Job Additions, Other Gains and Losses

According to the US economy notched its second straight month of job additions in June amid nationwide efforts to claw back from a coronavirus-induced recession.

American businesses added 4.8 million nonfarm payrolls during the month, according to the Bureau of Labor Statistics. That exceeded the 3 million payroll additions expected by economists surveyed by Bloomberg.

The US unemployment rate came in at 11.1%, the BLS said, lower than the 12.5% expected by economists. It was also down from 13.3% in May. April’s 14.7% reading was the highest since the Great Depression of the 1930s.

“Today’s positive jobs report does provide a powerful signal of how swiftly US job growth can bounce back and how rapidly businesses can reopen once the nation finally brings the coronavirus under control — a reason for optimism in coming months,” said Andrew Chamberlain, the chief economist at Glassdoor.

Nearly all sectors of the economy added jobs in June, with the 2.1 million payrolls added in leisure and hospitality representing the biggest gain. Within the industry, employment in food services and drinking places accounted for 1.5 million jobs added. Still, overall employment in the sector is down by 3.1 million since February.

Retail trade also added 740,000 jobs in the month, nearly double its gains in May. Education and health services, manufacturing, and professional and businesses services also added jobs in June. Still, employment in all sectors remains below February levels.

Have Plans? The Fed Does Too… Sort Of.

Brian Cheung with Yahoo Finance explains the Fed’s bond buying program in this June 29th article.

The Federal Reserve on Monday fired up its facility to directly purchase corporate bonds from the companies themselves, rounding out its bond-buying program as the central bank continues to combat the economic fallout from the COVID-19 crisis.

Since May, the Fed has already had a hand in the corporate debt market, snatching up billions in corporate bond ETFs and, as of late, purchasing individual bonds in the secondary market as well. On Sunday, the Fed announced the “broad market index” that will guide its individual purchases, including familiar names like Apple, General Electric, and Comcast.

Since firing up its Secondary Market Corporate Credit Facility in May, the Federal Reserve has steadily expanded its holdings of corporate bond ETFs and, as of late, individual bonds themselves. But its holdings as of June 24 was only $8.7 billion, a blip in the multi-trillion corporate bond market. (Credit: David Foster / Yahoo Finance)


As of June 24, the Fed’s purchases had only totaled $8.7 billion, a drop in the bucket when considering the Fed could lever its purchasing power to take on as much as $750 billion in assets. Upon launching its facility to directly buy debt from issuers, Fed officials said they expect limited usage of the facility, adding that corporate credit markets appear to be past the illiquidity from mid-March that manifested itself in the form of blown-out spreads.

Still, the Fed’s corporate bond intervention raises questions about how the Fed will go about the purchases and why it needs to backstop the corporate credit market at all.

What is the Fed buying exactly?

The Fed is bucketing its purchases into two categories: corporate bond ETFs and individual corporate bonds themselves. 

Corporate bond ETFs are baskets of corporate debt bundled together by issuers like Blackrock or Vanguard, and sold to investors. There are several types of corporate bond ETFs that target different maturities (i.e. short-term or long-term) or credit quality (i.e. investment grade or junk-rated). As of June 16, the Fed had purchased about $6.8 billion across 16 different ETFs, the bulk of which in Blackrock’s LQD and Vanguard’s VCSH, and VCIT

Beginning June 16, the Fed also began purchasing individual corporate bonds in the secondary market. Its first round of disclosed purchases included about $429 million in bonds including holdings of debt from AbbvieAT&T, and UnitedHealth Group.

Its operations so far have been part of its Secondary Market Corporate Credit Facility (SMCCF) since the ETF and individual bond transactions are done in the secondary market. But the Fed on Monday announced that it had fully stood up its Primary Market Corporate Credit Facility (PMCCF), which will purchase qualifying bonds and portions of syndicated loans or bonds at issuance.

Why is the Fed buying individual corporate bonds?

When the economy was spiraling out of control in the second half of March, the Fed announced it would backstop corporate credit markets. At the time, the concern was that a dramatic tightening of financial conditions would leave companies with nowhere to turn if they needed to issue debt to survive the crisis.

