Connect with us

Government

5 Reasons Why US Housing Has Been The “Shining Star” Of The Covid Crisis

5 Reasons Why US Housing Has Been The "Shining Star" Of The Covid Crisis

Published

on

5 Reasons Why US Housing Has Been The "Shining Star" Of The Covid Crisis Tyler Durden Tue, 07/21/2020 - 14:27

Two weeks ago we posted a chart from Deutsche Bank, which showed that contrary to previous economic contractions, the current one has been a clear outlier in that personal income has surged instead of fallen, as it usually does during slowdowns...

... despite tens of millions of newly unemployed workers, leading to what Deutsche Bank's Jim Reid called "the strangest recession in history." This has been almost entirely due to extremely generous government stimulus checks and unemployment benefits, although as we noted previously, the $600 per week in Federal Pandemic Unemployment Compensation (FPUC) is set to expire at the end of July, while the Pandemic Emergency Unemployment Compensation (PEUC) and Pandemic Unemployment Assistance (PUA) will also expire at the end of this year. It is widely expected that these will be replaced with a similar, if perhaps less generous stimulus program to take advantage of the $1.8 trillion in excess cash currently parked at the Treasury which Trump will be eager to spend before the recession.

However, which personal income has truly been a historic outlier, the current recession is also unique for one other reason: a housing market that has been on a tear - the "shining start in the economic recovery" according to BofA economists - and has stubbornly refused to succumb to the economic weakness.

As Bank of America writes, while home sales and construction fell sharply during the national lockdown in the spring, it has since bounced strongly with mortgage purchase applications rising above pre-COVID-19 levels and NAHB homebuilder sentiment flirting with record highs. Meanwhile, new home sales have recovered 49% (May) of the peak-to-trough loss and housing starts 37% (June), and in short order, we should see starts and sales fully recover to pre-COVID-19 levels or beyond.

The natural question is why the housing market was able to bounce so quickly in the face of an historic shock which left 22 million people unemployed? Here BofA offers five explanations:

  1. An uneven recession: the shock disproportionally impacted the lower income population who are less likely to be homeowners. Consider that 55% of households earning less than $35K a year lost employment income vs. only 40% of those earning $75K and above. According to the NAR, the median household income of recent homebuyers is $93k.
  2. Record low interest rates: mortgage rates reached a new historic low last week. Average monthly mortgage payments have declined by $80/month relative to this time last year due to lower mortgage rates.
  3. Running lean pre-crisis: inventory was low, home equity was high and debt levels manageable. The homeowner vacancy rate reached the lows of the mid-1990s.
  4. Supportive fiscal and monetary policy: forbearance programs reduced potential stress from delinquencies - according to the MBA, 7.8% of all mortgages were in forbearance as of July 12, which amounts to 3.9mn homeowners.
  5. Pandemic-related relocations: moving to the 'burbs is a real phenomenon. Take NYC - according to data from USPS, the number of mail forwarding requests from NYC spiked to more than 80,000 in April, 4X the pre-COVID-19 monthly pace.

Below we look at each of these in more detail:

An Uneven Recession

  • The COVID-19 pandemic has created pain unevenly with the lower income cohort feeling the brunt of the shock. For those households earning under $35k/year, more than 55% have experienced a loss of employment income.
  • For those households making between $35-75k, a little over half have lost employment income. Note that the median household income was $63k in 2018, which falls into this range.
  • The median income for new homebuyers is $93k, which means part of a population with more job security-42% of households making above $75k have seen a loss in employment income.

  • According to the NAR, the median household income of homebuyers is $93k. The majority are between $75-125k, although 11% of households make more than $200k.
  • Even for the youngest homebuyer, aged 22-29, median household income is $80k. This places them above the US median household income of $63k. The oldest homebuyer cohort of 74-94 has the lowest median income of $70k, presumably because they are retired and are not actively earning.
  • This income distribution suggests the housing market is more sensitive to the health of the middle- and upper-income population and more immune from strains on lower income cohorts.

