markets

More Evidence of MORE Income

As noted a few days ago, the benefits provided by the government so far have likely more than offset the loss in income by consumers. Today’s data on real incomes show that more clearly. Here’s the data.

Real Income and Real Income minus Transfer Payments (year-over-year change)

Usually changes in real income and real income minus transfer payments are about the same. Not in April.

Real Income went UP 11% while Real Income minus transfer payments went DOWN 7%. Thus, the government stimulus so far has more than offset lost wages.

This should last until at least through May as the extra $600 per week lasts until July and people are still getting their $1,200 checks. It’s likely to last after that as well as Congress appears posed to pass even more relief in the next few weeks.

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