June 1, 2021 – Bounce Back Month? Last month we saw a pretty disappointing jobs report.

Economic Commentary

Bounce Back Month? Last month we saw a pretty disappointing jobs report. The quarter of a million jobs added was actually quite strong for a normal month. However, for the era of economy recovery from the pandemic-induced recession, it fell short. Which brings us to an important point to consider. In economics, nothing happens in a straight line.

For example, the jobs recovery has been very uneven. We regained millions of jobs last summer, but the progress slowed towards the end of the year. Even this year, we had strong gains in March, and as we indicated, not so strong gains in April. This economic “rule” applies to many areas. Many had thought interest rates would keep rising this year, but after increasing for a few months, they leveled off and fell back a bit. That does not mean they won’t continue rising in the future.

Inflation is now increasing, but many analysts expect this inflation to calm down before long – referring to the phenomenon as “transitory.” Nothing goes up or down in a straight line. Well, we must make one exception. The economy ground to a halt all at once due to the pandemic. This was a unique happening and frankly we hope it never happens again. Today there is true optimism due to the success of the vaccination programs. We expect this optimism to carry the economy forward—just not in a straight line.

Weekly Interest Rate Overview

The Markets. Rates moved lower in the past week, though they did trend a bit higher after the survey was released. For the week ending May 27, Freddie Mac announced that 30-year fixed rates decreased to 2.95% from 3.00% the week before. The average for 15-year loans fell to 2.27% and the average for five-year ARMs remained at 2.59%. A year ago, 30-year fixed rates averaged 3.15%, 0.20% higher than today. Attributed to Sam Khater, Chief Economist, Freddie Mac – “Mortgage rates are down below three percent, continuing to offer many homeowners the potential to refinance and increase their monthly cash flow. In fact, homeowners who refinanced their 30-year fixed-rate loan in 2020 saved more than $2,800 dollars annually. Substantial opportunity continues to exist today, as nearly $2 trillion in conforming loans have the ability to refinance and reduce their interest rate by at least half a percentage point.” 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

Home buyers are up against limited inventories of homes for sale and struggling to triumph in a competitive market. But they’re hopeful for a turnaround over the next few months. Thirty-three percent of prospective buyers recently surveyed are hopeful that it will be easier to find a home over the coming months—an improvement from 25% who said so a year ago, according to the latest Housing Trends Report, produced by the National Association of Home Builders. Still, the majority–61%—of buyers expect home searches to become more difficult or stay the same in the future. But why are some buyers more hopeful? More new and existing homes were sold during the first quarter of 2021 compared to a year earlier. Millennial buyers may be the most upbeat about more prospects opening up in the coming months: 26% in the first quarter of 2020 believed more inventory was coming, compared to 42% in the first quarter of 2021. Other age segments weren’t as hopeful that the market would usher in more housing inventory. Source: NAHB

The median existing-home price for a single-family home in March jumped to a record high of $334,500, according to data from the National Association of REALTORS®. Meanwhile, the median sales price of a newly built home was $330,800, according to U.S. Census Bureau data. New homes are traditionally more expensive than used homes. The scenario in which existing homes sell for more than a new home hasn’t occurred in more than 15 years. However, that doesn’t necessarily mean existing homes are more expensive, economists say. “On a per-square-foot basis, within comparable markets, a new home is still priced higher than an existing home,” Robert Dietz, chief economist at the National Association of Home Builders, told CNBC. Available housing in the existing-home sector lately may be skewing toward the higher price brackets. New-home construction is increasingly drawing more first-time home buyers, and some builders are starting to build slightly more entry-level homes to meet demand. First-time buyers were responsible for 43% of new-home sales in February, according to the National Association of Home Builders, higher than the 31% of existing-home sales first-time buyers purchased. Regardless, the higher price tags for existing or new homes haven’t deterred home buyers. Source: CNBC

t’s a great time to be a homeowner: ATTOM Data Solutions, Irvine, Calif., said home equity rose sharply in the first quarter, with equity-rich properties in the U.S. outnumbering seriously underwater homes by a 7-1 margin. The company’s first quarter Home Equity & Underwater report said 17.8 million residential properties in the United States were considered equity-rich, with the combined estimated amount of loans secured by those properties 50 percent or less of their estimated market value. The count of equity-rich properties in the first quarter represented 31.9 percent, or one in three, of the 55.8 million financed homes in the United States, up from 30.2 percent in the fourth quarter, 28.3 percent in the third quarter and 26.5 percent a year ago. The report also said just 2.6 million, or one in 21, financed homes in the first quarter were considered seriously underwater, with a combined estimated balance of loans secured by the property at least 25 percent more than the property’s estimated market value. That figure represented 4.7 percent of all U.S. properties with a mortgage, down from 5.4 percent in the prior quarter, 6 percent in the third quarter and 6.6 percent a year ago. The improvement at both ends of the equity scale continued across the nation despite the fallout from the pandemic. Gains came as median home prices nationwide rose 16 percent, year over year, in the first quarter and were up at least 10 percent in most of the country. Todd Teta, chief product officer with ATTOM Data Solutions, said rising home equity is one of many measures showing how the U.S. housing market continues fending off economic damage caused by the worldwide coronavirus pandemic. Source: MReport