  • We can compare the demographic characteristics of homeowners vs. renters using information from the American Housing Survey.
  • The median household income of owner-occupied households in 2017 was nearly double that of renters at $70k vs. $36k.
  • Homeowners also tended to be older and more highly educated. Once again, the COVID-19 pandemic shock impacted the lower-income population disproportionally, likely keeping the housing market more sheltered than the rental market.

Record low interest rates

  • Mortgage rates have plunged, falling roughly 50bp from the February averages, prior to the shock from COVID-19. The 30 year fixed rate mortgage (FRM) has hit a record low.
  • Low rates will continue: the Fed has been forceful at providing stimulus and is likely to keep policy accommodative with rates exceptionally low well into the recovery.
  • Surveys show that low mortgage rates can push potential homebuyers into the market - according to the University of Michigan survey, 43% of respondents say that it is a good time to buy because rates are low.

  • Assuming the median home price of $288k and average mortgage rates, the monthly mortgage payment would be about $1,007/month. This is $80 less than a year ago.
  • While wages and salaries have fallen given the strains in the labor market, stimulus checks juiced up incomes resulting in median family income popping higher in April and May, increasing housing affordability.
  • Also individuals are making the decision to buy or rent - the decline in mortgage payments is faster than that of rents given that the latter tends to be stickier as landlords have to adapt to higher vacancies. But we expect lower rents to be forthcoming.

  • The decline in mortgage rates has prompted a sharp increase in applications for purchase loans which has exceeded pre-COVID-19 levels and is at the highest since early 2009.
  • While not all applications are approved, this measure is a good leading indicator of future home sales.
  • Indeed, new home sales bounced back 16.6% mom in May, which reflects almost a 50% recovery of the losses from the January high through April. Pending home sales similarly bounced 44.3% in May. We get data for June in the next few days which should show further gains.

Running lean pre-crisis

  • The housing market was lean heading into this crisis, which is in sharp contrast to the 2008-09 recession where the excesses in the housing market drove the downturn.
  • The supply of new homes on the market was running at 5.6 months in May while existing was at 4.6 months.
  • After recovering from the 2008-09 recession, builders were much more cautious and limited the degree to which they engaged in speculative building. There were also constraints on supply given limited labor and lots.

  • The homeowner vacancy rate stands at 1.1% while the rental vacancy rate is 6.6%. This represents a tight market for homes - home are typically sold or rented quickly and do not sit vacant for long
  • The low vacancy rates represent the lack of excess in the market.
  • The main trigger for vacancies tend to be foreclosures which were a major challenge in the last recession but have yet to be a factor today.

  • Little excess can also be seen on the lending side. The median FICO score at the end of the last expansion was 770, showing a responsible lending market and therefore a housing market that is better prepared to weather the storm.
  • Even the bottom tiers of the lending spectrum have become more conservative, with the 25th percentile credit score at 716 and 10th percentile at 661 at the end of 2019. Experian typically considers those that have a credit score above 670 as prime.
  • This compares to the end of the housing bubble when the median, 25th and 10th percentile credit scores bottomed at 707, 639, and 576, respectively.

Supportive fiscal and monetary policy

  • The CARES Act passed in late April allows for those with federally-backed mortgages to go into forbearance for 12 months without a lump-sum penalty thereafter. Other lenders followed suit to provide relief and similarly expanded forbearance rules.
  • According to the MBA, 7.8% of all mortgages were in forbearance as of July 12, which amounts to 3.9mn homeowners. The forbearance share was the highest for private label securities and portfolio loans at 10.41%, while Ginnie was a close second at 10.26%.
  • The MBA noted that forbearance has broadly edged lower in recent weeks as homeowners have been able to get back to work. However, there are risks given the virus spread and expiration of unemployment benefits at the end of July.

