Factories in the U.S. are at their busiest in the previous 15 years, since 2007 before we had smart phones. The auto sector has been doing extremely well. A the same time 11% of subprime personal loan accounts are at least 60 days late – those on the margin with low credit scores are having trouble paying their bills. Overall delinquencies for credit cards are below pre-pandemic but lower income folks are hurting with higher food and gas prices. Median Housing prices are up 35% from April 2020 to April 2022 fueled by strong demand and limited supply.

Rates improved very slightly this week as the price of Mortgage Backed Securities (MBS) moved out of their negative trading pattern.

Jobs – the number of people filing for unemployment for the first time increased by 21,000 to 218,000. This is still a really low level but it has been trending up for the past month. If this continues to trend upwards it would indicate a rise in unemployment – a recessionary indicator.

Home Sales – the paces of existing home sales (new construction not included) slowed down 2.4% in April and is down 5.9% year over year. This single digit decline shows the housing market is still strong despite higher rates, higher prices, and lower inventory. These numbers are compared to a banner year in 2021. The median price is up a whopping 15% year over year – the main story is the inventory of homes priced under $500k is entirely lacking. First time homebuyers made up 28% of sales, cash buyers 26%, investors 17%, and distressed sales less than 1%.

New Construction – the overall figure for housing starts increased marginally in April (0.2%) but the number of single family home starts is down 7.3% and single family permits also declined by 4.6%. These numbers are up year over year but supply is not burgeoning. Right now we are building about 1.7M homes annually. In the same time period about 1.4M new households are formed and 0.1M homes are destroyed. That leaves us with an annual net gain of about 200,000 homes per year to address the Freddie Mac undersupply estimate of 3.8M homes. Even if that figure was only 1M we would still need 5 years to recover at current pace.

Mortgage Applications to purchase homes declined 12% last week and are down 15% year over year. Interest rates fell slightly but are up about 2.375% from this time last year. Refinances are down approximately 76% year over year. Refinances are making up less than 1/3 of transactions and ARMs make up 10%.

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