Today the mortgage banking association purchase application data showed a continued V-shape recovery in housing as purchase application data was up 22% year over year.
From Calculated Risk:
We have seen 11 straight weeks of year over year growth and 10 consecutive weeks of double-digit growth.
Seasonality has kicked in with this data line, total volumes are falling, I keep saying that this year over year rate of growth can’t be sustained, but I have been wrong so far. As long as we stay flat to positive year over year until January 2021, the recent sale gains can be held.
Don’t forget our best home sales print has come in the fall and winter, not the spring or summer in the past decade. A few weeks ago for Housing Wire, I talked about a year over year growth print for the existing home sales market even getting sales back to 5,510,000
The V-Shape Housing Charts are legit!
It’s not just housing anymore. We have a lot of other data lines showing a V-shape recovery.
When dealing with high-velocity data, the context must be critical. We are working from the mother of all low bars that can’t be replicated again because it wasn’t just the government lockdowns that hurt the economy; it was the fear of the virus as well. So, the data can be very violent month to month going out, especially after the 2nd surge of cases focused on some states to close down some business.
We saw some of that in the ADP report today, which missed by some estimates a 1,000,000 jobs. It was positive, still at 167,000. The reality is that data is going to wild until we get a more stable environment.
We have a lot of work to do to get back to a traditionally slow and steady economy. However, we are making progress even with an active virus, still creating new cases every day in America. I still believe that by September 1st, the new virus data will look better from recent highs. We got back to reality before the July the 4th weekend, and the case growth has been falling. It’s the winter that I am very mindful right now and have been since the start of this recovery process.
As always, deaths lag cases, so while new case growth is slowing down. Deaths will be rising but shouldn’t see the type of velocity we saw at the start of this crisis.
If you want to make a case that mortgage rates on the 30-year fix can go below 2%, it’s a horrific winter 2nd wave that could create that.
For now, we shouldn’t see a W in the economy. Some of the data is at risk for reversing or slowing down some of the gains. We had moved off the worst economic case due to significant fiscal and monetary disaster relief, which could up being over 12 trillion dollars when its all said and done.
I am not a big fan of talking about shapes of recovery in the general economy because I believe that talk leaves you at a significant risk of missing out on the early recovery data. This is was a big reason why I wrote my (AB) America is Back economic model back in April because knowing the financial and political community, they were going to be too bearish as always for too long.
The model can be found here, it will be updated again near September 1st with new data.
Jobs Friday is coming up! Just be ready for some wild swings in the data until we can get to a more solid footing to work with. In time we will get a vaccine, and we will move past this horrific event. Then we can actually have a stimulus plan that will help small businesses and those in the service sector business that has been decimated due to this virus.
Logan Mohtashami is a Lead Analyst for Housing Wire, financial writer, and blogger covering the U.S. economy with a specialization in the housing market. Logan Mohtashami, now retired, was a senior loan officer at AMC Lending Group, which has been providing mortgage services for California residents since 1987.