Only once, in 1947, was a recession not declared when real GDP dipped twice in a row

Economists at CUNA, NAFCU and beyond said the U.S. economy seems to be dodging a recession despite Thursday’s report of a second drop in a row of quarterly gross domestic product.

The U.S. Bureau of Economic Analysis said its GDP index that is adjusted for seasonality and inflation (real GDP) fell 0.9% from the first quarter to the second quarter, after falling 1.6% in the first quarter.

Since at least 1947, recessions have almost always been declared when those figures drop for at least two quarters in a row.

CUNA Senior Economist Dawit Kebede said the guide is not the rule. But he said the economy could be brought down by future Fed rate hikes in addition to the historically large 75-basis point increases announced in June and on Wednesday.

“We are not in a recession just because we have two quarters of decline,” Kebede said. “Consumer spending and a strong labor market continue to be the firewall against a significant and widespread decline in economic activity. However, Federal Reserve’s resolve to fight inflation by slowing consumer demand will thin out this defense.”

Mike Fratantoni, chief economist for the Mortgage Bankers Association, also said the economy is not in recession.

“The headline of a second straight decline in real GDP highlights the abrupt change in the path of the U.S. economy, but the ongoing strength in the job market and other signs of growth make it unlikely that this will be categorized as a recession at this point,” Fratantoni said.

Those assessments will need to scale a steep mountain of history.

Economists and policy makers defer to the National Bureau of Economic Research (NBER), a nonprofit group based in Cambridge, Mass., for declaring recessions and setting their start and end dates.

NBER looks at monthly data — often declaring recessions months after they ended. A more timely rule of thumb is that a recession occurs with two consecutive quarters of decline in real GDP.

Since World War II, NBER has declared 12 recessions, the most recent being one of the shortest: the COVID-19 pandemic recession from February through April 2020.

Eleven of the 12 recessions coincided with at least two consecutive drops in real GDP.

Only once, in 1947, was a recession not declared when real GDP dipped twice in a row: 0.3% in the second quarter and 0.2% in the third quarter. And NBER declared a recession occurred in 1960-1961, when there were no consecutive quarters of declines in real GDP.

NAFCU Chief Economist Curt Long didn’t say whether the economy is now in recession, but he said the economy is “clearly slowing.”

“The question is, will it be enough to bring down inflation, but not so quickly that it leads to a major recession?” he said.

“For now, the underlying economic momentum is enough to avoid triggering wide-scale layoffs,” he said. “But the outlook remains concerning given that the Fed has little evidence at this point to justify pivoting off its aggressive tightening.”

Fratantoni reaffirmed the MBA’s July 19 forecast, which expects the economy to grow 0.6% for all of 2022, and 1.5% per year in 2023 and 2024 — “with downside risk as the full impact of the Fed’s rapid rate hikes is realized over the next 12 months.”

Some of the trends shown by the BEA’s reports reflect an economy recovering from disruptions from the COVID-19 pandemic. Fratantoni said the second quarter might have shown net growth if not for a sharp contraction in inventories, “which likely reflects ongoing challenges with supply chains.”

“Consumer spending on goods is growing more slowly, and consumer spending on services is picking up. This is an ongoing normalization as the effects from the pandemic wane. The travel and hospitality industries are certainly seeing a rebound,” Fratantoni said.

The report showed a 14% drop in residential investment — “yet another signal that the spike in rates brought the housing market to a sudden halt,” he said. “Housing tends to lead the rest of the economy, and we expect that pattern will hold this cycle as well.”

Jim DuPlessis

A journalist for decades.

With Inflation High and Rates Rising, LAFCU Introduces New Adjustable Rate Mortgage

 LANSING, Mich. — As inflation remains high and the Fed continues to push up rates, Lansing Area FCU (LAFCU) has introduced a 10/6 adjustable-rate mortgage (ARM).

In announcing the new offering, the $970-million credit union noted ARMs were a hallmark of the 1980s inflationary period and the mid-2000s mortgage crisis, and the product is now making a “comeback.”

The loan has a fixed rate of interest for the first 10 years of the loan, after which it adjusts once every six months over the remaining 20 years. The terms apply to both new and refinanced mortgages.

The Stanton familiy in their new home.

