How The Housing Market Is Being Affected – Natlional Housing Update

We are lucky to live in Montana in the Springtime!  It seems that someone let that secret out and the local market seems ever hotter than ever.  However, nationally, a drop in mortgage rates to near historic lows may not been enough to offset a decline in demand for home buyers. The ongoing travel and socialization restrictions are inhibiting would be home shoppers from viewing and buying properties. Of the various factors influencing the housing market, employment is the most significant. No matter how low mortgage rates are, if someone is unemployed, they won’t be able to make a mortgage payment at all, much less get approved for a new purchase. Historically, rising unemployment rates have been detrimental to the housing market. The last housing contraction, as measured by the Federal Reserve’s House Price Index, occurred in 2008 and 2009, when unemployment peaked at 10% in October 2009. Some economists believe that an extended period of elevated unemployment will negatively impact the housing market.

In addition, the onset of forbearance allowance for homeowners as enacted by the CARES Act has put lenders in precarious positions. The Federal Housing Finance Agency estimates that there were roughly one million mortgages in forbearance at the end of April, representing 7% of government held mortgages by the agency.  (Sources: Federal Housing Agency, Fannie Mae, Federal Reserve)

How Inflation May Eventually Return – Consumer Sentiment

The enormous monetary and fiscal stimulus actions launched by the Federal Reserve and Congress entail billions of dollars in newly issued government debt, thus potentially driving down the value of the U.S. dollar. When countries issue and carry additional debt, the value of their currency tends to devalue relative to other currencies, thus making imports more expensive. Ironically, a weaker U.S. dollar also makes the U.S. more competitive as U.S. exports become less expensive worldwide. The FDA also reported that the recent closures of several large meat plants will not necessarily lead to shortages, but may result in fewer options for less expensive products. The International Monetary Fund (IMF) estimates inflation for countries worldwide based on various factors. The IMF projects that inflation in the United States will increase through the remainder of the year and again in 2021 to 2.4%.

Two macro economic occurrences signal a probable rise in inflation. The first is the rapid increase in the U.S. Money Supply, also known as M2, which includes money market funds, checking deposits, and actual cash. Historically, an increase in the M2 has led to inflationary pressures in some instances. The second occurrence is the potential unwinding of globalization with a renewed focus on domestic production. Globalization is now in danger of retracting, as trade fears among countries has heightened due to the extensive exposure of the virus worldwide. Heightened tensions between the United States and China have also created the notion that a decrease in low-cost Chinese made imports may materialize. (Sources: FDA, U.S. Dept. of Agriculture, International Monetary Fund)

Typical Scams Surrounding Coronavirus – Consumer Awareness

The Federal Trade Commission (FTC) posted a handful of identified scams circulating throughout the country as a result of the coronavirus outbreak. Scammers are exploiting consumer fears and paranoia by targeting wary victims via email, phone, and text messages.

Below are various scams to be aware of and what to do:

1-Don’t respond to texts, emails or calls about checks from the government. It is very rare that government agencies contact consumers directly.
2-Ignore online offers for vaccinations and home test kits. There are no products proven to treat or prevent COVID-19 at this time.
3-Hang up on robocalls. Scammers are using illegal robocalls to pitch everything from low-priced health insurance to work-at-home schemes.
4-Watch for emails claiming to be from the CDC or WHO. Use sites like coronavirus.gov & usa.gov/coronavirus to get the latest information. Don’t click on unknown links.
5-Be increasingly weary about charitable organizations claiming to need assistance due to the coronavirus.

(Source: FTC: https://www.consumer.ftc.gov/features/coronavirus-scams)

Why Small Businesses Are So Important To The Economy – Domestic Economy

Just like Montana, the whole country is composed of millions of small businesses from home-based one person consultants to hair salons and manufacturing companies. As defined by the SBA’s Office of Advocacy, a small business has less than 500 employees and operates independently, not under the control of another entity.

As of 2018, the SBA acknowledged that there were 30.2 million small businesses in the U.S., 22 million of which were individually operated with no employees other than the owner. At 49.2%, nearly half of the nation’s workforce is employed by a small business, representing roughly 120 million employees.

The SBA reports that small businesses have historically accounted for 60-65% of net new jobs nationwide every year, amounting to approximately 2 million jobs per year. Data compiled by the Census Bureau for 2014 identify that roughly 50% of all net jobs created nationwide were by small business employers. With over 30 million newly unemployed Americans since the outbreak, small businesses are expected to eventually hire many of the recently unemployed.

The Paycheck Protection Program is extremely critical for small businesses because of the financial burden derived by the mandatory closures. Of the various industries affected, restaurants have been one of the hardest hit nationwide, as business owners have had to lay off employees and succumb to selling take out only menus in order to survive to pay rent and utilities. The SBA’s data shows that about 60% of all small businesses either are operating at a loss or merely breaking even. (Sources: Labor Department, BLS, SBA)