  • The CARES Act also provided a large boost to income. Starting in mid-April, checks for up to $1,200 a person were sent out and by early June there were 159mn payments distributed worth more than $267bn.
  • Unemployment insurance was also extended and expanded, providing a further boost and helping to augment income for those who became unemployed-many were laid off temporarily and therefore able to remain homeowners.
  • Transfer payments from the government averaged $5.8tn saar over May and June, reflecting a spike from $3.4tn in March that more than offset the loss in labor income. However, looking ahead, support will begin to wane with income set to normalize lower.

  • The Fed has been aggressive at expanding its balance sheet, buying mortgage-backed securities (MBS) and US Treasuries along with creating the credit facilities.
  • When the crisis first hit and markets looked unstable, the Fed launched a considerable QE program with purchases of MBS running as high as $50bn/day.
  • The pace has since been adjusted to a slower $40bn/month. Since COVID-19 hit, the Fed has expanded its MBS holdings by more than $575bn. This has been a decisive factor in keeping mortgage rates low and housing affordable.

Pandemic-related relocations

  • New York City emerged as one of the first pandemic hotspots in the US. Given the risks, many residents left the city for safer destinations, facilitated by a major shift by businesses to have employees work from home.
  • Indeed, a New York Times analysis of USPS data found that the number of mail forwarding requests from New York City spiked in March and April, reaching above 80,000 versus around 20,000 in February.
  • As businesses have adjusted to work from home, the spike in departures during the pandemic may mark just the beginning of an exodus from urban areas, not just New York but more broadly, towards suburbs.

  • A recent PEW survey in early June found that 3% of adults moved either permanently or temporarily due to the COVID-19 pandemic.
  • Where did those impacted relocate? The survey found that a solid majority (61%) moved to a family member's home. Digging a little deeper, 41% moved in with parents, 16% with another relative, and 4% with an adult child.
  • There were a variety of other options for those relocating: 13% of adults moved to a second home or a vacation home, 9% moved to a different permanent home, 7% moved to a temporary location, and another 7% moved in with a friend.

 

  • Another sign that the pandemic has garnered interest in relocating comes from the Redfin.com user data. The share of users searching for homes outside of their home metro area jumped to 27% as of the available 2Q data (April/May)-a record high-after falling to 26% in 1Q.
  • Redfin noted that the interest in smaller, less populated towns (1,000,000) were up a still strong 22% yoy.
  • From a regional perspective, New York, San Francisco, and Los Angeles have the greatest number of net outbound searches. Conversely, Phoenix, Sacramento, and Las Vegas were among the most attractive based on net inbound searches.

* *  *

Putting it all together, the bank believes there is likely "still more upside for housing activity into the fall but the rate of growth will moderate thereafter." That said, for now that fundamentals of the housing market remain favorable. Most notably, housing was affected by this recession and not the cause- in stark contrast to 2008-09-so a very different outcome is likely this time.

Read More

Continue Reading

Government

Delivering aid during war is tricky − here’s what to know about what Gaza relief operations may face

The politics of delivering aid in war zones are messy, the ethics fraught and the logistics daunting. But getting everything right is essential − and…

Published

on

By

Palestinians on the outskirts of Gaza City walk by buildings destroyed by Israeli bombardment on Oct. 20, 2023. AP Photo/Ali Mahmoud

The 2.2 million people who live in Gaza are facing economic isolation and experiencing incessant bombardment. Their supplies of essential resources, including food and water, are quickly dwindling.

In response, U.S. President Joe Biden has pledged US$100 million in humanitarian assistance for the citizens of Gaza.

As a scholar of peace and conflict economics who served as a World Bank consultant during the 2014 war between Hamas and Israel, I believe that Biden’s promise raises fundamental questions regarding the delivery of humanitarian aid in a war zone. Political constraints, ethical quandaries and the need to protect the security of aid workers and local communities always make it a logistical nightmare.

In this specific predicament, U.S. officials have to choose a strategy to deliver the aid without the perception of benefiting Hamas, a group the U.S. and Israel both classify as a terrorist organization.