The Fed announced both the PMCCF and the SMCCF, committing up to $750 billion of purchases when it unveiled term sheets for the programs in early April. But the Fed did not stand up either facility until May 12, at which point conditions in the corporate financing markets appeared to ease. 

Fed Chairman Jerome Powell has faced questions from Capitol Hill on why the Fed still feels the need to step into the corporate debt market if funding pressures have been relieved.

“I don’t see us as wanting to run through the bond market like an elephant doing things and snuffing out price signals or anything. We want to be there if things turn bad in the economy,” Powell insisted in Congressional testimony in mid-June.

How is the Fed picking which companies to buy bonds from?

The Fed has enlisted Blackrock as its investment manager and State Street as its custodian for its corporate bond programs. 

For the SMCCF, Fed has said from the beginning that it has wanted its purchases to get “broad exposure” to the corporate debt market, wary of the optics of favoring certain industries or companies over others. But the criticism of the Fed purchasing a large share of its ETFs in Blackrock-issued funds may have driven the central bank toward a different approach: building its own portfolio.

In mid-June, the Fed announced that its purchases would be guided by a “broad, diversified market index.” On Sunday, the New York Fed published the index for the first time, which detailed the 794 companies it plans to buy corporate debt in, alongside weights for how substantial those investments will be. The Fed insists that it will update the index every four to five weeks.

The Fed’s “broad market index” would be most heavily weighted in these ten companies, based on its disclosure as of June 5. The weights and companies will be updated every four to five weeks. (Credit: David Foster / Yahoo Finance) More

Unlike the SMCCF, the PMCCF will not involve the Fed going into the market to buy corporate bonds. Instead, companies will have to get certification from the New York Fed before selling bonds to the Fed facility.

So is the Fed rescuing junk companies?

The Fed has said it will primarily focus its purchases on investment-grade corporate debt, with the “remainder” going to some high-yield (or less gratuitously, “junk”) bonds. Through both the PMCCF and the SMCCF, the Fed will only take on junk debt if the issuer had investment-grade ratings before March 22 and subsequently faced a downgrade. So-called “fallen angel” companies include the likes of Ford and Delta. The idea behind the March 22 cut-off: to identify companies that were facing financing problems as a result of the COVID-19 crisis.

As of June 5, the Fed was targeting only 2.8% of its index in junk rated (BB) bonds. The Fed hopes to have about 54.8% of its index in investment-grade bonds (BBB) and the remaining 42.4% in high credit quality (AAA/AA/A) bonds.

Why are there foreign companies in the Fed’s index?

The Fed has said it is targeting U.S.-listed ETFs with exposure to U.S. corporate bonds, but the Fed’s broad index includes foreign names like Toyota, Volkswagen, and Daimler. But the Fed’s disclosure makes it clear that the central bank is targeting purchases of debt issued by their U.S.-incorporated subsidiaries.

For example, the Fed is not targeting Volkswagen debt issued by its German parent company, but debt issued by its U.S.-based Volkswagen Group America. 

Regardless, the heavy weights on U.S. subsidiaries of foreign car manufacturers may reflect the importance of their manufacturing plants and auto loan portfolios stateside.

How long is the Fed going to do this?

Both facilities will purchase assets through September 30, 2020, but the Fed could extend that timeline if needed. 

What will the Fed do with the bonds it bought?

It is not so clear how the Fed will exit its holdings.

Bonds purchased through the SMCCF can have a remaining maturity of up to 5 years and bonds purchased through the PMCCF can have a maturity of up to 4 years. The Fed says it can support the facilities through maturity (at which point the asset would roll off), but said it could also sell the bonds in the open market. 

The Fed’s plan for its ETF holdings are also unclear.

The State of the Current Housing Market

According to Mark Mathis, VP of Sales for, COVID-19 has had more effects on people and the economy than just what is seen.  With the CARES Act, many who lost their jobs used the opportunity to postpone their mortgage payments.  This was an option that looked attractive but now we are seeing the ripple effect from this massive amount of debt lenders are carrying.

Interest rates have fallen to the lowest recorded level but many are not able to get a new mortgage or even refinance an existing one.  If you are looking to buy a home, here is what you need to know about the current housing market.

It may be harder to get approved for a mortgage or refinance.

