US Debt Story, Home Values Rise, Jobs Bump

Andrew Jackson, American Lawyer, soldier, statesman, and 7th President of the United States is known for leading battles that lead to the annexation of Alabama, Georgia, and Florida. A hero of the common man (also a slave-owner) and founder of the Democratic party, he’s enshrined on our 2nd most popular bill (23% of circulation). Less famously he once ran a successful presidential campaign to pay off the National Debt. He spent over half the national budget to do so. Since income tax didn’t exist he raised tariffs (up to 45% on some goods), stole and sold Native American lands, and vetoed bills. After 6 years of pillaging land, throttling trade, and stifling infrastructure there were no more government bonds. 2 years later a credit bubble burst, half the banks failed, and the country experienced one of the worst economic depressions. The Panic of 1837 lasted for 5 years and the government began borrowing – we’ve been in debt ever since. Even though we are nearly $28T in debt, US government bonds continue to remain one of the most popular and trusted investments on Earth.

Rates – moved higher this week after 8 weeks of improvement. The price of Mortgage Backed Securities dropped in response to strong job reports, falling back below their 200 day moving average and outside of their recent trading pattern. Rates are down approximately 1/8% from this time last year.

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Jobs – the BLS Jobs Report was released for the month of July with the headline unemployment figure dropping 0.5% to 5.4%. Over a million jobs were created and 782,000 folks moved off unemployment benefits. The u-6 unemployment figure is closer to 9.2% which counts the 6.5M additional folks who are not counted in the headline figure (not in the labor force but want a job). 13M people continue to receive some sort of unemployment benefits. The labor force participation rate remained near 61%. Weekly earnings increased 0.4% month over month and are up year over year by 4.6%.

Home Values – CoreLogic released their home price index for June which showed a scorching 1-month gain of 2.3% . Year over year growth of 17.2% is the highest gain on record since 1979. This means if you purchased a home for $400,000 in June of 2020 it would be worth nearly $469,000. Moving forward CoreLogic predicts 3.2% growth over the next 12 months, but that number should be taken with a grain of salt as last June they predicted depreciation.

Mortgage Applications to purchase homes fell 1.8% from the previous week and are down 18% on a year over year basis. Nearly 23% of purchases were cash transactions (up from 16% this time last year). Refinances are down 3% year over year and compose 68% of applications.

Fed – Fed Governor, and possibly next chair, Lael Brainard believes the Fed should begin tapering their purchases of Mortgage Backed Securities and Treasury bonds. She will be more confident in her stance after assessing September data when school and work patterns settle in to post-pandemic norms. This data won’t be available until October, and the closest Fed meeting is November 3rd. As they have repeatedly said they would announce tapering with plenty of warning, if they were to announce in November actual tapering likely won’t start until early 2022.

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