Logistics

When aiding people in war zones, you can’t just send money, a development strategy called “cash transfers” that has become increasingly popular due to its efficiency. Sending money can boost the supply of locally produced goods and services and help people on the ground pay for what they need most. But injecting cash into an economy so completely cut off from the world would only stoke inflation.

So the aid must consist of goods that have to be brought into Gaza, and services provided by people working as part of an aid mission. Humanitarian aid can include food and water; health, sanitation and hygiene supplies and services; and tents and other materials for shelter and settlement.

Due to the closure of the border with Israel, aid can arrive in Gaza only via the Rafah crossing on the Egyptian border.

The U.S. Agency for International Development, or USAID, will likely turn to its longtime partner on the ground, the United Nations Relief and Works Agency, or UNRWA, to serve as supply depots and distribute goods. That agency, originally founded in 1949 as a temporary measure until a two-state solution could be found, serves in effect as a parallel yet unelected government for Palestinian refugees.

USAID will likely want to tap into UNRWA’s network of 284 schools – many of which are now transformed into humanitarian shelters housing two-thirds of the estimated 1 million people displaced by Israeli airstrikes – and 22 hospitals to expedite distribution.

Map of Gaza and its neighbors
Gaza is a self-governing Palestinian territory. The narrow piece of land is located on the coast of the Mediterranean Sea, bordered by Israel and Egypt. PeterHermesFurian/iStock via Getty Images Plus

Politics

Prior to the Trump administration, the U.S. was typically the largest single provider of aid to the West Bank and Gaza. USAID administers the lion’s share of it.

Since Biden took office, total yearly U.S. assistance for the Palestinian territories has totaled around $150 million, restored from just $8 million in 2020 under the Trump administration. During the Obama administration, however, the U.S. was providing more aid to the territories than it is now, with $1 billion disbursed in the 2013 fiscal year.

But the White House needs Congress to approve this assistance – a process that requires the House of Representatives to elect a new speaker and then for lawmakers to approve aid to Gaza once that happens.

Ethics

The United Nations Relief and Works Agency is a U.N. organization. It’s not run by Hamas, unlike, for instance, the Gaza Ministry of Health. However, Hamas has frequently undermined UNRWA’s efforts and diverted international aid for military purposes.

Hamas has repeatedly used UNRWA schools as rocket depots. They have repeatedly tunneled beneath UNRWA schools. They have dismantled European Union-funded water pipes to use as rocket fuselages. And even since the most recent violence broke out, the UNRWA has accused Hamas of stealing fuel and food from its Gaza premises.

Humanitarian aid professionals regularly have to contend with these trade-offs when deciding to what extent they can work with governments and local authorities that commit violent acts. They need to do so in exchange for the access required to help civilians under their control.

Similarly, Biden has had to make concessions to Israel while brokering for the freedom to send humanitarian aid to Gaza. For example, he has assured Israel that if any of the aid is diverted by Hamas, the operation will cease.

This promise may have been politically necessary. But if Biden already believes Hamas to be uncaring about civilian welfare, he may not expect the group to refrain from taking what they can.

Security best practices

What can be done to protect the security of humanitarian aid operations that take place in the midst of dangerous conflicts?

Under International Humanitarian Law, local authorities have the primary responsibility for ensuring the delivery of aid – even when they aren’t carrying out that task. To increase the chances that the local authorities will not attack them, aid groups can give “humanitarian notification” and voluntarily alert the local government as to where they will be operating.

Hamas has repeatedly flouted international norms and laws. So the question of if and how the aid convoy will be protected looms large.

Under the current agreement between the U.S., Israel and Egypt, the convoy will raise the U.N. flag. International inspectors will make sure no weapons are on board the vehicles before crossing over from Arish, Egypt, to Rafah, a city located on the Gaza Strip’s border with Egypt.

The aid convoy will likely cross without militarized security. This puts it at some danger of diversion once inside Gaza. But whether the aid convoy is attacked, seized or left alone, the Biden administration will have demonstrated its willingness to attempt a humanitarian relief operation. In this sense, a relatively small first convoy bearing water, medical supplies and food, among other items, serves as a test balloon for a sustained operation to follow soon after.