“LAFCU’s 10/6 ARM loan is a low-cost option that allows members to purchase more house for less out-of-pocket monthly expense,” said Rob Boomershine, LAFCU vice president of lending. “It was developed to help our members in this period of inflation and rising interest rates.” 

LAFCU said its 10/6 ARM loan is typically priced up to two percentage points less than a 30-year fixed loan. 

One Family’s Experience

The credit union shared the story of members Amber and David Stanton, who had been living in a 900-square-foot mobile home for four years with their five children while trying to get approved for a mortgage.

“We had been trying to work with another lender but had never met their requirements,” said Amber Stanton. “After working with a loan officer at LAFCU, we were pre-approved and able to pursue our dream of owning our own house. The 10/6 ARM saved us $200 a month on our mortgage. Knowing the monthly payments will be stable for 10 years made us much more comfortable with buying a house.” 

LAFCU added that it also has a program in which it assists physicians in obtaining mortgages under which student loan balances do not negatively impact the member’s debt-to-income ratio.

CU Board Modernization Act Passes House Committee

On Wednesday, members of the House Financial Services Committee passed the Credit Union Board Modernization Act (H.R. 6889) introduced by Reps. Juan Vargas (D-Calif.) and Anthony Gonzalez (R-Ohio).

The bill would alter the Federal Credit Union Act’s requirement that federally charted credit unions meet 12 times each year and reduce that number to a minimum of six times each year.

In a statement Wednesday after its passage out of Committee, CUNA President/CEO Jim Nussle said, “Thank you to the House Financial Services Committee for passing this common-sense bipartisan bill that will give credit union boards needed flexibility. This bill addresses an outdated Federal Credit Union Act requirement and will free up credit union staff and board members to focus more on member service.”

In letters to the Committee on Tuesday, both NAFCU and CUNA argued that the Federal Credit Union Act does not consider the advances in technology that have occurred to allow board members to communicate at any time.

In his letter, NAFCU Vice President of Legislative Affairs Brad Thaler wrote, “With all of the connectivity and technology available today, credit union boards are able to communicate in an ongoing manner that has negated the necessity of monthly meetings.”

CUNA President/CEO Jim Nussle wrote in his letter that the burden of the old meeting requirements puts a particularly large burden on small credit unions. “This outdated board meeting requirement can place a burden on credit union staff and their volunteer board members, especially smaller credit unions with few employees and those in rural areas. The amount of resources it takes for a credit union to run a monthly board meeting can shift employee time away from the services that a credit union provides to its community.”

Nussle added, “To incentivize good governance at credit unions and promote safety and soundness of the overall system, we also support exemptions made in this legislation for credit unions with a low CAMELS composite rating, credit unions with a low Management component rating and de novo credit unions as they stabilize operations.”

A similar bill in the Senate was introduced in May by Sens. Kyrsten Sinema (D-Ariz.), Bill Hagerty (R-Tenn.), Alex Padilla (D-Calif.) and Thom Tillis (R-N.C.).

Michael Ogden

Editor-in-Chief for CU Times.

Several CU Economists Envision More Rate Increases This Year After Wednesday's Historic Hike

The Federal Reserve raised rates by 75 basis points Wednesday, citing robust job gains, low unemployment and inflation.

The Federal Open Market Committee’s unanimous agreement on the increase was on par with economists’ expectations, and followed a 75-bps increase in June that was the largest increase in 30 years. The committee raised its target range for the federal funds rate to 2.25% to 2.50%, and expects it to rise to 3.25% to 3.5% by year’s end.

CUNA Senior Economist Dawit Kebede said the Fed’s 75-bps hike puts the federal funds rate at a neutral 2.25% to 2.50%, but its plan to increase its rates another percentage point by the end of the year also raises the risk of recession.

NAFCU Chief Economist Curt Long said the Fed was responding to “the hottest inflation numbers in 40 years,” but softening in the economy might lead it to raise rates by a smaller amount when it next meets Sept. 20-21.

Mike Fratantoni, chief economist for the Mortgage Bankers Association, said the Fed’s rate hike might keep mortgage rates stable in the 5%-to-5.5% range for the rest of the year.

