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Mortgage Economic Review For April 2022

Mark Paoletti
Apr 13, 2022
Mortgage Economic Review February table.

A summary and review of the key economic data that affects the mortgage & real estate industries.

Key Economic Data and Events during March 2022

  • Interest Rates Higher: The Fed raised the Federal Funds Rate 0.25%. The 10-Year Treasury yield rose to 2.32% (March 31) from 1.83% (Feb. 28).
  • Housing: Existing home sales fell 7.2% due to a lack of inventory, and new home sales fell 2% during February. Home prices continued upward at a 19% annual pace.
  • Labor: The economy created 431,000 new jobs in March, 750,000 in February. The unemployment rate fell 3.6%, and wage growth increased 5.6% year over year.
  • Inflation: February CPI up 0.8% (+7.9% YoY), PPI up 0.8% (+10.0% YoY).
  • The Economy: U.S. GDP grew at a 6.9% annualized rate during the fourth quarter of 2021.
  • Consumers: Retail sales rose slightly; consumer confidence rose, while sentiment fell.
  • Stock Markets had another down month and the worst quarter in 2 years.
  • Oil & Energy: Oil prices closed the month at $108/barrel after hitting a high of $125.
  • Ukraine War: Russian forces encountered fierce resistance from the Ukrainians, while peace negotiations have not had meaningful results.

Interest Rates & The Fed

As expected, the Federal Reserve concluded its March Federal Open Market Committee (FOMC) meeting and announced it would raise the federal funds rate by 0.25%, with a target range of 0.25% to  0.5%.

What wasn’t expected was Fed Chairman Jerome Powell’s comments a week after the FOMC meeting, where he said the Fed would begin to increase interest rates at a faster pace through the end of the year. Based on those comments, the debt markets expect a 0.5% increase in May and again in June. Plus, the possibility of an interest rate increase after every FOMC meeting until year-end.

Powell’s comments are meant to convince the debts markets that the Fed is getting tough on inflation. The Fed needs to break inflationary expectations before it gets embedded into consumers’ psyche. The trick is to raise rates without causing a recession, i.e., engineer a “soft landing.” 

Can the Fed pull it off? Let’s hope so. The next FOMC meeting is on May 3-4.

  • 10-Year Treasury Security Yield rose to 2.32% (March 31) from 1.88% (Feb. 28).
  • 30-Year Treasury Bond Yield rose to 2.44% (March 31) from 2.25% (Feb. 28)
  • 30-Year Fixed Mortgage rose to 4.67% (March 31) from 3.89% (Feb. 24).
  • 15-Year Fixed Mortgage rose to 3.83% (March 31) from 3.1% (Feb. 24).
  • 5/1 ARM Mortgage rose to 3.5% (March 31) from 2.98% (Feb. 24).

Housing Market Data Released in March 2022

There’s good and bad news in the housing data. Bad News first: Home prices continued upward, home sales slumped, and inventory is still dismal. 

Now the good news: Help is on the way. There are more homes permitted and under construction than at any time in recent history. Hopefully, inventory has bottomed out and will improve from here. Also, for the first time in history, the average price of a new home clocked in over $500,000 -- $511,000, to be exact.

  • Existing Home Sales (closed deals in February) fell 7.2% to an annual rate of 6.02 million homes, down 2.4% in the last 12 months. The median price for all types of homes is $357,300, up 15% from a year ago. The median single-family home price is $363,800; $305,400 for a condo. Homes were on the market for an average of 18 days, and 84% were on the market for less than a month. Currently, 870,000 homes are for sale, down 15.5% from 1.03 million units a year ago; 25% were all cash sales.
  • New Home Sales (signed contracts in February) fell 2% to a seasonally adjusted annual rate of 772,000 homes, down 6.2% YoY. The median new home price fell to $400,000 from $423,300 the prior month. The average price rose to $511,000 from $496,900 the prior month. There are 407,000 new homes for sale, a 6.3 month supply.
  • Pending Home Sales Index (signed contracts in February) fell 4.1% to 104.9 from 109.5 the previous month, down 5.4% YoY. 
  • Building Permits (issued in February) fell 1.9% to a seasonally adjusted annual rate of 1,859,000 units -- up 7.7% YoY. Single-Family Permits fell 0.5% to an annual pace of 1,207,000 homes, up 5.4% YoY.
  • Housing Starts (excavation began in February) rose 6.8% to an annual adjusted rate of 1,769,000, up 22.3% YoY. Single-Family Starts rose 5.7% to 1,215,000 units, up 13.7% YoY.
  • Housing Completions (completed in February) rose 5.9% to an annual adjusted rate of 1.31 million units, down 2.8% YoY. Single-Family Completions rose 12.1% to an annual adjusted rate of 1.03 million homes, up 1.7% YoY. 
  • S&P/Case-Shiller 20 City Home Price Index rose 1.4% in January, up 19.1% YoY.
  • FHFA Home Price Index rose 1.6% in January, now up 18.2% YoY.

