How The Housing Market Is Being Affected – Housing

A drop in mortgage rates to near historic lows has not been enough to offset a decline in demand for homebuyers. 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. 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.

With mortgage rates falling, refinances have increased for existing homeowners, with numerous applications backlogged due to the flood of new refi activity. Borrowers are experiencing varied approvals as lenders are sensitive to a deteriorating economic environment that may lead to additional foreclosures and bankruptcies.

Sources: Federal Housing Agency, Fannie Mae, Federal Reserve Bond Yields Stabilize – Fixed Income Overview

The Federal Reserve injected additional amounts of funds into the overnight lending markets, also known as the repo market, in October. The move served to dampen concerns that a repeat of volatility that hit markets in December 2018 would occur again.

The Federal Reserve cut interest rates for the third time this year but signaled that it would not cut them further unless economic growth slowed amid concerns.

Yields on government and corporate bonds remained stable in October as expectations of economic growth and a pause to further rate cuts stabilized bond markets. Bond prices have risen since the beginning of the year, with government and corporate bond yields still hovering near record low levels. Bond prices move in the opposite direction to yields.

Sources: Federal Reserve, U.S. Treasury Past Pandemics & What Came Of Them – Health Overview

Over the decades, pandemics have evolved and lasted for varying periods of time, yet always culminating with the containment and/or elimination of a virus. Should history repeat itself, a vaccine will eventually emerge to combat the COVID-19 virus, thus alleviating the threat of further immediate contamination.

Even though scientists have not identified how to stop a virus outbreak before it starts, advancements in medical technology over the past 17 years have drastically reduced the time it takes to develop and implement a vaccine after a new virus emerges.

The current coronavirus outbreak has been preceded by two similar outbreaks since 2003, Severe Acute Respiratory Syndrome (SARS) and Middle East Respiratory Syndrome (MERS). SARs originated out of China in 2002, spread worldwide and was contained within a few months. The World Health Organization (WHO) tracks deaths related to pandemics globally. The organization found that the SARs virus resulted in 774 deaths in 17 countries. MERs, also known as the camel flu, resulted in 862 deaths.

Joint efforts among international governments and nonprofit research entities have allowed extended research on emerging infectious diseases worldwide. Several groups and scientists from various countries are already underway trying to develop a vaccine for COVID-19.

Sources: The National Center for Biotechnology Information, WHO Rates Fluctuate In January – Fixed Income Overview

Bond yields moved lower in late January as the threat of the Chinese coronavirus influenced a shift from stocks to bonds. U.S. corporate and government bond indices advanced ahead of domestic and international stock indices in January, pulling the yield on the 10-year U.S. Treasury down to 1.51% on January 31st.

The low rate environment continues to fuel mortgage refinances helping to sustain housing prices across the nation. Mortgage rates for conventional 30-year fixed loans fell to levels not seen since before the 2016 presidential election.

Sources: U.S. Treasury, Fannie Mae April 2020 / (all values as of 03.31.2020) Stock Indices: Dow Jones 21,917 S&P 500 2,584 Nasdaq 7,700 Bond Sector Yields: 2 Yr Treasury 0.23% 10 Yr Treasury 0.70% 10 Yr Municipal 1.44% High Yield 9.24% YTD Market Returns: Dow Jones -23.20% S&P 500 -20.00% Nasdaq -14.18% MSCI-EAFE -23.43% MSCI-Europe -24.81% MSCI-Pacific -21.13% MSCI-Emg Mkt -23.87%   US Agg Bond 3.15% US Corp Bond -3.63% US Gov’t Bond 3.37% Commodity Prices: Gold 1,590 Silver 14.14 Oil (WTI) 20.14 Currencies: Dollar / Euro 1.12 Dollar / Pound 1.23 Yen / Dollar 107.81 Dollar / Canadian 0.70

Down Trash – Environmental Fact

As an abundance of trash is generated every day, more of an effort is being made to collect and recycle as much trash as possible. Several nations worldwide have had growing success in collecting and recycling their trash over the past few years.

Switzerland currently recycles over 50% of its trash with Austria, Germany, Netherlands and Norway recycling over 40% of their trash. In the United States, the Environmental Protection Agency (EPA) has been monitoring and collecting data on U.S. trash for over 30 years. In its most recent figures, Americans generated about 262 million tons of trash in 2015 and recycled 91 million tons of it, equivalent to a 35% recycling rate. The EPA estimates that Americans produce an average of 4.48 pounds of trash individually every day. That equates to roughly 1635 pounds of trash each year for every American. The EPA’s objective is to try to find new ways to efficiently and effectively recycle as much of this trash as possible.

The challenges with recycling trash is the multitude of components found in everyday trash and how best to separate them. Known in the trash industry as municipal solid waste (MSW), common everyday trash is comprised of food, waste, grass clippings, sofas, computers, tires and refrigerators. Fortunately, more and more of these items are being broken down for selective recycling of internal components, both hazardous and non-hazardous.