Michele Raneri, vice president of U.S. research and consulting at TransUnion, said the interest rate hike will translate into slightly higher payments for credit card holders. “With the average consumer credit card balance of about $5,200, today’s interest rate hike for consumers who do not pay off their balances in full will raise minimum monthly payments by less than $4, or about $40 per year.”

In comments during a news conference Wednesday, Fed Chair Jerome Powell said the Fed still expects to raise its target range to 3.25% to 3.5% by year’s end. Those raises will slow economic growth and soften the labor market, but inflation can be tamed without sending the nation into a recession.

“We’re not trying to have a recession, and we don’t think we have to,” Powell said. “The goal is to bring inflation down and have a soft landing.”

Although the Fed could raise rates by another large amount in September if economic conditions warrant, “it may be appropriate to slow the pace of increases,” Powell said.

The federal funds rate started the year at 0.25% and the Fed increased it 25 bps in March and 50 bps in May. The remaining Federal Open Market Committee (FOMC) meetings this year are Sept. 20-21, Nov. 1-2 and Dec. 13-14.

Kebede, the CUNA economist, said the FOMC anticipates more increases in future meetings to bring inflation down to its 2% goal.

Dawit Kebede

“This indicates that the Fed is committed to bringing price increases under control despite slowing spending and production,” Kebede said. “The war in Ukraine and pandemic-induced supply constraints are two major reasons behind the record inflation rate whose influence on the economy cannot be altered by monetary policy.”

“However, further rate increases and quantitative tightening will be restrictive and affect consumer demand because it raises the cost of borrowing,” he said. “This reduction in consumer demand increases the likelihood of a recession in the next year as it accounts for two-thirds of the economy.”

Long, the NAFCU economist, said he expects the Fed will raise rates 50 bps at its September meeting.

“Looking ahead, the next moves for the Committee will be more dependent on incoming data than this one,” Long said. “Powell said that another big hike is on the table if data supports it, but he also acknowledged that as rates rise, the standard for another 75-basis point hike will be more stringent.”

Curt Long

Some areas of the economy are already slowing, Long said. “Housing is an obvious area, but real consumer spending also declined as of its most recent reading in May, and unemployment claims have begun to rise modestly.”

Fratantoni said mortgage rates have dropped about half a percentage point in recent weeks, heading closer to 5.5% than June’s 6% rates.

Mike Fratantoni

“There is a tug-of-war in market expectations, between the persistently high inflation numbers and resulting rapid Fed hikes, and the increasing risk of a sharp slowdown and possible recession,” Fratantoni said.

“As a result, mortgage rates may have already peaked and could stay between 5% and 5.5% through the remainder of 2022,” he said. “If that were to be the case, potential buyers, who had been scared off by the rate spike, might find their way back to the housing market.”

Jim DuPlessis

A journalist for decades.

Another big Fed rate hike is here to battle inflation. Economy hangs in balance!

 With prices rising at their fastest pace in a generation, the Federal Reserve is ratcheting up its fight against inflation.

On Wednesday, the Fed raised its benchmark interest rate by an additional three-quarters of a percentage point. This is the fourth time the central bank has raised rates this year.

It follows an increase of the same size in June — rate hikes at this pace and magnitude have not occurred since the late 1980s.

Despite these fast and furious moves, the central bank has its work cut out for it. Its goal is to rein in inflation without kickstarting a recession.

"The labor market is extremely tight, and inflation is much too high," Fed Chair Jerome Powell said at a news conference, where he explained the "unusually large" move up in rates.

He and his colleagues are trying to fight inflation by tackling demand. They are pushing up the cost of of credit — what consumers and companies pay to borrow money — and they are trying to deal with a jobs market the Fed chair has called "unsustainably hot," where wages are rising fast because many businesses are paying more to find workers.

In a statement, the Fed said that some parts of the economy — like spending and production — have weakened. However, it noted that "job gains have been robust in recent months, and the unemployment rate has remained low."

The key goal, of course, is to fight inflation, which remains elevated at 9.1%, the highest in four decades. The Fed noted that pandemic's supply chain issues have continued to push prices and the Russia-Ukraine war is adding additional pressure on food and energy prices.

"My colleagues and I are acutely aware that high inflation imposes significant hardship, especially on those least able to meet the higher costs of essentials like food, housing and transportation," Powell said.

