumers are flush with cash – so there is a lot of potential for growth.
Consumer Economic Data Released in April 2021
Being stuck at home with loads of cash in the bank is burning a hole in Consumers’ pockets. Retail Sales had a bang-up month in March – skyrocketing 9.8%. Consumer Confidence and Sentiment is also way up. Consumers are itching to get out of the house and do things – like shopping, bars, restaurants, travel, etc. Expect Retail Sales to stay strong – especially through the warm summer months. The US Economy is 70% Consumer based, so a strong, Confident Consumer is a prelude to a strong Economy.
- Retail Sales rose 9.8%, now up 27.7% in the last 12 months
- Consumer Confidence Index rose to 121.7 from 109.7 the previous month
- Consumer Sentiment Index (U of M ) rose to 88.3 from 84.9 the previous month
Energy, International, and Things You May Have Missed
Oil prices edged higher in April due to increased demand, production cutbacks by OPEC countries, and a weaker dollar. As of May 3rd, West Texas Intermediate Crude is trading around $64/barrel, and North Sea Brent Crude is trading about $67/barrel.
- China’s Economy grew by a record 18.3% YoY – if you believe their data. A large part of the growth was due to the US Stimulus programs that increased demand for Chinese products.
- JPMorgan expects its staff to start heading back to their offices in July.
- India is struggling with a Covid resurge.
- The European Parliament Ratified the UK-EU Brexit Deal
The Mortgage Economic Review is a concise summary of Key Economic Data that influences the Mortgage and Real Estate Industries. It is a quick read that helps Mortgage Professionals stay updated on important Economic Information that affects their industry. Feel free to share this with friends and colleagues in the Mortgage and Real Estate industries. If you would like this Mortgage Economic Review emailed to you at the beginning of every month, click here. The Mortgage Economic Calendar for each month is available here.
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Mark Paoletti, MortgageElements.com
The Mortgage Economic Review is for informational and educational purposes only and should not be construed as investment, legal, financial, or mortgage advice. The information is gathered from sources believed to be credible; some are opinion-based and editorial in nature. Mortgage Elements Inc does not guarantee or warrant its accuracy or completeness, and there is no guarantee it is without errors. This newsletter is created for use by Mortgage and Real Estate Professionals and is not an advertisement to extend credit or solicit mortgage originations. © Copyright 2021 Mark Paoletti, Mortgage Elements Inc, All Rights Reserved.