Friday Market Update: February 4th 2022 with BRIAN MANNING

Happy Friday! Brian Manning here with the weekly update. Let’s get right to it. We got all kinds of stuff to talk about this week. Let’s see! Monday was a relatively quiet news day, not a lot to report on there. Tuesday, we got some feedback from CoreLogic. So, CoreLogic is looking at home appreciation across the United States. In the month of December, Home appreciation on a year-over-year basis was up 18.5% which is ridiculous. On a month-over-month basis, for the month of December across the nation home appreciation was up 1.3%. So… extremely strong appreciation numbers continuing into the beginning of this year as well. We also got apartment list giving us feedback on rent. So, they look at what the rental component is doing for tenants and rents are up 18%. So… certainly for first-time homebuyers giving them cause to look at the home buying process bringing yet more buyers into the marketplace because rents going up 18% is a really high number.

Wednesday this week, we got the ADP report. I can’t believe it. Another month has already gone by. I can’t believe that January is already over with. First week of every single month, we get employment reports. So the first Wednesday of every month, we get ADP. That’s the largest provider of private payrolls in the US. And the first Friday of every month we get the BLS. That’s the Bureau of Labor Statistics. So… Wednesday, we got ADP. There were expectations in the month of January that 200,000 new jobs would be created. But ADP said, oh, no, we actually had a reduction. We were down 300,000 jobs. So… The thing about the ADP report and the questioning really of the accuracy is that what’s called the sample week for ADP was the week of January 12th. And if we look at the week of January 12th, it’s kind of the peak of Omicron. And if you have people that are taking time off of work because they’re sick and they don’t have sick pay leave, then they’re counted as unemployed. So it’s kind of a tough report to look at and put a lot of weight into because a lot of people are out of work that day.

Also, on Wednesday and really every Wednesday, we have the Mortgage Bankers Association feedback of what’s happening with loan applications. Purchase mortgage applications on a month-over-month basis are up 4%. On a year-over-year basis, they’re down 7%. But still, it’s really amazing to see. And it just kind of shows the underlying strength in the housing market because you have interest rates that are about 7% higher right now compared to where they were last year. You have home appreciation of 18%. You have inventory down at record levels, and you’re still seeing an incredibly strong amount of new buyers coming into the marketplace with new mortgage applications.

Thursday this week, we had London, England, announcing their version of quantitative tapering. So just like the United States moving into the pandemic, they had to go into what was called quantitative easing that was getting money infused in the markets to create liquidity purchasing, mortgage back securities and treasuries, and that really helped kept rates low around the world. And everything in the world is very much interconnected. So you had England announcing that they’re going to be looking at rate hikes, they’re going to stop their bond buying program, and eventually maybe in the next year or two, they might actually be a seller from the run off of their balance sheet of mortgage-backed securities into the marketplace, which is really crazy. And I think that’s what a lot of people were worried about as far as the Federal Reserve as well. If you watched any of my classes that we’ve done recently on mortgage rate predictions, we’ve talked a lot about the Federal Reserve and their balance sheet and the tapering of their balance sheet and the potential impact that it’s going to have in the markets and interest rates. Well, here was England announcing this. Everything we’ve been talking about and markets didn’t like it because they feel the world’s interconnected. And if England is doing it, it’s not going to take long for it to move over to the US. So, we’ll have to wait and see what happens.

Today is Friday. We get the BLS report first Friday of every month. It’s the Bureau of Labor Statistics. It’s the government’s version of employment in the United States. They look at the month of January right now. And for the month of January, there was an anticipation. There was 150,000 new jobs that were created, but we had 467,000. So… the BLS really looks at this through two different reports. So, the first one is what’s called the birth-death ratio, so that’s the Bureau of Labor Statistics. They look at how many companies were opened in the United States, how many companies were closed in the United States. And they have a prediction based on the company and the industry that company is in, how many people they would hire if you open a new business or how many people you would have gotten let go if you close your business. So the birth-death ratio is the first one that gets looked at that showed 467,000 new jobs created. Then there’s what’s called the household survey. So household survey is when they actually call people and reach out and they get direct consumer data.

In the month of January, household survey showed that 1.2 million jobs were created in the month of January. And then in addition to that, it also took several prior months and added positive revisions to add yet even more employment accounted for in the US. While bond markets weren’t really that big of a fan of this because this is really kind of giving the Federal Reserve the green light on their upcoming rate hikes. You know, it’s always been kind of wondering are they going to hike rates in March or may and this is really giving them the green light to probably hike rates in March and bond markets were not really lovers of that today. I’m around all weekend. If you have any questions, let me know. Best way to reach me over the weekend is call me on my cell phone or text me. if you want to go through our strategic buyer consultation, I’m available seven days a week. I’d love to help you in any way I can. Happy Friday! I hope you have a great day.