Powell stressed that it was a time of great uncertainty in the economy. However, he's clearly trying to achieve what economists call a "soft landing" for the economy.

To do that, the Fed is ratcheting up interest rates. But this isn't a precise or painless process. As policymakers continue to raise rates, growth will slow further, and the unemployment rate, which is close to its pre-pandemic low, will rise.

The Fed would like those adjustments to happen in a measured way, but that is easier said than done.

In June, inflation rose by 9.1% from a year earlier, and the Fed is tackling a problem that is shaped by factors outside of its control.

The central bank is equipped to deal with demand, which surged as the U.S. emerged from the darkest days of the pandemic, but it can't fix supply chain issues or end the war in Ukraine, both of which have led to higher prices, especially of gasoline and food.

Fed Kicks Off Two-Days of Meetings Today as Critics, Proponents Respond to Rate Increases; Plus, What CUs Should Expect

CUToday

WASHINGTON–The Federal Reserve’s Open Market Committee (FOMC) will kick off two days of meetings today and the decision they announce tomorrow will affect everything from the major U.S. markets to credit unions that are seeing strong loan growth to individual credit union members struggling with monthly bills.

The FOMC is widely expected to again raise its benchmark rate as it seeks to cool raging inflation.

Among those expecting rates to be higher by Wednesday afternoon is CUNA’s chief economist, Mike Schenk, who expects the Fed will push up rates by 75 basis points. That follows the full one percentage point increase made during the Fed’s July meeting.

“That’s pretty substantial, but inflation is over 9%,” said Schenk. “It’s the Fed’s job to slow that rate of inflation down.”

Schenk said any rate increase will have “implications” on credit union lending, which was roaring in the first half of 2022, when it was up 8%.

If the second half of the year were to match the first, overall loan growth at credit unions would finish 2022 at an astounding 20%, but Schenk said he does not expect that to happen and is instead projecting the year will finish with loans up 12%.

ROA will also be up substantially in 2022, he added.

Other Forecasts

Schenk is hardly alone in predicting the rate increase by the Fed.

“Many on Wall Street believe that the Fed is likely to raise interest rates by as much as a full percentage point. If that happens, it would be the first time the Fed has raised rates that much in one meeting since at least the 1980s,” noted the New York Times. “The central bank has vowed to do whatever it takes to lower inflation — much like it did in the 1980s under Paul Volcker.”

Critics of Policies

But the Fed has plenty of critics.In an opinion piece published in the Wall street Journal, Sen. Elizabeth Warren (D-MA) said the Fed’s interest-rate hikes “won’t address many causes of today’s inflation,” including skyrocketing energy prices.

And, as CUToday.info reported here, one new survey finds consumers  say they are “fed up” with the job the central bank is doing. That same analysis said consumers can expect to pay billions more in interest as the result of the rate increases.

Among the factors the Fed will be weighing as it makes its decision, according to the Times:

• Earnings slowdown
• An inverted yield curve (see CUToday.info report here)
• The job market

Room to Move Higher

“Still, some argue that there is room for interest rates to move higher without causing an economic crash,” the Times reported.

The publication quoted  Peter Berezin, a global strategist at BCA Research, as arguing that job openings, as well as solid reserves at most large banks, should buffer the economy from a recession even if the Fed raises interest rates.

“What’s more, the expiration of pandemic-related aid should slow the excess money injected into the U.S. economy,” Berezin added.

Half of Small Biz Owners See a Risk of Failure by Fall if Conditions Don’t Improve

 BOSTON–A new survey of small business owners finds nearly half say their businesses are at risk of failing by the fall of this year unless economic conditions improve significantly.

According to Alignable's Small Business Revenue Report , which is based on a poll of 4,392 randomly selected small business owners conducted from June 10-July 13, 2022,  along with historic data from 680,000 surveyed since March 2020, key highlights include:

• 47% of small business owners (SMBs) say they're businesses are at risk of closing by Fall of '22, unless economic conditions improve significantly
• That's up 12 percentage points from last summer, when only 35% were concerned about economic issues forcing them to shut down, Alignable said.
• And SMBs in key industries face even bigger problems: 59% of retailers are at risk, along with 52% in construction, 51% in the automotive sector, and 50% of restaurant owners. 
• Supporting these unfortunate trends, the total percentage of SMBs reporting that they've fully recovered has dropped 7 percentage points since last summer. In the Summer of '21, 33% were fully recovered. But now, that number has declined to a new low: just 26%.
• Looking at different states and provinces, small businesses in CO (54%), MI (52%), OH (51%), PA (51%) , and Texas (51%) are struggling the most.
• In Canada, small businesses in British Columbia (47%) and Ontario (46%) top the list.

