Student Debt Forgiveness, Home Equity vs. Net Worth, New Podcast!

Biden’s plan cancels up to $10,000 of loans for borrowers making under $125,000 a year (single filing X2 for married filing jointly) and up to $20,000 for loans for lower-income Pell Grant recipients. If you have recently paid off debt you may be able to apply for a refund for payments made since March 2020 (when the government hit pause). Some critics worry this will be inflationary for an economy that is already struggling with inflation but this plan will also restart the payments on student loans that have been paused for 23 million Americans. The act might actually be a deflationary impact. Some of the finer details of the mechanics on how they will calculate income, application deadlines, etc. are still yet to be determined.

Mortgage Rates – increased over the last week as the price of Mortgage Backed Securities (MBS) deteriorated. MBS responded negatively to the second look at Q2 GDP which showed a 0.6% contraction instead of the 0.9% first look number. MBS also responded negatively to Fed Chair Jerome’s Powell’s comments stating that ‘curbing inflation will cause pain for U.S. households and businesses’ which suggests that the Fed might will take a weaker stance against inflation than previously thought. As we know inflation is the arch nemesis of mortgage rates which are up roughly 2.75% from this time last year.

Inflation – the Fed’s favorite measure of inflation, Personal Consumption Expenditures (PCE) showed that inflation dropped 0.1% in July and the year over year reading is down from 6.8% to 6.3%. The core rate, which strips out food and energy, rose by 0.1%. The year over year core rate is down from 4.8% to 4.6%.

Jobs – the number of people filing for unemployment for the first time decreased slightly this week and the rolling 4 week average has flattened out just under 250,000 claims per week.

Home Sales – the number of homes with signed contracts decline 1% in July and are down nearly 20% year over year. NAR’s chief economist Lawrence Yun believes we are at or near the bottom in contract signings and he predicts annual home gains to moderate to a more sustainable 5% by year’s end.

Net Worth – now that rates have gone up and the housing market is coming back to a normal, pre-covid level, there are many influencers out there questioning the value of owning a home. Generally speaking home equity makes up about 2/3’s of America’s net worth. An important reminder that forced savings (mortgage payments) on appreciating assets are very valuable.

Mortgage Applications to purchase homes declined by 1% last week and are down 21% year over year. Refinance applications decreased 3% last week and are down 83% year over year making up 31% of transactions.

Podcast – episode 3 is out! We interviewed Henry Liu, local restauranteur, real estate investor, and now realtor.

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