The Mortgage Economic Review is a monthly summary of Key Economic Indicators, Data, and Events pertinent to Mortgage and Real Estate Professionals.
AT A GLANCE – Key Economic Data and Events during March 2022
- Interest Rates Higher: The Fed raised the Fed Funds Rate 0.25%. The 10-Year Treasury yield rose to 2.32% (Mar 31) from 1.83% (Feb 28).
- Housing: Existing Home Sales fell 7.2% due to a lack of inventory, and New Home Sales fell 2.0% during February. Home Prices continued upward at a 19.0% annual pace.
- Labor: The Economy created 431,000 New Jobs in March and 750,000 in February. The Unemployment Rate fell 3.6%, and Wage Growth increased 5.6% YoY.
- Inflation: February CPI up 0.8% (+7.9% YoY), PPI up 0.8% (+10.0% YoY).
- The Economy: US GDP grew at a 6.9% annualized rate during the 4th Quarter of 2021.
- Consumers: Retail Sales rose slightly, Consumer Confidence rose while Sentiment fell.
- Stock Markets had another down month and the worst quarter in 2 years.
- Oil & Energy: Oil prices closed the month at $108/Barrel after hitting a high of $125.
- Ukraine War: Russian forces encountered fierce resistance from the Ukrainians, while peace negotiations have not had meaningful results.
Interest Rates and Fed Watch
As expected, the Fed concluded its March FOMC Meeting and announced it would raise Fed Funds by 0.25% with a target range of 0.25% – 0.50%. What wasn’t expected was Fed Chair Powell’s comments a week after the FOMC Meeting, where he said the Fed would begin to increase Interest Rates at a faster pace through the end of the year. Based on those comments, the Debt Markets expect a 0.50% increase in May and again in June. Plus, the possibility of an Interest Rate increase after every FOMC Meeting until year-end. The comments by Chairman Powell are meant to convince the Debts Markets that the Fed is getting tough on Inflation. The Fed needs to break Inflationary Expectations before it gets embedded into Consumers’ Psyche. The trick is to raise Interest Rates without causing a Recession – engineer a “Soft Landing”. Can the Fed pull it off? Let’s hope so. The next FOMC Meeting is on May 3rd and 4th.
- 10-Year Treasury Security Yield rose to 2.32% (Mar 31) from 1.88% (Feb 28).
- 30 Year Treasury Bond Yield rose to 2.44% (Mar 31) from 2.25% (Feb 28).
- 30-Year Fixed Mortgage rose to 4.67% (Mar 31) from 3.89% (Feb 24).
- 15-Year Fixed Mortgage rose to 3.83% (Mar 31 from 3.1% (Feb 24).
- 5/1 ARM Mortgage rose to 3.50% (Mar 31) from 2.98% (Feb 24).
Housing Market Data Released in March 2022
Good News and Bad News in the Housing Data. Bad News first – Home Prices continued upward, Home Sales slumped, and inventory is still dismal. Now the Good News – help is on the way. There are more Homes permitted and under construction than at any time in recent history. Hopefully, inventory has bottomed out and will improve from here. Also, for the first time in history, the average price of a New Home clocked in over $500,000 – $511,000 to be exact.
- Existing Home Sales (closed deals in February) fell 7.2% to an annual rate of 6,020,000 homes, down 2.4% in the last 12 months. The median price for all types of homes is $357,300 – up 15.0% from a year ago. The median Single-Family Home price is $363,800 and $305,400 for a Condo. Homes were on the market for an average of 18 days, and 84% were on the market for less than a month. Currently, 870,000 homes are for sale, down 15.5% from 1,030,000 units a year ago. 25% were all Cash Sales.
- New Home Sales (signed contracts in February) fell 2.0% to a seasonally adjusted annual rate of 772,000 homes – down 6.2% YoY. The median New Home price fell to $400,000 from $423,300 the prior month. The average price rose to $511,000 from $496,900 the prior month. There are 407,000 New Homes for sale, which is a 6.3 month supply.
- Pending Home Sales Index (signed contracts in February) fell 4.1% to 104.9 from 109.5 the previous month, down 5.4% YoY.
- Building Permits (issued in February) fell 1.9% to a seasonally adjusted annual rate of 1,859,000 units – up 7.7% YoY. Single-Family Permits fell 0.5% to an annual pace of 1,207,000 homes, up 5.4% YoY.
- Housing Starts (excavation began in February) rose 6.8% to an annual adjusted rate of 1,769,000, up 22.3% YoY. Single-Family Starts rose 5.7% to 1,215,000 units, up 13.7% YoY.
- Housing Completions (completed in February) rose 5.9% to an annual adjusted rate of 1,309,000 units – down 2.8% YoY. Single-Family Completions rose 12.1% to an annual adjusted rate of 1,034,000 homes – up 1.7% YoY.
- S&P/Case-Shiller 20 City Home Price Index rose 1.4% in January, up 19.1% YoY.
