• Dimitri Petit-Frere

Economic Update October 18, 2021

Economic Update October 18, 2021

  1. Consumer prices continue to rise at a record pace not seen since 1991

  2. Average time to foreclose increased 11% from last year, while foreclosure starts are up 67% from last year.

  3. Retail sales are up across the board including bars and restaurants, which has been the hardest hit since the COVID restrictions

Consumer Price Index Maintains Record Pace

Inflation has risen to its highest level since 1991 due to a tight labor market, strong consumer demand, rising energy prices and supply chain disruptions. The Consumer Price Index (“CPI”), which measures price changes across a wide range of goods and services, is a closely monitored inflation indicator.

Core CPI (which excludes volatile food and energy components), was 4.0% higher in September than it was a year ago. This was the same annual increase as in September last year, but much higher than the 2.0% levels seen earlier this year. Fed officials and economists disagree on whether the recent rise in annual inflation rates is due to temporary factors such as the pandemic (“transitory”), or if it will continue for a long period.

Retail Sales Rose in September

Retail sales were up 0.7% in September, which was unexpectedly higher than the consensus. General merchandise stores led the way with sales gains in September. a higher price at gas stations, with consumers spending more at the pump and driving further. The overall sales have increased by 13.9% compared to a year ago.

Another way to view it is that sales have increased 18.9% over February 2020 (pre-COVID). The temporary government support has made retail sales much more hot than they would in the absence COVID. However, real GDP (real GDP) still runs lower than it would in the absence COVID. However, it has not been an equal recovery across all major categories. Since February 2020, for example, sales of non-store retailers (36.1%) or sporting goods stores (37.1%) have increased significantly faster than total retail sales.

Restaurants and bars were the last category to surpass February 2020 sales levels. They finally made the transition into the green in April, and are up 9.3% compared to 19 months ago. The path to retail sales in the months ahead will be determined by a variety of factors. Retail sales will see rising wages, inflation, and jobs as tailwinds. However, the temporary boost provided by the “stimulus” checks will soon wane and will be replaced with a more limited and permanent boost.

Foreclosures Activity Increases in the 3rd Quarter of 2021

ATTOM has just released its third quarter “U.S. Foreclosure Market Report” – This report shows that there were 45,517 properties in the United States with foreclosure filings. The report shows that there were 45,517 properties with foreclosure filings (i.e. default notices. In September 2021, there were 19,609 properties that had filed for foreclosure. This is an increase of 102 percent over September 2020.

This may seem like a lot, but when you consider that September’s foreclosures were nearly 70% lower than before the COVID-19 pandemic in Sept 2019, and that Q3 foreclosure activity was 60% lower than the same quarter last year, it becomes apparent that this is a remarkable number. This means that we will end the year with a significantly lower number of foreclosure starts than we would see in normal housing markets. The states with the highest number of foreclosures in Q3 2021 were California (3,434; Texas (2,827); Florida (2,546); New York (1.363 foreclosure begins); and Illinois (1.362 foreclosure starts). The report analyzed 220 metropolitan areas. New York City had 1,456 foreclosure starts; Chicago had 1,122 foreclosure starts; Los Angeles had 1,102 foreclosure starts); Miami had 992 foreclosure starts; and Houston had 866.

Why is the foreclosure rate still so low? According to Rick Sharga (Realtytrac.com), both the government and mortgage industry have collaborated to stop millions of foreclosures by using the foreclosure moratorium and having programs for mortgage forgiveness. However, there is a possibility that we will see more borrowers defaulting on their loans with the exit of thousands of borrowers who have been granted forbearance. In September 2021, one in seven 7,008 homes had a foreclosure filing.

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