December 8, 2020 – Another “Last” Job Report. Last week’s reading on employment was the last we will see in 2020.

Economic Commentary

Another “Last” Job Report. Last week’s reading on employment was the last we will see in 2020. We believe that we have had enough bad economic news this year and are looking for a better year in 2021. The gain of 245,000 jobs was seen as disappointing, as the gain in jobs has slowed significantly as the year has worn on. In total, the economy has recovered just over half of the 22 million jobs lost since the start of the pandemic. The unemployment rate of 6.7% is well below the peak unemployment rate of 14.7%. As impressive as these numbers are, there is still a long way to go.

As we have said all along, the economic news this year is not as important as the medical news. A full recovery does not occur without the end of the pandemic. This is why the announcement of successful vaccine trials have been met with euphoria in the stock market. The stock market is not reacting to the jobs lost in 2020. The stock market is reacting to news that could bring a brighter future for us all.

Keep in mind that this does not mean that we are out of the woods. There is still a long way to go. But it does mean that we will finally have a path out of the woods. Many times during the pandemic, we had no path. We were moving forward, but there seemed to be no end to the woods. It is the world of medicine which will give us this path. We are really looking forward to 2021 as we travel along the path to recovery. The heroes of 2020 were our first responders. We hope the heroes of 2021 will be the companies that bring us effective vaccines.

Weekly Interest Rate Overview

The Markets. Rates eased a bit to hit another record low last week. For the week ending December 3, Freddie Mac announced that 30-year fixed rates eased one tick to 2.71% from 2.72% from the week before. The average for 15-year loans also decreased slightly to 2.26% and the average for five-year ARMs fell to 2.86%. A year ago, 30-year fixed rates averaged 3.68%, almost 1.00% higher than today. Attributed to Sam Khater, Chief Economist, Freddie Mac – “Despite persistently low interest rates, home sales have hit a wall. While homebuyer appetite remains robust, the scarce inventory has effectively put a limit on how much higher sales can increase. Unfortunately, the record low supply combined with strong demand means home prices are rapidly escalating and eroding the benefits of the low rate environment.”  Note: Rates indicated do not include fees and points and are provided for evidence of trends only. They should not be used for comparison purposes.

Real Estate News

If you’re a real estate investor, you should know that the Biden win could result in a number of near-term and long-term changes, according to an article in Millionacres/Motley Fool. Millionacres author Maurie Backman gives these 3 predictions for real estate investors, but here are the highlights from those points:

• A mask mandate could prevent business closures. Whether or not you agree with it, forcing Americans to wear masks in public could actually work wonders for the economy. If masks prove effective at curbing the spread of the virus, the nation can avoid widespread closures that hurt businesses small and large. 
• Homeownership could become more affordable. Biden plans a $15,000 tax credit for qualified homebuyers. Biden also intends to work with Congress to establish a new renter’s tax credit, the goal of which would be to reduce rent and utilities to 30% of income for low-earning tenants who make too much to qualify for housing vouchers. Biden also wants a tax credit for renters, which could make it easier for tenants to keep up with their rent, thereby giving landlords more income stability.
• The 1031 exchange could go away. Real estate investors are privy to a number of tax breaks, one of which is the 1031 exchange. Also called a like-kind exchange, this loophole allows investors to unload one piece of real estate for another without paying capital gains taxes on that sale. These like-kind exchanges are estimated to account for as much as 20% of all commercial real estate deals nationally. Biden, however, has talked about eliminating the 1031 exchange. If that ends up happening, real estate investors could see their tax burdens skyrocket. Source: Rise and Shred — Motley Fool

The Federal Housing Finance Agency (FHFA) announced the maximum conforming loan limits for conventional conforming loans to be acquired by Fannie Mae and Freddie Mac in 2021. In most of the U.S., the 2021 maximum conforming loan limit for one-unit properties will be $548,250, an increase from $510,400 in 2020. According to FHFA’s seasonally adjusted, expanded-data HPI, house prices increased 7.42 percent, on average, between the third quarters of 2019 and 2020. Therefore, the baseline maximum conforming loan limit in 2021 will increase by the same percentage as required by the Housing and Economic Recovery Act (HERA). For areas in which 115 percent of the local median home value exceeds the baseline conforming loan limit, the maximum loan limit will be higher than the baseline loan limit. The new ceiling loan limit for one-unit properties in most high-cost areas will be $822,375 — or 150 percent of $548,250. As a result of generally rising home values, the increase in the baseline loan limit, and the increase in the ceiling loan limit, the maximum conforming loan limit will be higher in 2021 in all but 18 counties or county equivalents in the U.S. For a map showing the 2021 maximum loan limits across the U.S. — Click Here. Source: FHFA