If the U.S. were to provide the humanitarian convoy a military escort, by contrast, Hamas could see its presence as a provocation. Washington’s support for Israel is so strong that the U.S. could potentially be judged as a party in the conflict between Israel and Hamas.

In that case, the presence of U.S. armed forces might provoke attacks on Gaza-bound aid convoys by Hamas and Islamic jihad fighters that otherwise would not have occurred. Combined with the mobilization of two U.S. Navy carrier groups in the eastern Mediterranean Sea, I’d be concerned that such a move might also stoke regional anger. It would undermine the Biden administration’s attempts to cool the situation.

On U.N.-approved missions, aid delivery may be secured by third-party peacekeepers – meaning, in this case, personnel who are neither Israeli nor Palestinian – with the U.N. Security Council’s blessing. In this case, tragically, it’s unlikely that such a resolution could conceivably pass such a vote, much less quickly enough to make a difference.

Topher L. McDougal does not work for, consult, own shares in or receive funding from any company or organization that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.

Read More

Continue Reading

Government

Diagnosis and management of postoperative wound infections in the head and neck region

“The majority of wound infections often manifest themselves immediately postoperatively, so close followup should take place […]” Credit: 2023 Barbarewicz…

Published

on

“The majority of wound infections often manifest themselves immediately postoperatively, so close followup should take place […]”

Credit: 2023 Barbarewicz et al.

“The majority of wound infections often manifest themselves immediately postoperatively, so close followup should take place […]”

BUFFALO, NY- October 20, 2023 – A new research perspective was published in Oncoscience (Volume 10) on October 4, 2023, entitled, “Diagnosis and management of postoperative wound infections in the head and neck region.”

In everyday clinical practice at a department for oral and maxillofacial surgery, a large number of surgical procedures in the head and neck region take place under both outpatient and inpatient conditions. The basis of every surgical intervention is the patient’s consent to the respective procedure. Particular attention is drawn to the general and operation-specific risks. 

Particularly in the case of soft tissue procedures in the facial region, bleeding, secondary bleeding, scarring and infection of the surgical area are among the most common complications/risks, depending on the respective procedure. In their new perspective, researchers Filip Barbarewicz, Kai-Olaf Henkel and Florian Dudde from Army Hospital Hamburg in Germany discuss the diagnosis and management of postoperative infections in the head and neck region.

“In order to minimize the wound infections/surgical site infections, aseptic operating conditions with maximum sterility are required.”

Furthermore, depending on the extent of the surgical procedure and the patient‘s previous illnesses, peri- and/or postoperative antibiotics should be considered in order to avoid postoperative surgical site infection. Abscesses, cellulitis, phlegmone and (depending on the location of the procedure) empyema are among the most common postoperative infections in the respective surgical area. The main pathogens of these infections are staphylococci, although mixed (germ) patterns are also possible. 

“Risk factors for the development of a postoperative surgical site infection include, in particular, increased age, smoking, multiple comorbidities and/or systemic diseases (e.g., diabetes mellitus type II) as well as congenital and/ or acquired immune deficiency [10, 11].”

 

Continue reading the paper: DOI: https://doi.org/10.18632/oncoscience.589 

Correspondence to: Florian Dudde

Email: floriandudde@gmx.de 

Keywords: surgical site infection, head and neck surgery

 

About Oncoscience

Oncoscience is a peer-reviewed, open-access, traditional journal covering the rapidly growing field of cancer research, especially emergent topics not currently covered by other journals. This journal has a special mission: Freeing oncology from publication cost. It is free for the readers and the authors.

To learn more about Oncoscience, visit Oncoscience.us and connect with us on social media:

For media inquiries, please contact media@impactjournals.com.

