Market Matters

The Coronavirus continues to fetch top headlines as President Trump now says that he won’t re-open the economy until it is ‘safe.’ In addition, the markets have spent the past week digesting more jobless claims, more headlines around forbearance, as well as more added stimulus from the Fed to help ‘smooth’ the market out.

Jobless Claims

Initial Jobless Claims for the week of April 3rd posted at 6.606mln, which is now a decrease from the upwardly revised level of 6.867mln in the prior week (orig. 6.648mln). The 4-week moving average of claims now sits at 4.266mln, up from 2.667mln a week earlier. Expectations are for that average to hit over the 5mln mark by next week. Continuing claims, which lag by a week, were 7.455mln, which is more than twice the prior week’s number at 3.059mln.

 

FHFA, MBA, and Forbearance

At this point, servicers are heavily concerned with just how they are going to cover and make timely payments for the high percent of loans that are expected to enter into forbearance. The FHFA director came out earlier this week and said he isn’t as concerned as people think, as the percent of those entering forbearance should remain low, and for those servicers that can’t make payments, FNMA and FHLMC will just transfer the servicing over to larger banks/servicers. The MBA then rebutted, as it believes we could see a more highly disruptive change in mortgage markets if in fact the agencies start allowing those transfers to take place. The MBA also believes that the percent of borrowers entering into forbearance is much more than the FHFA thinks it to be. The MBA isn’t blaming the FHFA for the problem or asking them to fix it, but they are asking them to convey a need for a liquidity facility of some sort, one that the Fed and Treasury would have to approve and create in order to alleviate servicers in the wake of more disruption. The industry also feels that much more education for borrowers is needed around what exactly entering their loan into forbearance means, as there could be a lot more future ramifications here versus just being able to skip a few payments.

CPI

March CPI fell -.4% on headline, while the core measure (ex- food and energy) declined by -.1%. On headline, energy and transportation prices fell drastically, with gasoline prices down -10.5% and airline fares down -12.6%. The transportation sector fell by -2.9%, mostly due to that -10.5% drop in fuel, while service prices fell -1.9%. Food and Beverage components rose by +.3%, fairly mixed when looking at food at home and food away from home. Finally, Housing came in unchanged, yet still well below trend. Looking YoY, headline CPI is up +1.5%, with the core up +2.1%. Both are down from February’s YoY measure of +2.3% and +2.4%, respectively.

 

Federal Reserve Stimulus

This week the Federal Reserve took even more additional actions to provide up to $2.3 trillion in loans to support the economy. The funding is meant to assist households and employers of all sizes and strengthen the ability of state and local governments to provide critical services. Fed Chair Powell noted, "Our country's highest priority must be to address this public health crisis, providing care for the ill and limiting the further spread of the virus. The Fed's role is to provide as much relief and stability as we can during this period of constrained economic activity, and our actions today will help ensure that the eventual recovery is as vigorous as possible."

 

NAR Survey

The National Association of Realtors recently conducted an Economic Pulse Flash Survey on April 5-6th. The survey showed that 59% of its members feel buyers are delaying home purchases for a few months, while 57%, said sellers are doing the same with listings. NAR Chief Economist Lawrence Yun commented, "Home sales will decline this spring season because of unique economic and social consequences resulting from the coronavirus outbreak, but much of the activity looks to reappear later in the year. Home prices will remain stable because of a pandemic-induced reduction in inventory coupled with less immediate concerns over foreclosures." The survey also asked members questions about how the pandemic has impacted the residential and commercial real estate markets. A large majority of respondents, 90%, said buyer interest has diminished during the crisis, while 80% said there had been a decline in homes out on the market. Finally, respondents also mentioned the importance that technology is playing in the current environment. The most common ‘tools’ mentioned in the survey were that of e-signatures, social media, messaging apps and virtual tours.