Mortgage questions

It’s Just The Facts: June 2020

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  1. FED ACTION – When the Federal Reserve cut short-term interest rates to near zero on 12/16/08 during the global real estate crisis, they did not raise rates again until 12/16/15 or 7 years later. The Fed has once again cut short-term interest rates to near zero, this time on 3/15/20. On Wednesday 6/10/20, Fed Chair Jay Powell said the nation’s central bank has no plans to raise interest rates for possibly as long as 2.5 years, i.e., through the end of 2022 (source: Federal Reserve).
  2. COST OF MONEY WENT DOWN – During the 7 years that the Fed kept short-term interest rates near zero between 12/16/08 and 12/16/15, the average interest rate on a 30-year fixed rate mortgage fell from 5.47% to 3.95% (source: Freddie Mac).
  3. KEEP WORKING – 71% of 1,008 American adults surveyed in late April 2020 say that the COVID-19 pandemic has negatively impacted their retirement plans. 51% say that the pandemic has also forced them to be “more open” to the idea of having some type of income-paying job during retirement (source: TD Ameritrade).
  4. GONE – Household wealth in the United States fell by $6.5 trillion (from $117.3 trillion to $110.8 trillion) during the first 3 months of 2020 (source: Federal Reserve).
  5. MISS THE OFFICE – 1 in 3 American workers (32%) surveyed in May 2020 does not want to “work from home” when the option to return to an office environment is offered (source: Deutsche Bank Research).
  6. BIG CITIES – The median rent for a 1-bedroom apartment in Chicago in May 2020 was $1,097. The median rent for a 1-bedroom apartment in San Francisco in May 2020 was $2,445 (source: Apartmentlist.com).
  7. WHERE YOU LIVE – The average single-family home in the USA has appreciated +33.4% over the 5 years ending 3/31/20. Homes in Idaho (+69.6%) have experienced the greatest growth in value while homes in North Dakota (+9.3%) have seen the least percentage increase in value (source: Federal Housing Finance Agency).
  8. FORECLOSURES – The moratorium imposed by Congress to prevent lenders from repossessing homes from delinquent homeowners who have federally back mortgages was extended last week from 6/30/20 to 8/31/20. An average of 9,974 homes per month were repossessed by lenders during the 1st Q 2020 before the ban was implemented. Just 5,490 homes were repossessed in total during April and May (source: Attom Data Solutions).
  9. THE “CARES ACT” EFFECT – The nation’s 13.3% jobless rate as of 5/31/20 (released on Friday 6/05/20) would have been an estimated 16.3% if the workers who were being paid wages from funds obtained through a “Payroll Protection Program” (PPP) loan were counted as “temporarily laid off” instead of “actively employed” (source: Bureau of Labor Statistics).
  10. HIGHEST EVER – As of the end of April 2020, 43 US states reported their highest unemployment rate in history. US states have measured monthly jobless rates since January 1976 (source: Department of Labor).
  11. BEING CAREFUL – Spending by Americans in April 2020 dropped a record 13.6% on a month-over-month basis, i.e., $13.90 trillion of “seasonally adjusted annual spending” in March 2020 free-falling to $12.01 trillion in April 2020, a drop of $1.89 trillion. If this level of decline continued for 12 consecutive months, that would mathematically be equal to every American household (there are 124.4 million households in the country) reducing their out-of-pocket spending by $15,200 over the course of a year (source: Commerce Department).
  12. JUST WAITING – 23% of millennials surveyed indicate they will not be buying a home “anytime soon” as a result of the COVID-19 pandemic. Millennials were born between 1981-97 and are ages 23-39 in 2020. The survey was compiled from data gathered from 1,300 American adults in April 2020 (source: Quicken.com).
  13. GREAT TIME TO BUY – The average interest rate nationwide on a 30-year fixed rate mortgage fell to 3.15% on Thursday 5/28/20, the lowest ever recorded in US history. That means home buyers would pay just $430 per month in “principal and interest” payments for every $100,000 borrowed (source: Freddie Mac).
  14. GETTING SMALLER – The median size of 903,000 new single-family homes completed in America during 2019 was 2,301 square feet. A decade earlier, the median size of 520,000 new single-family homes completed during 2009 was 2,417 square feet (source: Census Bureau).
  15. LET IT BE PERPETUAL – Existing home prices in the United States have risen for 35 consecutive quarters through the end of the 1st quarter 2020, i.e., from 6/30/11 through 3/31/20. Existing homes in Idaho, up +12.6% on average for the 12 months ending 3/31/20, have experienced the greatest year-over-year appreciation of any US state (source: Federal Housing Finance Agency).
  16. NO HURRY TO RETIRE – 45% of American workers expect to work past age 65. 30 years ago, just 18% of American workers anticipated working past age 65 (source: Employee Benefit Research Institute 2019).
  17. WHERE DO YOU LIVE? – 39% of the US population live in cities that have at least 50,000 people, but only 4% of US cities have a population of at least 50,000 (source: Census Bureau)