Additional details can be found here.

Yield Curve Sounding ‘Loudest Alarm’ Over Recession, Analysis Suggests

CUToday 

 NEW YORK–One of the most watched indicators over whether a recession is approaching is “sounding its loudest alarm”—the yield curve, according to one new analysis.

As every credit union portfolio manager and CFO is aware, the standard yield curve should show rates moving higher as terms grow longer, hence, the “curve.” But every once in a while, short-term rates rise above long-term ones, known as an inversion, and such inversions have preceded every U.S. recession over the past 50 years.

“And it’s happening now,” the New York Times reported, adding, the yield curve has predictive power that other markets don’t.

On July 20 the yield on two-year Treasury notes stood at 3.23%, above the 3.03% yield on 10-year notes. A year ago, by comparison, two-year yields were over one percentage point lower than the 10-year yields, the Times reported.

“…Over the past nine months, the Fed has become increasingly concerned that inflation isn’t going to fade on its own…By next week, when the Fed is expected to raise rates again, its policy rate will have jumped about 2.5 percentage points from near zero in March, and that has pushed up yields on short-term Treasurys like the two-year note,” the Times report stated. “Investors, on the other hand, have become increasingly fearful that the central bank will go too far, slowing the economy to such an extent that it sets off a severe downturn. This worry is reflected in falling longer-dated Treasury yields like the 10-year, which tell us more about investors’ expectations for growth.”

Not the ‘Gospel,’ But…

The Times analysis went on to add, “What sets the yield curve apart is its predictive power, and the recession signal it is sending right now is stronger than it has been since late 2000, when the bubble in technology stocks had begun to burst and a recession was just a few months away.”

Greg Peters, co-chief investment officer at PGIM Fixed Income told, the Times, “The yield curve is not the gospel, but I think to ignore it is at your own peril.”

More People Looking to Tik Tok Than Their Credit Union for Financial Advice, Survey Finds

CUToday 07/2022

SAN ANTONIO—More consumers are looking to Tik Tok and YouTube for financial advice than they are their own financial institution, according to new research.

Nearly half of the respondents in the research from Vericast said they seek financial advice from friends or family, while less than a third are seeking it from a bank, credit union or financial advisor. Thirty-four percent of Gen Z consumers obtain financial advice from TikTok and 33% get it from YouTube, while only 24% of this age group seek advice from financial advisors, according to Vericast, which surveyed 1,000 adults.

“It is clear that financial institutions have a critical need to innovate quickly and reimagine their approach to retain customers,” said Stephenie Williams, VP-financial institution marketing product and strategy at Vericast. “Banks and credit unions need to meet customers where they are, not only positioning themselves as a go-to, trusted resource providing education through traditional strategies, but also using new channels and platforms to reach younger generations.”

Opportunity Seen

According to Vericast, the findings show there is an opportunity to deliver on evolving expectations to help banks and credit unions acquire and retain customers/members amid market volatility.

According to the survey, consumers expect “financial institutions to accommodate them during widespread financial hardships, like the unprecedented inflation we are experiencing today. Seventy-nine percent expect flexibility on rates and fees, such as waiving overdraft or late fees, while 66% say they expect it to be easier to obtain new lines of credit.”

An additional 69% said notifications about lines of credit available to them and promotions on special rate offers, such as low-interest balance transfers, are also expected during times of financial instability.

The Specifics

According to Vericast, the survey found:

• There is a correlation between mental well-being and banking. Seventy-five percent of consumers said the amount of money in their bank account impacts their mental health. For this reason, almost half (48%) are prioritizing building their savings account in 2022, the company found.
• Mobile banking, interest rates, and sign-up incentives factor into choosing a financial institution. Sixty-one percent of consumers surveyed selected mobile banking capabilities as one of the top factors influencing their choice to bank with a financial institution.

