The main headline in housing is yet another week of historically low mortgage rates. However, the extremely low rates are starting to have an adverse effect on purchasing power.
This week, and for the eighth time this year, Freddie Mac’s 30-year fixed-rate mortgage average hit an all-time low. The latest reading shows 2.88% for the 30-year loan and 2.44% for a 15-year loan. These low interest rates are clutch for homebuyers, especially those who don’t have a lot for a downpayment, because it gives them more purchasing power. However, as buyers continue to flood the market, home prices are starting to skyrocket.
A recent report from the National Association of Home Builders/Wells Fargo Housing Opportunity Index shows the median home price in America jumped from $280,000 to $300,000. There is also the issue of a staggering lack of inventory. The National Association of Realtors showed a paltry four-month supply of existing homes in June, down 18.2% year-over-year. New home inventory is also down by 14.5%, according to the U.S. Census. So while super low rates give buyers more power, the lack of inventory is starting to push prices up, and push some would-be buyers out of the market.
WALL STREET WAITING ON CONGRESS
Congress continues to go back and forth over the details of the latest pandemic assistance plan. The two sides are split over how much to give unemployed Americans, with Democrats asking to continue the $600 surplus payment while Republicans have upped their plan to $400 extra per week. The federal unemployment stipend lapsed on July 31. The overall proposed spending cost is also vastly different, with Democrats pushing a $3 trillion bill and Republicans offering a $1 trillion spending package.
According to the report from the Bureau of Labor Statistics, the July jobs report was better than expected, with 1.763 million nonfarm payroll jobs added. Economists had expected an increase of 1.48 million. The unemployment rate fell to 10.2%, which was also a more positive outcome than expected. This helped Dow futures trade higher Friday morning. The 10-year Treasury note yield also avoided a record low and was trading up at 0.543%.
Private payrolls saw a markedly different month. The report from ADP showed that private payrolls grew by just 167,000 jobs in July. Economists were expecting around 1 million jobs created in the private sector. This abysmally low number offsets the June data, which was revised up to 4.3 million. When you break it down by company size, employers with 50-499 employees recorded a loss of 25,000 jobs. Large businesses increased by 129,000 jobs, while those with fewer than 50 employees saw an increase of 63,000.
- Labor Department reports 1.1 million Americans filed initial unemployment claims.
- That’s the 20th straight week of more than 1 million people filing claims.
- Additionally, 16.1 million people filed continuing claims, meaning they’ve claimed unemployment for at least two straight weeks.
- Unemployment coverage for self-employed, independent contractors expired on July 31.
- New York Federal Reserve analysts say household debt has declined by $34 billion in Q2 2020. That’s the first quarterly decline in six years.
- A separate study by the Philadelphia Fed shows that, nationally, 45.5% of respondents said they used their stimulus checks to pay off debt.
- The Nasdaq hit an all-time high of 11,000 points at Thursday’s close, led by Facebook, Apple and Netflix.