The Congressional Budget Office (CBO) is anticipating a grim second quarter this year as the economy sputters amid coronavirus-related layoffs and business closures, CBO director Phill Swagel said in a blog on Thursday (April 2).
Considering the disruption of daily business combined with a boost from the stimulus package, the CBO’s “very preliminary estimates” point to a drop in gross domestic product (GDP) exceeding 7 percent in Q2 2020.
“If that happened, the decline in the annualized growth rate reported by the Bureau of Economic Analysis would be about four times larger and would exceed 28 percent. Those declines could be much larger, however,” he said.
There were more than 3.3 million new unemployment claims reported on March 26. The Q2 unemployment rate “is expected to exceed 10 percent during the second quarter, in part reflecting the … claims reported on March 26 and the 6.6 million new claims reported this morning [Thursday, April 2].”
The CBO indicated that new claims filed April 2 were 10 times higher than in any single week from 2007-09, during the financial crisis and recession. And unemployment is likely to exceed 10%
Of course, mortgage delinquencies will explode to near 30%.
Mortgage Real Estate Investment Trusts (MREITs) got clobbered starting February 20th and declined by over 50% before a small rally after the Fed/Congressional bailouts.
Year-to-date, mortgage REITs are down over 50%.
The Fidelity and Vanguard bond indices didn’t plunge as far and had a better rebound effect after the bailouts.
Equity REITs had a plunge and rebound similar to the Dow.
Mr. Freeze is still around for mortgage REITs.
(Bloomberg) — U.S. loan applications for buying and refinancing homes plunged last week by the most since the global financial crisis, amid coronavirus shutdowns and related financial turmoil that pushed borrowing costs higher.
The Mortgage Bankers Association’s index of applications fell 29.4% in the week ended March 20, the biggest decline since early 2009. Home-purchase applications dropped by 14.6% while refinancing applications plummeted 33.8%.
The average contract rate on a 30-year fixed mortgage increased 8 basis points to a two-month high of 3.82%, despite the Federal Reserve cutting the benchmark interest rate to near zero.
The decline in applications is an early sign suggesting home sales will slow and that refinancings are coming off a spike. That follows other data indicating a precipitous dropoff in business activity this month as stores and schools shutter to prevent the spread of the virus.
Yes, MBA mortgage applications fell the most since 2009 and the financial crisis.
Mortgage rates actually rose last week (yellow line) but will likely decline this week.
The biggest decline came in mortgage refinancing applications, down 33% WoW.
Mortgage purchase applications dropped 14.64% WoW.
The WHO (World Health Organization, not the 60s/70s rock band) announced that the coronavirus is a new PANDEMIC.
Or it is a bubble pop? Not tiny bubbles as Don Ho sang. But a BIG bubble … burst.
Yes, The Federal Reserve and other Central Banks kept their target rate near zero for almost the entire Obama Presidency, then started to raise rates only to lower them again. But the S&P 500 and NAREIT – all equity indices have risen dramatically as well.
A bear market in equities is when prices fall 20% from their peak. Over the past month, we are almost in a bear market.
Is this that fast 20% in history? Nearly.
And there is lots of downward rotation in global equities.
Yes, equity markets are fragile thank to the central banks. And now the bears have been awakened.
Fear is roiling the markets on Monday.
Thus far, the Dow is down over 800 points.
Global equity indices are seeing red.
The 10-year Treasury yield is down over 10 basis points.
WTI Crude is down 4.36%. Gold is up 1.88%.
Fear is dominating the market!
But one can do well on the corona fear with Proshares S&P500 short ETF!