Part of this is due to the economic shock caused by the COVID crisis.  In this unstable economy, borrowers are at a greater risk of losing their jobs and, as a result, not being able to keep up with their loan payments.  Thereby prompting additional caution from lenders.

In addition this is compounded by policies in the CARES Act.  As a result of the relief act, borrowers have been able to postpone their mortgage payments for up to a year without proof of financial hardship.  This may have been the only option for jobless citizens, the act did not provide a way to cover the missed payments.  Because of this many lenders were forced to make up for it and are now placing more restrictions on their requirements for those looking to refinance or take on a mortgage. The result is some lenders now require a credit score of 700 or higher or a 20 percent down payment.  At least one lender no longer allows cash out loans and several lenders have suspended new home-equity lines of credit.

What Happens Next

The lack of approved mortgages and refinancing options will likely cause a strong impact on economic recovery.  It could slow down other industries as well, such as new construction.  In general, it’s likely that it will cause a general lack of spending, since current or potential homeowners will be forced to either continue paying at their current interest rate or save for a larger down payment if they’re looking to buy a home.  Expect it to be more challenging for the foreseeable future.

Fed Rates Unchanged

According to Liz Dominguez, senior online editor for RISMedia, the Federal Reserve has decided to maintain the target range for the federal funds rate at 0 to ¼ percent.  This was expected that the Fed would leave interest rates unchanged and near zero in order to continue the flow of credit reeling from the coronavirus.  Further the Fed predicts no interest-rate increase through 2022.

“The ongoing public health crisis will weigh heavily on economic activity, employment and inflation in the near term, and poses considerable risks to the economic outlook over the medium term,” said the FOMC statement.  “The Committee expects to maintain this target range until it is confident that the economy has weathered recent events and is on track to achieve its maximum employment and price stability goals.”

To support the flow of credit, the Federal Reserve says it will continue to increase its holdings of Treasury securities and agency residential and commercial mortgage-backed securities, “at least at the current pace to sustain smooth market functioning.”

What does this mean for real estate?  While Fed rates do not have a direct influence, mortgage interest rates will likely remain low or flat through the next few years.

Are Experts Expecting a Market Rebound?

According to Liz Dominguez, senior online editor writing for RISMedia and sourcing from the National Association of REALTORS®  (NAR),  April marked two consecutive months of the decline in pending home sales.  There was a decline in every major market and year over year pending home sales were down 33.8 percent and decreasing 21.8 percent from March.   NAR reported this to be the biggest decline in pending home sales since tracking began in 2001.  The good news is this may be the bottom and that the market may bounce back soon.

“With nearly all states under stay-at-home orders in April, it is no surprise to see the markedly reduced activity in signing contracts for home purchase,” said Lawrence Yun, NAR’s chief economist.  “While coronavirus mitigation efforts have disrupted contract signings, the real estate industry is ‘hot’ in affordable price points with the wide prevalence of bidding wars for the limited inventory.  In the coming months, buying activity will rise as states reopen and more consumers feel comfortable about home-buying in the midst of the social distancing measures.”

“Given the surprising resiliency of the housing market in the midst of the pandemic, the outlook for the remainder of the year has been upgraded for both home sales and prices, with home sales to decline by only 11 percent in 2020 with the median home price projected to increase by 4 percent,” Yun added.  ‘In the prior forecast, sales were expected to fall by 15 percent and there was no increase in home price.”’s Weekly Housing Trends Report also points to a rebound.  For the week ending May 23, listings were still down, but only by 20 percent as sellers are making a return to the market.  Median listings prices have regained momentum, with growth approaching pre-COVID levels, increasing 3.1 percent year over year.  Due to inventory constraints, time on market is still slow down by 16 days year over year. predicts it will take a few more weeks before days on market reaches normal levels.

The Price is the thing. Getting maximum value for your home. Part 5

Why not try a higher price for a couple of weeks?

If you knowingly chose to over price your home, you would be overpriced during the period of highest potential for buyer activity.  You would then lower the price after buyers have already seen your home and decided not to preview it.

Price it right during the initial phase of exposure in order to capture the best buyers.

The benefits of pricing your home to sell.