Vericast added that when asked what would persuade them to switch financial institutions, two-thirds noted better interest rates as well as incentives to open an account, such as a cash reward for signing up, while 68% said fewer fees would incentivize switching.

• Financial priorities for 2022 show opportunity. Amid market volatility, building up savings (48%), paying off debt (47%), and investing directly in stocks (21%) are top financial priorities this year.

The survey further found only 12% plan to open a new checking account this year, and only 19% anticipate opening a credit card; for over half of consumers, it has been five years or more since they last opened a bank account.

“There are opportunities for financial institutions to generate business: nearly half (42%) of consumers are planning to buy a car in 2022 and 34% are planning to remodel their homes,” Vericast reported in its analysis.

PSCU: Inflation Helps Boost Member Spending in June

 

The gains in the amount spent far outpace gains in the number of transactions.

By Jim DuPlessis | July 2022

Source: Shutterstock.

PSCU reported Tuesday that the value of purchases it handles for affiliated credit unions rose much faster than the number of transactions in June, which it said indicated inflation was a growing factor in purchasing growth.

The St. Petersburg, Fla., payments CUSO found members whose credit unions use PSCU services spent 16% more by credit cards in value and 12% more in the number of transactions in June than they did in June 2021. By debit, they spent 7% more by value and 3% more by number.

“While overall consumer spending remained strong throughout June, current inflationary pressures are keeping growth in purchases outpacing growth in transactions,” Brian Scott, PSCU’s chief growth officer, said.

The U.S. Bureau of Labor Statistics reported July 13 that inflation rose a seasonally adjusted 1.3% from May to June, and rose 9.1% from June 2021 to June 2022 — the largest 12-month gain since November 1981.

“With another record Consumer Price Index increase announced this month, the Federal Reserve is under continued significant pressure to tame soaring inflation,” Scott said.

Brian Scott

Overall spending by credit union members served through PSCU seemed to trend higher that retail spending among all U.S. consumers.

The U.S. Census Bureau reported July 15 that retail spending — excluding automobiles, auto parts and gasoline — rose 7% from June 2021 to June 2022. The seasonally adjusted increase from May to June was 0.7%.

In particular categories, the 12-month gains reported by PSCU bracketed those reported by Census:

• Grocery spending rose 8.9% from June 2021 to June 2022, according to the Census Bureau. PSCU reported a purchase gain of 15% by credit and 5% by debit. Transactions rose 11% by credit and 2% by debit.
• Gasoline spending rose 49.9%, according to the Census Bureau. PSCU reported purchase gains of 59% by credit and 35% by debit. Transactions rose 15% by credit and 5% by debit.
• Restaurant spending rose 13.7%, according to the Census Bureau. PSCU reported purchase gains of 20% by credit and 6% by debit. Transactions rose 16% by credit and 2% by debit.

PSCU’s July Payments Index found the average credit card balance for June 2022 was $2,733, up 3.5% or $93 from June 2021. June marked the fourth consecutive month in which year-over-year growth was over 2%.

PSCU’s numbers reflected the national pattern for both credit unions and banks. Credit card balances dwindled after COVID-19 was declared a pandemic in March 2020, and had remained below the February 2020 mark for more than two years.

However, balances have been rising this year. The Fed’s G-19 Consumer Credit Report released July 8 showed May balances at both banks and credit unions had finally exceeded their February 2020 levels. NAFCU Chief Economist Curt Long said then that high inflation is one reason he expects credit card balances to grow quickly through the rest of the year.

The credit card delinquency rate for June was 1.54%, 20 basis points lower than pre-pandemic June 2019 levels.

PSCU’s report was based on data from credit unions that have been processing payments with PSCU since January 2020. It encompassed 2.8 billion transactions valued at $140 billion of credit and debit card activity in the 12 months ending June 30.

The MBA finds mortgage applications are at their lowest level since 2000

 

The MBA finds mortgage applications are at their lowest level since 2000.

By Jim DuPlessis | July 2022

Source: AdobeStock.

Mortgage applications fell for the third week in row, reaching their lowest level since 2000, the Mortgage Bankers Association reported Wednesday.

