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Friday Market Update for the Week of April 2nd 2021

Happy Friday Brian Manning here with the weekly update. Let’s get right to it!

So let’s see. Tuesday this week we got Case Shiller reporting. Case Shiller is just kind of like the top notch reporter of home appreciation or what’s happening in the housing market. And on a year over year basis, home appreciation across the nation went from 10.4% to 11.2%. So just really strong housing market right now, it’s at a 15 year high, which is unbelievable. We also get the FHFA and they’re reporting on appreciation. So the FHFA looks at home appreciation for homes across the United States that have a conventional mortgage attached to them. So this does not include homes that are owned free and clear, Jumbo mortgages, FHA, VA USDA, purely homes with a conventional mortgage. So for the month of January home appreciation was up 1%, which is amazing to see a 1% increase in one month. On a year over year basis home appreciation, according to the FHFA was at 11.5%. So just really strong housing market.

Wednesday of this week, and I can’t believe we’re doing this already first Wednesday, although this wasn’t technically the first Wednesday, but they rolled it in here. First Wednesday of what would be every month is our employment reports. So first Wednesday, we get ADP. This Wednesday, we got the ADP report. And we got 517,000 new jobs created for the month of March, which is just unbelievable. And certainly stronger than expected and the prior month was revised higher. We also got pending home sales, pending home sales down 10%. It looks like this is primarily due to inventory, you know, inventory across the nation is down 30%. So the buyer pool is definitely at a high but when the inventory available is just not there, we’re seeing a decrease in pending home sales. We got consumer confidence, consumer confidence is at a 13 month high right now.

So certainly consumers in their shopping and their opinions on what’s going on the economy is at a 13 month high. And also another really interesting fact that we got this week, was that for first time home buyers looking to purchase in the next six months is at the highest level since 1967. And we’ve talked about this in the past. This is because millennials are just kind of starting to hit their prime Home Buying season and age. If you look at the age brackets on millennials for like the next six or seven years straight, you start to see millennials hitting the age of 30 to 33 years old, which is the prime age for being a first time home buyer and year after year after year, because of the amount of births that were taking place for the next six or seven years, we have first time home buyers just increasing every single year for six or seven years straight. This is absolutely going to have an impact on the housing market going forward because first time home buyers historically make up 32% to 35% of all home purchases. So really strong and great to see that.

Today we get the BLS. So first Friday of every month is the Bureau of Labor Statistics employment report for what happened in the prior month. There were expectations in the month of March, there were about 650,000 new jobs created, we got 916,000 certainly a blockbuster report, not going to be surprised if we start to see month over month really strong employment reports coming out. We have vaccines taking place working towards herd immunity, there’s all these job positions starting to open up, they’re going to start to get filled, and really great to see a strong employment report. For sure, though, as we see month after month strong and clear reports, this is going to look positively in stocks, it’s going to affect bonds, it’s going to have some impact on interest rates.

If we look at the unemployment report, unemployment went from 6.2% to 6%. Kind of accurate, but not really. So let’s break that down a little bit. So there’s about 160 million people in the labor force in the United States. 9.7 million people are unemployed right now. There’s another 3.7 million people that were unable to look for work, whether the job openings weren’t available or they couldn’t get to work, whatever it was, and then there’s always this floating misclassification that goes around every single month. So when we look at available employment force in the United States unemployed people, people that couldn’t look for a job, we’re really floating right here on 8.75%. So we’re still seeing improvement in unemployment. We’re seeing really good job growth. This is great to see, it’s exciting. I know everyone wants to see the US economy come back to where it was pre pandemic levels. And it looks like we’re working towards that.

I just want to show you some information on the charts here as well, been looking at the 10 year treasury, this is something worth paying attention to. We always look at the technical level. So mortgage rates will go in line with what the yield of the 10 year treasury is doing. That does not mean that when the 10 year treasury goes up, yield goes up, mortgage rates go up automatically, but the trajectory of mortgage rates, specifically 30 year fixed mortgage rates is very similar. So we’ve kind of seen since January 28th through now just a slow, steady increase in rates, nothing crazy. It’s been pretty minimal. What’s interesting, though, and we talked about this, when we broke above this ceiling of resistance here, we said, Hey, if we break above this, we have some room for the upside and the yield on the 10 year treasury. What’s interesting is we got to the ceiling right here, and we were not able to break above it, right? We tested the ceiling, the yield came back down. We did that twice. Test it again, wasn’t able to make it in the yield came back down. So we’re kind of sandwiched right now with our yield on the 10 year treasury in between this ceiling of support and this floor of support. And if we continue to get positive economic news, eventually we’ll probably break above that. And we have room for the 10 year treasury yield to go up. For us to look at what the next ceiling of support would be, we actually need to go back two years to see where the next ceiling of support would be right? Because this is from back in 2019. So this is right pre pandemic area. So if we do start to get positive continual unemployment information, economic information, and stocks are continuing to react positively, you’re going to see the 10 year yield eventually, at some point in time, potentially break above that. So we have to watch this. We’ll wait and see what happens. See what the impact is on mortgage rates.

Right now. mortgage rates are still phenomenal. We’re still helping tons of people to buy houses and refinancing. There’s great opportunities for refinancing. What’s interesting now is we’re actually starting to see availability and adjustable rate mortgages open up, and many arms right now are more favorable than a 30 year fix. So if you’re interested in talking about an adjustable rate mortgage and how that works, and maybe how it could benefit you, give me a call. I’d love to walk you through the steps and give you some feedback and the details of how that works.

I’m available all weekend. I know it’s Easter Sunday, I’m going to go to Flagstaff house for Easter Sunday brunch with the family, super stoked. But I’ll be around if you have any questions, let me know. Call me, text me. I’d love to help you out. Happy Friday. Have a great day!

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