Retail sales plummet, but home purchases on the rise - Movement Mortgage Blog

As states begin to reopen, home purchases are slowly beginning to regain steam. The latest data from the Mortgage Bankers Association shows that home purchases, while down compared to last year at this time, are up 11% week-over-week. Mortgage lenders, like Movement, are relying heavily on technological enhancements to allow customers to go through the homebuying process digitally. 

Also, this week the Federal Reserve started buying mortgage-backed securities at a lower price point, which allowed many lenders to reduce interest rates for some borrowers. Keep in mind, your interest rate is determined by a lot of factors including type of loan, credit score and where you live. 

Meanwhile, refinance activity has slowed week-over-week, but is still a whopping 200% higher than a year ago at this time, according to the MBA.

“There continues to be a stark recovery in purchase applications, as most large states saw increases in activity last week. In the ten largest states in MBA’s survey, New York – after a 9% gain two weeks ago – led the increases with a 14% jump. Illinois, Florida, Georgia, California and North Carolina also had double-digit increases last week,” said Joel Kan, MBA’s Associate Vice President of Economic and Industry Forecasting. “We expect this positive purchase trend to continue – at varying rates across the country – as states gradually loosen social distancing measures, and some of the pent-up demand for housing returns in what is typically the final weeks of the spring home buying season.”

On the other end of the mortgage loan spectrum, Fannie Mae and Freddie Mac, along with the Department of Housing and Urban Development (HUD), extended their freeze on foreclosures and evictions through June as more people apply for loan forbearance. Set to expire on May 17, the temporary suspension of evictions and foreclosures will go through at least June 30. 

The number of loans going into forbearance continues to rise. The MBA’s weekly survey shows 7.91% of all mortgage loans in America are in forbearance. Before COVID-19, that number was around 0.25%. 

When you look at the type of loans that are in forbearance, mortgages with Ginnie Mae lead the pack. Nearly 11% of Federal Housing Administration (FHA) and Veterans Administration (VA) loans are currently in forbearance, according to the MBA’s weekly survey. For Fannie Mae and Freddie Mac, just over 6% of their loans are in forbearance. 

Markets struggle with negative data

Retail sales, producer prices and consumer prices all felt the brunt of the pandemic in April. This week the markets felt the sting as well with the Dow Jones Industrial average struggling to finish the week strong. 

Friday morning’s retail sales data caused a 200 point drop in Dow futures. The Dow had just broken a three-day losing streak on Thursday, jumping 300 points on the backs of banks and the oil market. OPEC and its allies announced another cut in production, just as demand is starting to rise with states reopening.

That jump for banks and oil helped stave off the wave of negative employment data. An additional three million Americans filed initial unemployment claims over the last week, according to the Labor Department. That brings the total to more than 36 million over the last two months. The one silver lining is the number of continuing claims only went up by less than half a million. That is a sign that some people are returning to work. However, the number of Americans making continuing claims is still more than 22 million, which is a staggering data point. 

The Labor Department’s producer price index just saw its biggest decline since 2015 with a year-over-year drop of 1.3% in April. April’s consumer prices dropped by 0.8%, the largest drop for that statistic since 2008. The core CPI, which excludes volatile products like gas and energy, saw a 0.4% drop in April, its largest decline since 1957. Perhaps the largest drop was the 16.4% decline in retail sales for April, a record for the Commerce Department’s statistics.

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Movement Staff

The Market Update is a weekly commentary compiled by a group of Movement Mortgage capital markets analysts with decades of combined expertise in the financial field. Movement's staff helps take complicated economic topics and turn them into a useful, easy to understand analysis to help you make the best decisions for your financial future.