Remember your last move? How long was your home on the market?  What was it like to keep your home ready for showings all the time?

Did you know that up to 60% of sales are generated by cooperating agents? Overpricing will deter them showing it to their prospects. Proper pricing increases the response we get from the market.

When a home is priced right, buyers get excited and make higher offers.


· Faster sale

· Less inconvenience

· Increased salesperson response

· More Internet response

· Better sign and ad response

· Avoids being “shopworn”

· Attracts higher offers

· Means MORE MONEY to sellers

The Price is the thing. Getting maximum value for your home. Part 4

Codependent pricing.  Overpricing your home in anticipation of a low offer.

Codependency is a behavior in which a party engaging in dysfunctional behavior stays the same while the codependent “enabler” changes their behavior to compensate.  In this case, the buyers are the dysfunctional party making low offers, but the seller overprices to compensate.  Sellers say: “But I know the buyers will offer low so I’m just going to raise the price so we end up at market value.”

By doing this, sellers end up with an overpriced home that doesn’t sell, while buyers continue on with their lives.  Price properly and you’ll get the buyers to change their behavior.

You harm you own marketing efforts by appealing to the wrong buyers.  How do buyers react to homes that are overpriced?

You don’t want to become a ‘Pinball Listing’.  In a pinball game the ball bounces off bumpers (overpriced homes) to scoring positions (properly priced homes). Buyers ‘bounce” off an overpriced listing into a properly priced homes instead. If your home is overpriced, it makes the others look better and may help the competing homes sell first.

The price is the thing. Getting maximum value for your home. Part 3

What external factors affect the value of a home?

External influences on value:

· Interest rates

· New listing

· Area competition

· Local economy

· Builder offerings

· Neighbor’s price

 A common mistake that many owners make is to focus solely on their home when determining 

value.  Yet in dynamic markets, many influencing factors are completely out of their control.

We’ve witnessed recent dramatic market change in which the economy, interest rates and financial

 markets have negatively affected values.

The simple act of a neighbor reducing a price can lower street values.  A subdivision of new 

construction can lure buyers away from existing homes and lower their value.

What about internal influences on home value?

Internal influences on value

· Location

· Size

· Amenities

· Condition

The classic determinants of value are the intrinsic characteristics of location, size and amenities. 

 The cliché “The three most important factors of value are location, location, location.” has basis in fact.

Again, many sellers cite their home’s amenities and conditions as a reason to overprice.

The price is the thing. Getting maximum value for your home. Part 2

How does the property in your neighborhood affect the price of your home?

The value of a larger home is reduced by the influence of smaller surrounding homes.

Sometime owners will brag that their home is the “biggest on the block” as a way of puffing value.

Actually, when a property is oversized for the neighborhood, it often experiences the adverse effects of regression — the value is reduced through the influence of less expensive homes.

In contrast, progression demonstrates that value can be increased by the more expensive surrounding homes. The value of a smaller home is increased by the influence of larger surrounding homes.

How can the correct price attract buyers?

Think of it in these terms. When the price is too high, it doesn’t attract. Like a magnet, buyers are attracted when the price moves closer to market value. As you move your price closer to market it will reach the point at which it attracts buyers and produces a sale.

The price is the thing. Getting maximum value for your home. Part 1

Pricing your home for market is an inexact science but we have many sources from which to draw to get as accurate a price as possible.  Many times the question is asked “Can we get back all the money we’ve put into our home?”  The answer is a definite “well, that depends.”  It depends on the following…

  • When were the improvements made?
  • At that time were you planning to sell or stay?
  • If you had known then that you were going today, would you still have made improvements?
  • If the improvements were removed, what percent of today’s buyers would put them back and pay what you did?

Another related question is, “Shouldn’t I expect to get back what I put into it?”  And that also depends.  Let’s say a builder built a $500,000 home on a lot and included a well that cost $20,000.  Then a similar home was built on the next lot but the well went through harder rock and to a deeper water table costing the builder $40,000.00.  How much is the home worth?  $500,000.  Even though the cost of building it was an additional $20,000.

According to the principle of substitution, value is determined not by what a seller puts in a home, but by what a buyer gets out of the home.  In both cases they get water.