finance

Policy is Changing

It’s clear policy rules are changing: OC has record high 7 day average hospitalizations, deaths, and new cases… and yet continues to reopen. See the data here:

Number of New Cases per Day, Hospitalizations, and patients in ICU (left axis) and Number of Test (right axis)

Note the number of tests has been declining so this isn’t a testing increasing issue. Plus deaths and hospitalizations doesn’t depending on testing asymptomatic people.

The question is what this means for our recovery and economy. We will see soon what percentage of the decline in demand is due to mandatory stay-at-home and what percentage is due to people voluntarily staying away due to fear.

By Christopher Schwarz, ago

Residential Housing Will Be Just Fine

One of the most frequent questions I’ve been asked is about the residential housing market. Many people have memories of 2007-09 and think we will repeat it. However, I’ve been arguing the market will be fine given where the layoffs are happening.

One early indication is looking at the number of mortgage applications. Here’s the data that came out today.

Year-over-year Change in the MBA Purchase Index

You can see that purchase applications are just about where they were last year and recovering quickly. Why? Most people that lost their job are probably not in the mortgage market.

Additionally another item that has helped is mortgage rates. Here’s a graph of rates over the same time period.

30-year Mortgage Rates

They are down 0.50% since the beginning of the year and last year. While 0.5% doesn’t sound like much, all else equal the same mortgage payment will afford you 5% more house.

House prices will be something to watch this summer. Inventory is way down over last year, which could cause bidding wars.

By Christopher Schwarz, ago