Labor Market Economic Data Released in March 2022

The Economy created 431,000 New Jobs in March and 750,000 in February. Add January’s data of 504,000 (431 + 750 + 504 = 1,685), and the Economy created 1.685 million New Jobs in the first quarter. In the last 12 months, the Economy has added roughly 7.2 million jobs. 

Job creation continues at a strong pace. On the surface, the Labor Data looks good, but there are some worrisome implications. Wages have risen only 5.6% YoY, which is not keeping up with Inflation. Another perplexing question: why is the Participation Rate so low when there are 11 million job openings? It’s slowly inching up, but still historically low. Roughly 2 million workers that left the Labor Force during the pandemic have not returned. I can’t believe they all retired …

  • The Economy created 431,000 New Jobs during March and 750,000 in February.
  • The Unemployment Rate fell to 3.6% in March from 3.8% in February and 4.0% in January.
  • The Labor Force Participation Rate rose to 62.4% in March from 62.3% in February.
  • The Average Hourly Wage rose 0.4% in March after a 0.1% rise in February, up 5.6% YoY.
  • Job Openings were unchanged in February from 11.3 million in January.

Inflation Economic Data Released in March 2022

It’s scary when you realize the February Inflation Data released in March was collected before the Ukraine War started. It’s also scary how fast Inflationary Psychology can creep into Consumers’ Psyche. Once that happens, the Wage-Price Spiral kicks in, and Inflation becomes a self-fulfilling, self-sustaining phenomenon.

The Fed knows this. That’s one reason they started talking tough after the March FOMC meeting. The bulk of the current Inflation is shelter, cars, energy, and food – all the things we really need. However, everything is going up in price.

  • CPI rose 0.8%, up 7.9% YoY | Core CPI rose 0.5%, up 6.4% YoY.
  • PPI rose 0.8%, up 10% YoY | Core PPI rose 0.2%, up 8.4% YoY.
  • PCE rose 0.6%, up 6.4% YoY | Core PCE rose 0.4%, up 5.4% YoY.

GDP Economic Data Released in March 2022

The third and final estimate for fourth quarter GDP showed the U.S. Economy grew at a 6.9% annualized rate, slightly lower than the second estimate of 7%. That places GDP for all of 2021 at 5.7%, the fastest since 1984. One significant aspect of this data was Inventory Rebuilding, a large contributor to fourth quarter GDP growth. This is especially good news for the Supply Chain and Inflation.

Consumer Economic Data Released in March 2022

When analyzing Consumer Data, keep in mind that an Inflation component is embedded in the Retail Sales data. Retail Sales is reported in terms of the “dollar amount” Consumers spent to buy stuff, not the number of units purchased. So, if Consumers bought the exact same physical amount of goods, and Inflation caused the price of the goods to cost more, then Retails Sales Data would rise. Eventually, higher prices will erode Consumers’ buying power, and they will cut back on buying anything but the necessities.

  • Retail Sales rose 0.3% during February, now up 17% in the last 12 months.
  • Consumer Confidence Index rose to 107.2 from 105.7 the prior month, down 6.7% YoY.
  • Consumer Sentiment Index (UofM) fell to 59.7 from 62.8 the previous month.

Energy, International, and Things You May Have Missed

Oil Prices soared to $125 per barrel, then fell back as the Ukraine War dragged on. After President Biden announced he would release oil from the Strategic Reserve, Oil Prices fell again.

  • West Texas Intermediate Crude rose $100/barrel (March 31) from $96/barrel (Feb. 28)
  • North Sea Brent Crude rose to $108/barrel (March 31) from $99/barrel (Feb. 28).
  • Natural Gas rose to $5.65/MMBtu (March 31) from $4.40/MMBtu (Feb. 28).
  • The Ukraine War has not affected the U.S.-Russian joint space effort, as three Russian Cosmonauts boarded the International Space Station this month. 
  • President Biden announced he is releasing Oil from U.S. Strategic Reserve to help relieve pain at the pump.
  • The value of the Russian Ruble bounced back roughly to its pre-war level, despite Economic sanctions.

The Mortgage Economic Review is produced by Mortgage Elements Inc. and MortgageElements.com, and is a concise summary of key economic data that influences the mortgage and real estate industries. The information is gathered from sources believed to be credible; some are opinion-based and editorial in nature. Mortgage Elements Inc. does not guarantee or warrant its accuracy or completeness.

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