The market has been anything but normal over the past few weeks as the U.S. economy has come to a standstill amid the COVID-19 outbreak. States and cities across the U.S. have issued stay-at-home orders.
President Trump had initially hoped the economy would be reopened by mid-April, but his latest guidelines urge stay-at-home orders to remain in effect through the entirety of the month. Only essential businesses — real estate, title insurance, healthcare, hospitality, food, shipping, law, infrastructure, and energy — have remained open with the rest moving their operations entirely online and mandating “work-from-home” policies.
An Historic Month
The COVID-19 pandemic has dominated the financial markets since mid-March resulting in historic movement day in and day out. As the economy prepared for shutdown, many investors moved their money out of stocks and bonds and into cash instead.
Stocks have been hit hardest; in terms of bonds, even low-yield bonds, have seen less demand. Investors are worried that the stimulus package will push the yields on bonds much higher, making them a riskier buy. For now, many investors are keeping their assets in cash. Many economists believe a combination of a fiscal stimulus and monetary stimulus will be needed to stabilize the economy.
Central banks around the world are now preparing for action. The European Central Bank announced lending programs for businesses impacted by the crisis. Last Monday, the Fed decided to start purchasing securities, announcing that they will do so to the degree necessary to support the economy, thus putting no limit on their spending. With mortgage-backed securities on their purchase list, the mortgage rate continued to decrease.
Congress also announced an historic stimulus package last week, a $2 trillion relief fund for individuals, small businesses, and industries hardest hit by the economic downturn. This includes direct payments to individuals and families under a certain threshold. Many small businesses received a tax credit for keeping their employees on payroll. Larger industries such as hospitals and airlines received funds as well.
When the stimulus package was passed, the mortgage rate then returned to previous U.S. levels. Treasuries flooded into the market funding spending, thus pushing the mortgage rate back up, offsetting the decrease from the Fed’s spending earlier in the week.
Other Economic News
Core inflation has remained stable in recent weeks and months. The Consumer Price Index, the most popular measure of inflation, found core CPI in February to be 1.8% higher year-over-year.
This is slightly lower than the average annual rate of 2.3% from January 2020. It is also below the Fed’s target inflation rate of 2.0%, and the economic downturn is likely to push it even lower.
The COVID-19 pandemic is going to dominate the news and financial markets. Investors are primarily focused on the actions of the Fed and the government.
The monthly employment report for March will be bleak, but investors remain hopeful that the current action and stay-at-home orders will start to level off the negative economic news sooner than later.
For further information on the loan and real estate market, get in touch with one of the title and escrow specialists at Plymouth Title Guaranty Corporation.
Information accredited to MBSQuoteline.
Please note: The safety of our staff and clients is our highest priority. Effective immediately, Plymouth Title Guaranty Corp. will be taking the following precautions to limit the spread of the COVID-19 virus:
All purchase transactions need to take place at a Plymouth Title Guaranty Corp. closing office
- If a party to the closing is not feeling well, please contact your closer prior to the closing so appropriate precautions can be taken;
- We ask visitors to utilize the restroom in our building upon arrival to thoroughly wash hands before entering our office;
- Only individuals required to sign and/or deliver documents at closings will be allowed in our office. Specifically, closings will be limited to borrower(s), seller(s), agents, and lenders;
- All pens used in the closing will be given to the client after use;
- All closing rooms will be cleaned and disinfected in-between each closing;
- Those picking up checks at our office will be instructed to call our main line and request to speak to a staff member who will make arrangements for delivery to the lobby or parking lot of our office; and
- All staff will refrain from shaking hands before or after closings and ask clients do the same
Please be advised that our staffing may be impacted during this unprecedented event. While we are committed to continuing to provide outstanding service, we ask for your patience in the face of this pandemic.
This is a fluid situation and we will continue to adjust our protocols as necessary while following the CDC guidelines.