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Created by: Chris Scott, The Paperless Agent

Everyone you know moved during the pandemic. A new Census Bureau report helps clear up where they left and where they ended up. Here are four takeaways:

1. Americans chased the sun. Phoenix, Houston, Dallas, Austin, and Atlanta collectively gained 300,000 residents from mid-2020 to mid-2021.

2. That came at the expense of “superstar cities.” New York, LA, Chicago, and San Francisco lost more than 700,000 people combined over the same time frame.

3. Growth is heavily concentrated. The 10 fastest-growing counties in the US made up nearly 80% of population growth during the period studied.

4. Size doesn’t matter. Micro areas, or regions with a core city of fewer than 50,000 residents, reversed their yearslong stagnation by increasing their populations. Kalispell and Bozeman in MT and Jefferson, GA, led the way.

Big picture: Immigration is the X factor. Immigration levels plunged during the pandemic, which helps explain the population loss in America’s biggest cities. Some demographers say a bump in immigration post-Covid could result in those population declines representing a “blip,” rather than a more permanent trend.—NF

Economic Data

Housing Starts for February came in at 1.77 million, beating market expectations of 1.7mm and the prior months revised number of 1.657mm. This was a 6.8% increase month over month, beating expectations of an increase of 3.8% and was also a nice bet of January’s revised 5.5% drop. Single family starts increased 5.7% for the month, at a pace of 1.22 million units. Multifamly starts increased 554,000, which was the highest since January 2020. Building permits for February came in at 1.859mm, beating market expectations of 1.85mm, but came in under January’s revised number of 1.895mm. This was a drop of 1.9% month over month, beating market expectations of a 2.4%, although it was still below January’s 0.7% increase. Housing starts at 1.77 million is the strongest pace since 2006, which is a strong number.

US initial weekly jobless claims fell to 214,000 for the week of March 12, beating expectations of 220,000, and is a drop of 15,000 from the prior week. Continuing claim for the week of March 5th were at 1.419 million, which is down from the prior weeks 1.49 million, a 71,000 drop. The four week moving average is now at 223,000.

The Philly Fed Index for March came in at a level of 27.4, which is a strong beat from market expectations of 14.5 and from last month’s level of 16.0. The prices paid index continued to rise at 81.0, compared to 69.3 versus last months, and prices received index also rose to 54.4 versus the prior month’s 49.8. The employment index also climbed to 38.9 versus last months 32.3.

Industrial Production for the month of February came in as expected +0.5% month over month. Capacity utilization rose to 77.6%, which missed expectations of 77.9%, but is up from last month’s revised number of 77.3%. Manufacturing production came in at 1.2% m/m, a bit higher than expectations of 1.0%, and much higher than the prior months revised number of 0.1%. Production at US factories rose by the most in four month in February.

Looking at the economic calendar for the remainder of the week, we have Existing Home Sales (Feb) and Leading Economic Indicators (Feb) on Friday.

Headlines, The Fed, & Other News

The Bank of England (BoE) increased its benchmark rate for the third consecutive time bringing it to 0.75% from 0.5%. Their statement regarding future rate hikes was a bit muted saying "The Committee judged that some further modest tightening might be appropriate in the coming months, but there were risks on both sides of that judgement depending on how medium-term prospects evolved.”

The Fed raised the federal funds target rate yesterday by 0.25%, and the hike is the first of several to come. In the Fed’s dot plot, the median projection for the benchmark rate at the end of 2022 is about 1.9%, which is higher than the previous projection by the Fed but it is in line with what the market was pricing in. They are forecasting the target rate to go to about 2.8% at the end of 2023. Chairman Powell did say that every meeting is now a live meeting, looking at the dot plot the Fed is projecting a 0.25% rate increase each meeting in 2022.

Market Analysis

The Fed increased rates as expected yesterday, and their projections matched what the market priced into the market. I saw some strategists call it a dovish surprise but it was priced into the market so it shouldn’t have caught too many people off guard. The 10 year did hit 2.24 during the press-conference yesterday, getting very close to 2.25%, which is a level of support on the 10 year. Overnight the 10 year traded as low as 2.10. Looking at an hourly chart, we in a nice uptrend beginning on 3/7 on the 10 year, just something to keep an eye.

Currently the 10 year is at 2.16, UM30 3.5 in May is up 6/32, and the Dow is up 150 points.

Last week, we saw the 10-year reach as high as 1.90%, before bouncing back lower. The sell-off we saw in rates this week has seemed overdone for some time, it is tough to say if we will see some consolidation here for a bit or if we will see the sell-off continue. There is an FOMC meeting this week, and it will be interesting what new information we will gather from the meeting as the market is fully anticipating a 0.25% rate hike in the March meeting. Not a bad idea to stay defensive, as this market has continued to be very volatile.

The Federal Housing Finance Agency (FHFA) has announced that the base conforming loan limit will increase from $548,250 to $647,200 in January 2022. Due to the loan limit increase, the new high balance limit will also increase to $970,800 (150 percent of $822,375) for one-unit properties in the contiguous U.S.

Reverse mortgages will also have a national increase in maximum claim of $970,000 -- effective 1/1/2022.

Refer to FHFA Press Release.

Note: The loan limit change made in November was a conservative approach to help you be more successful in a competitive market, we will align to follow the FHFA’s announcement.

As was widely expected, the Fed voted unanimously to keep its target interest rates unchanged, but to begin the process of slowing/tapering its monthly asset purchases.

After growing its balance sheet from $4.1t to $8.4t since the onset of the pandemic, the Fed announced that it will begin slowing its $120bln in monthly purchases by $15bln per month, beginning this month. Monthly Treasury purchases will initially be slowed from $80bln to $70bln and MBS purchases from $40bln to $35bln.

In December, purchases will then be slowed to $60bln and $30bln, respectively. If the $15bln per month taper continues in that fashion, purchases will conclude in June 2022 with the balance sheet at $8.8t. The Official Statement provides policymakers with flexibility, noting that the Committee "is prepared to adjust the pace of purchases if warranted by changes in the economic outlook."

The persistence of higher-than-expected inflation led officials to provide a slightly less certain inflation assessment in the Official Statement. The previous Statement noted that "Inflation is elevated, largely reflecting transitory factors." This was changed to say, "Inflation is elevated, largely reflecting factors that are expected to be transitory" (emphasis added). However, while the Committee is less certain, they continue to believe it will prove transitory.

As it relates to the supply chain challenges, the Statement notes that "an easing of supply chain constraints [is] expected to support continued gains in economic activity."

With the taper process now announced, attention will turn to when the first rate hike may occur and how much the Fed will be able to raise its target interest rates. Fed Funds Futures currently project greater than a 50/50 chance of the first rate hike occurring by mid-2022