[REN #923] Real Estate News Brief: A Boom in Pending Home Sales, a Dip in the Jobless Rate, and a New FICO Score

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Real Estate News Brief: A Boom in Pending Home Sales, a Dip in the Jobless Rate, and a New FICO Score, Real Estate News for Investors Podcast Episode #923

In this Real Estate News Brief for the week ending the Fourth of July 2020… market optimism after a report on pending home sales, good news about jobs, and a new FICO score that could help borrowers with below-average scores.

Economic News

We begin with economic news from this past week, and a report on pending home sales that sent the stock market soaring. They were up a record 44.3% from April to May, according to the National Association of Realtors. That’s the largest monthly increase ever. It also followed two months of serious declines, but is evidence of what some economists say will be a “V”-shaped recovery for the housing market. (1)

The latest report on home prices was also a positive sign for housing. The S&P CoreLogic Case-Shiller 20-city index released a report for April that shows a 4% year-over-year gain. It’s significant because it’s the first monthly report that accounts for the full effect of the pandemic, and it shows that home prices are stable.

The Commerce Department is showing a decline in construction spending for May, but the numbers are better than April. Overall spending was down 2.1% in May compared to 3.5% in April.  Residential construction was down 4% while non-residential construction slipped 2.4%. Spending on government construction projects was up a little more than 1%.

The stock market had another good day on Thursday, after the government released June employment numbers. The report shows that the U.S. added 4.8 million jobs in June. That helped bring the unemployment rate down to 11.1%. The report was compiled before the latest surge in coronavirus cases. Economists are worried that a rise in new infections could slow the current rehiring process.

Consumers are feeling more optimistic with the reopening of the economy. The Conference Board says, consumer confidence jumped to a three-month high of 98.1. That’s up from 85.9 in May. This survey was also taken before a steep rise in COVID-19 cases, and new restrictions on reopening plans.

Mortgage Rates

Mortgage rates are sinking lower. Freddie Mac says the average 30-year fixed-rate mortgage fell six basis points to 3.07%. If you do your homework, you’re sure to find some lenders offering rates below 3%. (2)

In other news making headlines…

New FICO Resilience Index

The company that created the FICO score has come up with a new credit index that could help borrowers with a low score to qualify for a loan. It’s called the FICO Resilience Index to show lenders whether a borrower can weather an economic downturn. (3)

It’s based on personal financial data before and after the Great Recession. Unlike the FICO, a lower score is better. On a scale of 1 to 100, a lower score shows greater financial resilience while a higher score shows more sensitivity to economic ups and downs. The new index puts more emphasis on a person’s use of credit, instead of whether they might default on a loan. FICO says, people who are more resilient will have fewer active accounts, lower balances on those accounts, and more experience managing their credit.

Realtor.com’s senior economist, George Ratiu, says the FICO score alone may not be “a clear indicator of a consumer’s current financial health” in today’s economic environment.

National Mask Mandate and the GDP

Goldman Sachs is making an argument in favor of a national mask mandate, by showing how it could impact the GDP. Goldman chief economist Jan Hatzius and his team of researchers say that a national mask mandate could increase the number of people who wear masks by 15%. They say that would reduce the number of new coronavirus cases by 1%, and lower the infection rate to just .6%.

By their calculations, the reduced infection rate would prevent lockdowns that would have taken a 5% bite out of the gross domestic product. Right now, the federal government recommends the wearing of masks, but it’s up to individual states to issue a mandate. Hatzius’ team analyzed state data on masks and found that a mandate is issued, the use of masks by people who always or frequently use them increased by about 25%.

Hatzius says, “We find that face masks are associated with significantly better coronavirus outcomes.” And, because of that, a significantly better GDP. (4)

FHFA Extends Multifamily Forbearance

The FHFA has extended the forbearance timeline for multi-family landlords with loans from Fannie Mae or Freddie Mac. Under this new agreement, property owners can have a total of six months of forbearance. The deal also protects renters from eviction during the forbearance period. Once that six month period has lapsed, property owners have 24 months to make up the missed payments.

IRS July 15th Tax Deadline

The IRS has decided not to extend the tax filing deadline from its current date of July 15th. Treasury Secretary Steven Mnuchin had hinted at the possibility of another extension, but the IRS announced this last week that officials were sticking with July 15th. The IRS had initially postponed the date from April 15th because of the pandemic. (5)

I wish everyone a happy and safe at home Fourth of July holiday. 

Links:

(1) MarketWatch Report

(2) Mortgage Rates: Freddie Mac

(3) New FICO Index

(4) Mask Mandate

(5) Tax Deadline

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