Oncoscience Journal Office

6666 East Quaker Str., Suite 1D

Orchard Park, NY 14127

Phone: 1-800-922-0957, option 4

###


Read More

Continue Reading

Government

Biden’s Student Loan Forgiveness Plan Makes the Poor Pay for the Rich

A year after the Supreme Court struck down President Biden’s student loan forgiveness plan, he presented a new scheme to the Department of Education…

Published

on

A year after the Supreme Court struck down President Biden’s student loan forgiveness plan, he presented a new scheme to the Department of Education on Tuesday. While it is less aggressive than the prior plan, this proposal would cost hundreds of billions of taxpayer dollars, doing more harm than good. 

As the legendary economist Milton Friedman noted, “One of the great mistakes is to judge policies and programs by their intentions rather than their results.” 

Higher education in America is costly, and this “forgiveness” would make it worse. 

Signing up for potentially life-long student loans at a young age is too normalized. At the same time, not enough borrowers can secure jobs that offer adequate financial support to pay off these massive loans upon graduation or leaving college. These issues demand serious attention. But “erasing” student loans, as well-intentioned as it may be, is not the panacea Americans have been led to believe.

Upon closer examination, the President’s forgiveness plan creates winners and losers, ultimately benefiting higher-income earners the most. In reality, this plan amounts to wealth redistribution. To quote another top economist, Thomas Sowell described this clearly: “There are no solutions, only trade-offs.” 

Forgiving student loans is not the end of the road but the beginning of a trade-off for a rising federal fiscal crisis and soaring college tuition. 

When the federal government uses taxpayer funds to give student loans, it charges an interest rate to account for the cost of the loan. To say that all borrowers no longer have to pay would mean taxpayers lose along with those who pay for it and those who have been paying or have paid off their student loans.

According to the Committee for a Responsible Federal Budget, student debt forgiveness could cost at least $360 billion. 

Let’s consider that there will be 168 million tax returns filed this year. A simple calculation suggests that student loan forgiveness could add around $2,000 yearly in taxes per taxpayer, based on the CRFB’s central estimate. 

Clearly, nothing is free, and the burden of student loan forgiveness will be shifted to taxpayers.

One notable feature of this plan is that forgiveness is unavailable to individuals earning over $125,000 annually. In practice, this means that six-figure earners could have their debts partially paid off by lower-income tax filers who might not have even pursued higher education. This skewed allocation of resources is a sharp departure from progressive policy.

Data show that half of Americans are already frustrated with “Bidenomics.” 

Inflation remains high, affordable housing is a distant dream, and wages fail to keep up with soaring inflation. Introducing the potential of an additional $2,000 annual tax burden at least for those already struggling, mainly to subsidize high-income earners, adds insult to injury.

Furthermore, it’s vital to recognize that the burden of unpaid student loans should not fall on low-income earners or Americans who did not attend college. Incentives play a crucial role in influencing markets. 

By removing the incentive for student loan borrowers to repay their debts, we may encourage more individuals to pursue higher education and accumulate debt without the intention of paying it back. After all, why would they when it can be written off through higher taxes for everyone?

The ripple effect of this plan could be far-reaching. 

It may make college more accessible for some, opening the floodgates for students and the need for universities to expand and hire more staff, leading to even higher college tuition. This perverse incentive will set a precedent that will create a cycle of soaring tuition, which would counteract the original goal of making higher education more affordable.

While the intention behind President Biden’s student loan forgiveness may appear noble (in likelihood, it is a rent-seeking move), the results may prove detrimental to our nation’s economic stability and fairness. And if the debt is monetized, more inflation will result.

Forgiving student loans will exacerbate existing problems, with the brunt of the burden falling on lower-income Americans. Instead of improving the situation, it will likely create an intricate web of financial consequences, indirectly affecting the very people it aims to help. But that is the result of most government programs with good intentions.

 


 

Vance Ginn, Ph.D., is president of Ginn Economic Consulting, chief economist or senior fellow at multiple state thinks across the country, host of the Let People Prosper Show, and previously the associate director for economic policy of the White House’s Office of Management and Budget, 2019-20. Follow him on X.com @VanceGinn.

(0 COMMENTS)

Read More

Continue Reading

Trending