It’s Just The Facts: March 2022

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  1. EATING AT HOME – US grocery prices, i.e., “food at home,” increased by +8.6% over the year ending 2/28/2022.  That compares to a +3.5% price increase for groceries for the year ending 2/28/2021 and a +0.8% price increase for the year ending 2/29/2020 (source: Bureau of Labor Statistics).
  2. WE BOUNCED BACK QUICKER – Minutes from the Fed meeting that ended on 3/17/2021 (a year ago) anticipated that there would be no interest rate hikes implemented by the Fed until at least 2023.  Instead, the Fed raised short-term rates on 3/16/2022 with indications that it may implement additional rate hikes at each of the remaining 6 Fed meetings scheduled in 2022 (source: Federal Reserve).
  3. THAT WILL COST YOU MORE – 55% of 1,009 American adults surveyed in September 2021 do not pay the full amount of their credit card debt each month (source: GOBankingRates).
  4. SMALL INVENTORY – From 12/31/2019 (pre-pandemic) to 2/28/2022, the number of existing homes for sale in the US have declined from 1.39 million to 870,000, a drop of 520,000 (source: National Association of Realtors).
  5. JOB MARKET – The unemployment rate in the USA was 3.5% in February 2020 (pre-pandemic) and was 3.8% in February 2022.  The number of unemployed Americans was 5.7 million in February 2020 and was 6.3 million in February 2022.  The number of job openings was 6.9 million in February 2020 and was 11.3 million in January 2022 (source: Department of Labor).
  6. IN THE NEXT YEAR – 2020 was the 10th year in the last 72 years, i.e., 1950-2021, that the US economy contracted.  Our economy has rebounded the following year with positive growth 8 out of 10 times, including +5.7% growth in 2021 following its 3.5% contraction in 2020 (source: Commerce Department).
  7. BORROWED TOO MUCH?  American lenders repossessed 7,418 homes during the first 2 months of 2022 (January-February), up +150% over the 2,973 repossessions that took place during the first 2 months of 2021 (source: Attom Solutions).
  8. NOT RENEWED THIS YEAR – $93 billion in Child Tax Credit payments were paid over the final 6 months of 2021 on behalf of 61 million children from 40 million families (source: Treasury Department).
  9. FIRST OF MANY? – The Federal Reserve is widely expected to raise short-term interest rates this Wednesday (3/16/2022), in what would be its first rate hike since 12/19/2018.  The rate hike on 12/19/2018 was the Fed’s 8th rate increase implemented over a 2-year period that began on 12/14/2016 (source: Federal Reserve).
  10. LESS THAN WHAT YOU THINK – The average single family home in the United States has appreciated just +4.7% per year over the 25 years from 12/31/1996 to 12/31/2021 (source: Federal Housing Finance Agency).
  11. READY FOR A CHANGE – 27.1 million Americans moved last year, 8.4% of the US population.  That’s the lowest percentage of Americans that reported living at a different residence based on an annual survey conducted since 1948.  Of the 27.1 million movers in 2021, just 4.4 million people moved out-of-state.  25 years earlier (1996), 16.3% of Americans moved in the prior 12 months (source: Census Bureau).
  12. HIS OPINION – In his 2/27/2021 annual investor newsletter (i.e., a year ago), Warren Buffett opined that “bonds are not the place to be these days.  Fixed-income investors worldwide – whether pension funds, insurance companies or retirees – face a bleak future.”  Taxable bonds were down 3.4% (total return) over the 1-year from 2/27/2021 to 2/27/2022.  The Bloomberg Barclays US Aggregate Bond Index, calculated using publicly traded investment grade government bonds, corporate bonds and mortgage-related bonds with at least 1 year until final maturity, was used as the bond measurement.  The widely followed bond index was created in 1986 but has released backdated performance history calculated to 1976 (source: Berkshire Hathaway, Bloomberg Barclays).
  13. MOST DON’T MAKE A LOT OF MONEY – 31.5% of the 148.2 million tax returns that were filed nationwide for tax year 2019 (the latest year for which data has been released) did not pay any federal income tax, a total of 46.7 million tax returns.  83.5% of these “non-taxable” returns (39.0 million returns) reported adjusted gross income of less than $44,269 (source: Internal Revenue Service).
  14.  TOO MUCH SUPPLY? – The Federal Reserve owned $1.37 trillion of mortgage-backed securities (MBS) on 3/11/2020, 2 days before President Trump declared a national emergency due to the global pandemic.  2 years later (3/02/2022), the Fed has doubled its MBS to $2.69 trillion.  To implement its plan to reduce its MBS, the Fed will sell MBS outright or allow the MBS to mature.  Either plan may result in an increasing supply of MBS in the bond market which may drive prices of MBS lower and push mortgage yields higher (source: Federal Reserve).
  15. BRAND NEW HOMES – The median sales price of a new home sold in the USA in January 2022 was $423,300, an all-time record high both on a nominal basis and on an inflation-adjusted basis (source: Census Bureau).
  16. NOT ALWAYS UP – For 17 consecutive quarters (from 3/31/2007 through 6/30/2011), the average price of American single-family homes fell in value (source: Federal Housing Finance Agency).

Courtesy of Mortgage Market Guide