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It’s Just The Facts: April 2020

  1. WITH THE PRESS OF A BUTTON – Over a 2-week period ending Friday 3/27/20, the Federal Reserve launched or reopened 6 lending facilities to provide billions of funds to distressed corporations, municipalities, investors, investment companies and money market funds: 1) Commercial Paper Funding Facility (3/17/20); 2) Primary Dealer Credit Facility (3/17/20); 3) Money Market Mutual Fund Lending Facility (3/18/20); 4) Term Asset-Backed Securities Lending Facility (3/23/20); 5) Primary Market Corporate Credit Facility (3/23/20); 6) Secondary Market Corporate Credit Facility (3/23/20) (source: BTN Research).
  2. TO NEAR ZERO – The Fed cut its key benchmark interest rate to “0-to-0.25%” on Sunday 3/15/20. The only other time in American history that the Fed has cut rates to near zero was on 12/16/08, a level that was maintained for 7 years until they raised rates by 0.25 percentage points on 12/16/15 (source: Federal Reserve).
  3. WHAT WE SPEND IN 2.5 DAYS – If the United States was to fund the entire $2.3 trillion “Coronavirus Aid, Relief and Economic Security” Act (CARES) by issuing new 30-year bonds at the long-dated bond’s interest rate from the close of trading on 3/31/20 (1.35%), the annual debt service cost would be $31.05 billion per year. During fiscal year 2019, the US had outlays of $12.18 billion per day (source: Treasury Department).
  4. WILL WE GO HIGHER? – The United States has tracked unemployment rates in the nation since 1948. Our country’s highest recorded jobless rate is 10.8% from November 1982 and December 1982. During the 2008-2010 financial crisis, our nation’s jobless rate peaked at 10.0% in October 2009 (source: Department of Labor).
  5. MORE THAN TEN MILLION – More Americans filed for “first-time” unemployment benefits in the last 3 weeks (10.237 million for the 3 weeks ending 3/28/20) than the combined total of “first-time” unemployment claims that were applied for (10.179 million) in the previous 47 weeks (source: Department of Labor).
  6. BETTER HAVE A JOB – The median monthly rent in March 2020 for a 1-bedroom apartment in San Francisco was $3,500 (source: Zumper).
  7. BEFORE COVID-19 HIT – 59% of Americans surveyed in early February 2020 admit they live “paycheck-to-paycheck” and are unable to consistently put money away for an emergency or for retirement (source: Charles Schwab Modern Wealth Survey).
  8. HOUSING COSTS – Inflation, as measured by the “Consumer Price Index,” was up +2.3% in calendar year 2019, but was up just +1.4% for the year when the cost of housing is excluded (source: Department of Labor).
  9. YOUR LIFE – If you were born in 1987 and you turn age 33 in 2020, you have lived through 5 bear markets and 3 recessions, the 1987 “Black Monday” stock market crash on Wall Street, the 9/11 terrorist attacks, the 2008 global real estate crisis, and now the 2020 pandemic. You have also lived through 4 bull markets (including the 11-year bull that ended on 2/19/20), 4 economic expansions and you have benefited from the lowest interest rates in history. Your life expectancy as of today: 47.3 additional years on earth (source: BTN Research).
  10. SMART – 39% of millennials have at least a college bachelor’s degree, and another 28% have attended college but not graduated. Millennials were born between 1981-97 and are ages 23-39 in 2020 (source: Pew Research).
  11. NOT SMART – 54% of Americans surveyed in February 2020 say that if they inherited $1 million today, they would “spend it” as opposed to paying off debt or investing (source: Charles Schwab Modern Wealth Survey).
  12. DON’T HAVE TO BE A CITIZEN – The $1,200 per person stimulus payment created in the CARES Act (paid to individuals making less than $75,000 and couples making less than $150,000) is available to non-citizen immigrants working legally in the United States on H-1B and H-2A visas (source: CARES Act).
  13. HOME BUILDING – 888,000 single-family homes began construction in 2019, the 8th year of increasing home starts since this measurement bottomed at 431,000 in 2011. The all-time US record for home starts in a single year is 1.72 million in 2005 (source: Census Bureau).
  14. WILL THEY LOOK TO WASHINGTON FOR HELP? – 88% of more than 2,400 city officials across the USA anticipate the economic impact of the COVID-19 virus will result in budget shortfalls that will force them to reduce services and cut staff. The loss of sales tax and fee revenue occurred as businesses have closed and travel and tourism has disappeared (source: National League of Cities).
  15. YOU GET A WHOLE ROW TO YOURSELF – 95,085 travelers went through TSA screening at US airports last Thursday 4/16/20, down 96% from the 2,616,158 screened passengers on Tuesday 4/16/19 or one year earlier (source: Transportation Security Administration).
  16. REAL NUMBER – The USA’s 3/31/20 unemployment rate is 4.4%, representing 7.1 million out-of-work Americans. But the government uses employment data collected only through the 12th of the month to compile the monthly jobless rate. Adding the number of workers who have filed for “first-time” unemployment benefits from 3/12/20 to 4/12/20 (a 4-week total of 22.0 million) to the 7.1 million individuals who were out of a job as of 3/12/20 suggests that 29 million Americans may now be out-of-work, equal to an 18% jobless rate (source: Department of Labor).
  17. PEOPLE ARE NOT SPENDING – Retail sales in the United States in March 2020 declined 8.7% from the previous month to $483 billion. The worst month-over-month decline in retail sales during the 2008-2010 mortgage crisis was a drop of just 3.0% in December 2008 (source: Census Bureau).
  18. EXPENSIVE – The 2 highest “effective property tax rate” states are Illinois and New Jersey, defined as property taxes collected divided by the fair market value of the real estate (source: Attom Data Solutions).
  19. BIGGEST IN HISTORY – The largest annual budget deficit in US history is $1.41 trillion in fiscal year 2009, i.e., the 12 months ending 9/30/09 (source: Office of Management and Budget).
  20. PRESTO! – The Fed’s balance sheet reached $5.45 trillion as of 4/22/20, up from $3.85 trillion as of 2/26/20. The $1.6 trillion balance sheet increase in less than 2 months is the result of digital creation of money by the Fed, i.e., money used for purchases or lending created with the press of a button (source: Federal Reserve).

Courtesy of Mortgage Market Guide