Economic Gains Broad-Based in June, but Difficulties PersistIn a busy week for economic data releases, a range of June metrics registered meaningful improvement while generally underscoring the long road that remains to full recovery. In its July edition of the Beige Book, the Federal Reserve reported that economic activity was improving in 10 of 12 Fed districts through early July, but also took pains to emphasize that the gains took place against a very low baseline. In the previous May edition, all 12 Fed districts observed economic contractions. The Beige Book noted that demand for business and professional services had generally increased but remained weak. Construction activity remains subdued. In addition, Fed contacts in nearly every district reported firms experiencing further layoffs and difficulties bringing back workers while addressing health and safety concerns. Some severely impacted sectors are seeing positive movement. Industrial production beat expectations and jumped 5.4% in June as previously idled motor vehicle and business equipment factories restarted operations. The index is still down 10.8% YOY, however, and capacity utilization for the industrial sector remains 11.9 percentage points below the long-run average. Similarly, retail and food services sales surged 7.5% in June compared to a month prior and is one of the few indicators to return to pre-COVID levels. The improvement in both consumer spending and business spending pushed inflation to 0.6%, easing disinflationary concerns after three months of consecutive declines. Several sentiment indices have improved in line with the economic gains noted above, but an early-July downturn in consumer sentiment underscores the fragile nature of the recovery. After notching solid gains in June, the University of Michigan consumer sentiment survey retreated in early July to 73.2, just above May levels. This retreat corresponds with rising virus levels and a return of restrictions in many areas, suggesting sentiment is unlikely to substantially improve without more positive perceptions of public health and safety.Consumer, Small Business, and Builder Sentiment Indices ![]() |
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Multifamily and Office Relatively Stable in Second QuarterSecond quarter data released by REIS last week show both the national multifamily and office sectors holding relatively steady but with some signs of softening beginning to appear. The U.S. apartment vacancy rate remained unchanged from the prior quarter holding steady at a healthy 4.8%, and net absorption was positive in 66 of the 82 markets that REIS covers. Multifamily effective rents did fall 0.4%, however, marking the first nationwide decrease since the Great Recession. In the office sector, the national vacancy rate ticked up 10 bps to 17.1% as net absorption turned negative for the second consecutive quarter. In turn, the slack demand for office space corresponded with declines in asking and effective rents of 0.1% and 0.4%, respectively. Overall, office rents decreased in 49 of REIS’s markets with the greatest rent losses in Fort Worth, Tucson, and Fairfield, CT.Q2 Top & Bottom Apartment Rent Growth Q2 Top & Bottom Office Rent Growth ![]() |
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Mortgage Rates Reach an All-time Low and Could Decrease FurtherThe average interest rate on a 30-year fixed-rate mortgage averaged 2.98% during the week ending July 16th, marking the first time the rate dropped below 3.0% since Freddie Mac began reporting the metric nearly 50 years ago. The average interest rate stood at 3.8% a year prior but has steadily declined in recent weeks as lenders worked through a backlog of refinancing applications. Looking ahead, the 3.0% mortgage rate could be here to stay, especially if the Federal Reserve maintains benchmark interest rates near zero through 2022 as currently planned. Even after the recent declines, the spread between mortgage rates and the yield on the 10-year Treasury remain wider compared to a year ago, suggesting lenders still have room to cut rates, and that is what Fannie Mae expects them to do. In the government-sponsored entity’s most recent Economic & Housing Outlook, Fannie Mae projects the 30-year fixed-rate mortgage rate will average 2.9% during the first half of 2021 before dropping further to 2.8% in the latter part of the year. |
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June Payrolls Expanded in Every StateDuring the month of June when the U.S. added 4.8 million net new jobs, every state across the country saw nonfarm employment increase as officials lifted stay-at-home restrictions and allowed business to reopen. The leisure and hospitality sector led the way with the largest percentage increases in nearly every state, while trade, transportation, and utilities and education and health services also recorded significant increases. Despite June’s gains, official unemployment rates remain elevated across the country with Massachusetts, New Jersey, and New York registering the highest figures and setting all-time highs in records that date back to 1976. Nevada follows fourth with an unemployment rate of 15.0%, better than May’s 25.3%.June Official Unemployment Rate by State ![]() |
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The Weekly Briefing - July 20th, 2020
The Weekly Briefing – July 20th, 2020
In This Week’s Brief:
- Economic Gains Broad-Based in June, but Difficulties Persist
- Multifamily and Office Relatively Stable in Second Quarter
- Mortgage Rates Reach an All-time Low and Could Decrease Further
- June Payrolls Expanded in Every State