Most individuals and every type of entity in the country contributes to the trash pile, including individual homes, apartments, businesses, hospitals, and schools. Optimistically, current data from the EPA is telling us that both individuals and businesses are producing less trash than we were 10 years ago.

With over 321 million people producing rubbish in the United States, the feat of recycling nearly 91 million tons of trash is an accomplishment.

So where does so much trash go? Most of it ends up in landfills. The number of landfills in the United States has declined over the past few years, yet the average landfill size has increased. On a national basis, landfill capacity is sufficient for current levels of garbage, but it is limited in certain regions of the country

Source: Environmental Protection Agency
Medigap Plan F Phasing Out – Medicare Benefits Update

Of the ten Medicare supplemental plans, known also as Medigap, the single most popular plan, Plan F, will be eliminated at the end of the year to new subscribers.

Retirees who turn 65 after 2019 will no longer have Plan F as an option. Plan F is the most expensive supplemental option since there are no deductibles, no co-pays and no additional bills after a doctor’s visit.

Plan G has become the next best comprehensive plan after Plan F is phased out to newcomers. Plan G is almost identical to Plan F with the exception of having to pay the Medicare deductible before insurance pays any benefits.

A Medigap policy supplements expenses not covered by Medicare including co-payments, co-insurance, and deductibles. Medigap policies are sold by private insurance companies and vary in pricing and coverage from state to state.

The following are important aspects regarding Medigap policies:

In order to have Medigap coverage, one must have Medicare Part A & Part B.

A Medigap policy only covers one person, not a married couple. So, each person needs their own separate policy.

Any standardized Medigap policy is guaranteed renewable even with a pre-existing condition.

Medigap does not cover prescription drugs. Medicare Part D does offer coverage for prescription drugs.

Medigap policies generally don’t cover long-term care, vision, dental care, hearing aids, eyeglasses, or private nursing.

Sources: medicare.gov

Coronavirus Affect On The Markets, Economies & Commerce – Global Commerce

Global trade has been hindered by U.S. China trade disputes for the past two years, but the virus outbreak has nearly stalled all trade between China and its trading partners.

Production delays resulting from the virus are expected to affect company earnings across a host of various industries. The disruption of established supply chains has created havoc for companies trying to maintain inventory levels to meet demand.

Economic growth estimates were revised downward by the World Health Organization, World Bank, and International Monetary Fund. The concern is how deeply the spread of the outbreak will affect local economies worldwide.

Oil markets have reacted negatively as the world’s largest importer of oil, China, is now expected to reduce consumption. Other commodities related to manufacturing and production also fell as demand pulled back and factories shut down across China.

Technology products and the travel industry have thus far been impacted the most by the virus spread. Nearly every technology-related product has components sourced out of China, or manufactured entirely within the country. The inability for companies to cease production and not be able to meet demand may eventually translate into reduced revenue and earnings.

Several analysts have already slashed earnings estimates for many companies in various sectors, anticipating an extended period of time before companies catch up on inventory and demand.

Some international and U.S. companies are considering a transition of a portion of their manufacturing and operations to other countries. Emerging market economies are expected to benefit from companies leaving China for manufacturing and production locations elsewhere.

Sources: WHO, World Bank, IMF Nearly 10 Million Claim Unemployment In Just Two Weeks – Labor Market Update

The sudden loss of jobs and mass layoffs by businesses nationwide has brought about the single largest increase in unemployment claims in the country’s history. What should have been another average week for unemployment claims of roughy 243,000 based over the past five years, turned into 3.28 million people applying for unemployment for the week ending March 21st, and another 6.6 million for the week ending March 28th.

Unemployment claims and the unemployment rate is expected to only increase over the upcoming reporting periods. Optimistically, the 50-year low of 3.5% for unemployment is a buffer for the anticipated increase in unemployment.

There are varying estimates as to how high the unemployment rate may go as a result of the virus outbreak and its economic aftermath. Some economists project 25% unemployment, which was last seen during the Great Depression, while others expect 10-15%. Regardless of how high unemployment heads, many believe that it will be short-lived as companies and small businesses are encouraged and financially incentivized by the Cares Act to re-hire employees.

The Federal Reserve is preparing for a worst case scenario, estimating a possible 30% unemployment rate as noted by St Louis Fed President James Bullard. The dismal estimates allow the Fed to aggressively pump massive amounts of liquidity into the U.S. financial system and the economy in the form of buying bonds and maintaining ultra low interest rates until employment conditions improve.

The concern is that as unemployment rapidly increases, consumer confidence may fall to levels not allowing for a viable economic recovery. Roughly 2/3s of the country’s GDP is hinged on consumer expenditures.

Sources: Dept.of Labor, Federal Reserve