All Things in Moderation

Vital Statistics:

Stocks are higher this morning as we head into a 3 day weekend. Bonds and MBS are flat. Note the bond market closes early today.

Personal Incomes fell 13.1% in April, which was driven by March stimulus checks. Personal spending rose 0.5%, while the savings rate came in at 14.9%. The Personal Consumption Expenditures index (inflation) rose 0.6%, and 0.7% ex-food and energy. On a YOY basis it was up 3.6% overall and 3.1% ex-food and energy. We will see elevated annual figures for the next several months as COVID lockdowns a year ago introduce noise into the numbers.

The US savings rate has been elevated since the COVID lockdowns were imposed. I suspect a lot of this has been due to reduced spending on experiential stuff – i.e. vacations, eating out, etc. The economic consensus seems to be that the elevated savings rate will reverse this year and that higher spending will drive growth in the second half of the year. That said, the Atlanta Fed’s GDP now tracker for the second quarter has been trending down, having just fallen from 10% to 9%.

Pending Home Sales fell 4.4% in April, according to NAR numbers. On a YOY basis, however sales were up 51.7%. “Contract signings are approaching pre-pandemic levels after the big surge due to the lack of sufficient supply of affordable homes,” said Lawrence Yun, NAR’s chief economist. “The upper-end market is still moving sharply as inventory is more plentiful there.”

Loans in forbearance increased according to numbers out of Black Knight Financial. The number rose 16k to 2.2 million homes. This is 4.1% of homeowners.

Fannie Mae’s new “Refinance Now” program opens June 5. These are basically high LTV refis. They will be limited to primary borrowers at lower than 80% of the area median income income, and will be subject to the GSE high risk loan limits. They also must have a DTI under 65% and an LTV below 97. The minimum FICO is 620.

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