MBA Mortgage Applications (week ended 4/24/2020)
- Purchase Index week/week +12.0%. Previous weeks were -2.0%., -2.0%, -12.0% -11.0%, -15.0%, -1.0%, 6.0%, -3.0%, +6.0%, -3.0%, -6.0%., -10.0%, and +5.0%
- Refinance Index Week/Week -7.0%. Previous weeks were -1.0%, +10.0%, -19.0%, +26.0%, -34.0%, -10.0%, 79%, +26.%, -1.0%, -8.0%, +5.0%, +15.0%, and +8.0%
- Composite Index Week/Week -3.3%. Previous weeks were -0.3%, +7.3%, -17.9%, +15.3%, -29.4%, -8.4%, 55.4%, +15.1%, +1.5%, -6.4%, +1.1%, 5.0%, and +7.2%
This makes 6 consecutive weeks of decline in purchase applications. While it is clear that sales of existing homes will not recover any time soon there is an opportunity here for buyers
who are confident of their income in the near future. Buyers may find that theirs is the only offer rather than the situation of a year or two ago when it would have been one of 25 offers.
Source: Mortgage Bankers Association
GDP (1stQ2020)
- Real GDP quarter/quarter, seasonally adjusted annualized -4.8%. Previous was +2.1%
- Real Consumer Spending quarter/quarter, seasonally adjusted annualized -7.6%. Previous was +1.8%
- GDP price index quarter/quarter, seasonally adjusted annualized 1.3%. Previous was +1.3%
The strangest thing about this is that the largest contributor to the decline in Consumer Spending was a 2.25% drop in Health Care expenses. People avoided elective surgery and dental visits. The second largest drop was in motor vehicles sales.
A drop in GDP was anticipated. Since recession is usually defined as 2 consecutive quarters of decline in GDP we will be in recession when 2ndQ2020 GDP is announced at the end of July.
This recession in unlike any other because it is not caused by bad fiscal, monetary or regulatory policies but is the result of government stay ay home mandates which shut down much economic activity.
Moreover, both the fiscal (massive deficit spending) and monetary (massive increases in money supply) have already been deployed.
Personal Income and Outlays
Current-dollar personal income increased $95.2 billion in the first quarter, compared with an increase of $144.1 billion in the fourth quarter.
Disposable personal income increased $76.7 billion, or 1.9 percent, in the first quarter, compared with an increase of $123.7 billion, or 3.0 percent, in the fourth quarter. Real disposable personal income increased 0.5 percent, compared with an increase of 1.6 percent.
Personal outlays decreased $253.5 billion, after increasing $118.8 billion. The decrease was mainly accounted for by a decrease in PCE.
Personal saving was $1.60 trillion in the first quarter, compared with $1.27 trillion in the fourth quarter. The personal saving rate—personal saving as a percentage of disposable personal income—was 9.6 percent in the first quarter, compared with 7.6 percent in the fourth quarter.
Recovery from this and the drop we will see in 2ndQ GDP will take 3-5 years. The questions are to what extent the COVID crisis is judged to be passed and whether or not it will reappear in 2021.
Source: Bureau of Economic Analysis Details: https://www.bea.gov/data/gdp/gross-domestic-product
Pending Home Sales Index (March 2020)
- Pending Home Sales Index month/month -20.8%. Previous was +2.2%
- Pending Home Sales Index 88.2. Previous was 111.4
If this continues there will be more TV shows about people buying homes than there will be people buying homes.
To be a bit more serious this is creating buying opportunities. Places with homes which can be purchased using conforming loans will be in better shape tham place necessitating jumbo loans.
Source: National Association of Realtors
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