- FHFA Home Price Index rose 1.6% in January, now up 18.2% YoY.
Labor Market Economic Data Released in March 2022
The Economy created 431,000 New Jobs in March and 750,000 in February. Add January’s data of 504,000 (431 + 750 + 504 = 1,685), and the Economy created 1,685,000 New Jobs in the 1st Quarter. In the last 12 months, the Economy has added roughly 7,200,000 jobs. Job creation continues at a strong pace. On the surface, the Labor Data looks good, but there are some worrisome implications. Wages have only risen 5.6% YoY, which is not keeping up with Inflation. Another perplexing question: why is the Participation Rate so low when there are 11,000,000 job openings? It’s slowly inching up but still historically low. Roughly 2,000,000 workers that left the Labor Force during the Pandemic have not returned. I can’t believe they all retired?
- The Economy created 431,000 New Jobs during March and 750,000 in February.
- The Unemployment Rate fell to 3.6% in March from 3.8% in February and 4.0% in January.
- The Labor Force Participation Rate rose to 62.4 in March from 62.3% in February.
- The Average Hourly Wage rose 0.4% in March after a 0.1% rise in February, up 5.6% YoY.
- Job Openings was unchanged at 11,300,000 in February from 11,300,000 in January.
Inflation Economic Data Released in March 2022
It’s scary when you realize the February Inflation Data released in March was collected before the Ukraine War started. It’s also scary how fast Inflationary Psychology can creep into Consumers’ Psyche. Once that happens, the Wage-Price Spiral kicks in, and Inflation becomes a self-fulfilling, self-sustaining phenomenon. The Fed knows this. That’s one reason they started talking tough after the March FOMC Meeting. The bulk of the current Inflation is Shelter, Cars, Energy, and food – all the things we really need. However, everything is going up in price.
- CPI rose 0.8%, up 7.9% YoY | Core CPI rose 0.5%, up 6.4% YoY
- PPI rose 0.8%, up 10.0% YoY | Core PPI rose 0.2%, up 8.4% YoY
- PCE rose 0.6%, up 6.4% YoY | Core PCE rose 0.4%, up 5.4% YoY
GDP Economic Data Released in March 2022
The 3rd and final estimate for 4th Quarter GDP showed the US Economy grew at a 6.9% annualized rate – slightly lower than the 2nd estimate of 7.0%. That places GDP for all of 2021 at 5.7% – the fastest since 1984. One significant aspect of this data was Inventory Rebuilding, a large contributor to 4th quarter GDP growth. This is especially goods news for the Supply Chain and Inflation.
Consumer Economic Data Released in March 2022
When analyzing Consumer Data, keep in mind that an Inflation component is embedded in the Retail Sales data. Retail Sales is reported in terms of the “dollar amount” Consumers spent to buy stuff – not the number of units purchased. So if Consumers bought the exact same physical amount of goods, and Inflation caused the price of the goods to cost more, then Retails Sales Data would rise. Eventually, higher prices will erode Consumer’s buying power, and they will cut back on buying anything but the necessities.
- Retail Sales rose 0.3% during February, now up 17.0% in the last 12 months.
- Consumer Confidence Index rose to 107.2 from 105.7 the prior month, down 6.7% YoY.
- Consumer Sentiment Index (U of M) fell to 59.7 from 62.8 the previous month.
Energy, International, and Things You May Have Missed
Oil Prices soared to $125 per barrel, then fell back as the Ukraine War dragged on. After President Biden announced he would release oil from the Strategic Reserve, Oil Prices fell again.
- West Texas Intermediate Crude rose $100/barrel (Mar 31) from $96/barrel (Feb 28).
- North Sea Brent Crude rose to $108 /barrel (Mar 31) from $99/barrel (Feb 28).
- Natural Gas rose to $5.65/MMBtu (Mar 31) from $4.40/MMBtu (Feb 28).
- The Ukraine War has not affected the US-Russian joint space effort as 3 Russian Cosmonauts boarded the International Space Station this month.
- President Biden announced he is releasing Oil from US Strategic Reserve to help relieve pain at the pump.
- The value of the Russian Ruble bounced back roughly to its pre-war level, despite Economic sanctions.
The Mortgage Economic Review is a succinct summary of key Economic Indicators and Economic Data that influence the Mortgage and Real Estate Industries. It is written for Mortgage Professionals that need to stay current on Economic Information but don’t have hours to research and analyze Economic Data. Feel free to share this with a friend or colleague in the Mortgage or Real Estate business.
Mark Paoletti, Mortgage Elements Inc
The content in this newsletter has been created by an independent third party for use by Mortgage and Real Estate Professionals only and not for use by Consumers. The material provided 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 is opinion based and editorial in nature. Act Appraisal Inc and Mortgage Elements Inc do not guarantee or warrant its completeness or accuracy and there is no guarantee it is without errors. © Copyright 2022 Mark Paoletti, Mortgage Elements Inc, All Rights reserved