June 22, 2021 – Nothing to Sneeze At. We are actually referring to the May jobs report, which shows almost 560,000 jobs created.

Economic Commentary

Nothing to Sneeze At. No, we are not talking about the pandemic here. We are actually referring to the May jobs report, which shows almost 560,000 jobs created. This number was seen as disappointing. If you look at it from a year-to-date standpoint, we have added close to 2.5 million jobs this year—or an average of just under 500,000 per month.

We also have to remember that the first few months of the year coincided with a spike in Coronavirus cases. As the cases decline and the economy opens up we believe that the number should increase in the second half of the year. Yes, we understand that over 22 million jobs were lost during the pandemic, and we have recovered less than 15 million of these jobs. If we continue at the pace of 500,000 per month, the recovery will not be complete for well over a year—especially when you consider that normal job growth would have created another four to five million jobs last year and this year.

Thus, the recovery number is more like 27 million jobs. Should we really be disappointed in adding 560,000 jobs last month? If we keep adding 500,000 jobs per month, we will eventually get to where we need to be. However, if job creation accelerates from here, we may be positive more quickly than the analysts are projecting.

Weekly Interest Rate Overview

The Markets. Rates fell again last week, but rose after the survey data period ended in reaction to the Fed’s statement on Wednesday. For the week ending June 17, Freddie Mac announced that 30-year fixed rates decreased to 2.93% from 2.96% the week before. The average for 15-year loans rose one tick to 2.24% and the average for five-year ARMs fell to 2.52%. A year ago, 30-year fixed rates averaged 3.13%, .20% higher than today. Attributed to Sam Khater, Chief Economist, Freddie Mac – “Mortgage rates continue to drift down as markets concur with the view that inflation increases are temporary. While rates are low, purchase demand has weakened over the last couple of months, primarily due to affordability constraints stemming from high home prices. With inventory tight, the slowdown in demand has yet to impact prices, meaning the summer will likely remain a strong seller’s market.”  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

Fannie Mae launched RefiNow earlier this month, which could help lower-income homeowners save hundreds of dollars a month on their mortgage payments. The program, which began June 5, aims to help about 2 million homeowners lower the interest rates on their mortgages. Eligible homeowners could save an estimated $100 to $250 a month, according to the Federal Housing Finance Agency, Fannie Mae’s regulator. Among the eligibility requirements, homeowners must earn 80% or less of their area’s median income to apply. Borrowers also must have a Fannie Mae–backed loan. Borrowers must be current on their home loan and have no missed payments in the last six months. The mortgage also can’t have a loan-to-value ratio above 97%, and borrowers’ FICO credit scores must be at least 620. “Lower-income borrowers typically refinance at a slower pace than higher-income borrowers, potentially missing an opportunity to save on housing costs,” says Malloy Evans, senior vice president and single-family chief credit risk officer at Fannie Mae. “Fannie Mae’s new RefiNow option will help homeowners refinance by removing some of those barriers, improving affordability, and promoting sustainable homeownership.” Under the program, participating lenders would be required to reduce eligible borrowers’ interest rate by at least one-half of a percentage point. That could be higher, however. Lenders also must waive the adverse market refinance fee for borrowers whose loan balance is no more than $300,000. Lenders must provide a credit of up to $500 if the borrower is ineligible for an appraisal waiver. Freddie Mac will start its own refinance program later this summer. Source: CNBC

The U.S. median home price continued to post double-digit appreciation in May and reached a record high of $380,000, realtor.com® reports. But the rate of price growth has shown signs of slowing for the second time in 13 months (15.2% year-over-year in May compared to 17.2% annually in April), realtor.com®’s Monthly Housing Trends Report shows. Prices have been rising due to high buyer demand and a lack of inventory. Inventories are less than half the total number of homes for sale on the market compared to a year ago. “Home buyers looking to lock in still-low mortgage rates face fierce competition for fewer homes for sale than last year’s historic pandemic lows, pushing up the typical asking price in May to an all-time high for the fourth consecutive month,” said Danielle Hale, realtor.com®’s chief economist. “The good news is that price momentum may be beginning to cool off.” “While still in double-digits, May was the first non-weather-related slowing in price appreciation since April 2020,” Hale added. “And with a normal, summer seasonal peak in home prices expected this year, we could see growth fall back to a more normal single-digit pace in the fall.” Source: realtor.com®

Millennials are ending their leases, moving out and buying houses in larger numbers. In fact, they make up the fastest-growing segment of buyers today, according to a recent National Association of Realtors report. Particularly, those in their late 20s to early 30s are pushing this segment along the most. A Pew Research study found that household income rates of this bunch were two to four times higher than that of other age groups. Millennials are having an impact on the market, and it’s not just buyers. A Zillow study found that about half of all buyers are under the age of 36 and about half of the sellers are under 41. The movement in the market by millennials is likely due to growth in their careers, higher income and paying off student loans and other personal debts. Over the past year specifically, recent changes to the economy due to Covid-19, rebounding of employment figures and a steep drop in interest rates have all converged to create a perfect storm for personal growth opportunities like buying a home. Many were surprised that they could stretch their budgets a bit and afford a better home due to low-interest rates, especially when paired with savings from pandemic sheltering. Millennial homebuyers are waiting longer to buy a first home than previous generations. Due to the effects of the Great Recession and rising student debt, millennials have been slower to buy their first homes than older generations. Technology has become crucial to the home buying process. Utilizing the internet and mobile devices to find, view and buy homes has become the norm among millennials. According to a 2017 report by the National Association of Realtors, 99% of millennials used the internet to get information about the home buying market. This might seem obvious, but this figure is nearly double that of Baby Boomers using the internet to browse homes. Source: Forbes