Meanwhile, the National Association of Realtors reported Wednesday that the streak of falling sales of existing homes stretched into a fifth month in June.

The MBA’s Market Composite Index of loan application volume for the week ending July 15 was 6.3% lower than the previous week after seasonal adjustments. Refinances, which have been slashed by rising interest rates, fell a further 4% for the week ending July 15, and were down 80% from a year earlier.

But the three-week falling streak also extended to mortgages for home buyers. Purchase applications fell a seasonally adjusted 7% from the previous week. That followed drops of 4% in each of the two previous weeks after a bare 0.1% gain for the week ending June 24.

“Purchase activity declined for both conventional and government loans, as the weakening economic outlook, high inflation and persistent affordability challenges are impacting buyer demand,” Joel Kan, the MBA’s assistant vice president of economic and industry forecasting, said.

“Similarly, with most mortgage rates more than two percentage points higher than a year ago, demand for refinances continues to plummet, with the MBA’s refinance index also falling to a 22-year low,” Kan said.

Joel Kan

That followed the MBA’s report Tuesday that mortgage applications for new home purchases in June fell 12% compared to a year ago and an unadjusted 10% from May. It said new-home purchase applications were at the lowest level since April 2020.

“The decline in recent purchase applications aligns with slower homebuilding activity due to reduced buyer traffic and ongoing building material shortages and higher costs,” Kan said.

The National Association of Realtors reported that existing single-family homes, townhomes, condominiums and co-ops were sold at a seasonally adjusted annual rate of 5.12 million in June, down 5.4% from May and down 14.2% from a year ago. Single-family homes sold at a SAAR of 4.57 million in June, down 4.8% from May and down 12.8% from a year ago.

The median existing-home price for all housing types in June was $416,000, up 13.4% from June 2021. The single-family home median was $423,300 in June, up 13.3% from a year ago.

“Falling housing affordability continues to take a toll on potential home buyers,” NAR Chief Economist Lawrence Yun said. “Both mortgage rates and home prices have risen too sharply in a short span of time.”

Total housing inventory was 1.26 million units at the end of June, up 9.6% from May and up 2.4% from a year ago. Unsold inventory sat at a 3.0-month supply at the current sales pace, up from 2.6 months in May and 2.5 months in June 2021.

Lawrence Yun

However, properties typically remained on the market for just 14 days in June — the fewest since NAR began tracking it in May 2011. It was down from 16 days in May and 17 days in June 2021. Among homes sold in June, 80% were on the market for less than a month.

“Finally, there are more homes on the market,” Yun said. “Interestingly though, the record-low pace of days on market implies a fuzzier picture on home prices. Homes priced right are selling very quickly, but homes priced too high are deterring prospective buyers.”

Meet our New Orleans Speakers

  

www.NCOFCU.org

As New Orleans nears, we’ve rounded up some of the best minds in the industry to share their knowledge with us. “Attendees will network with their peers and colleagues while receiving an in-depth look at relevant governance and strategy issues, and walk away with a deeper and broader understanding of current industry trends and enhanced skills to help improve their credit unions’ performance,”

Here’s a sample of some of this year’s speakers and their respective sessions:

Special Guest speaker

Dr. Jerry V. Teplitz, Jerry Teplitz Enterprises Inc

"INCREASING YOUR BRAIN’S PERFORMANCE FOR GREATER LEADERSHIP WHILE MANAGING THE STRESS OF CHANGE"

• Frank J. Diekmann CUToday, "Key Issues & Trends for 2023: Opportunities & Challenges for First-responder CUs"
  
• Rodney Hood Director NCUA - NCUA & Credit Unions' future.
• Steven Rick, Chief Economist CUNA Mutual - U.S. Economic Outlook & Its Impact on Credit Unions for 2022 and Beyond.
• Tammy O'Hara CCUE, OM Financial - Recruiting and Retaining Successful Leadership
• Mike Beall, CU Strategic Planning - The Path and Benefits to Becoming CDFI Certified.
• Mike Richards CEO, Richards & Associates - Countdown to CECL
• Murray Halperin CEO, CUFR - Credit Union First-Responder Fininance CUSO Development
• Randy Thompson CEO, TCT Solutions - WARM v/s SCALE
• The McCormick Hour - NCOFCU Select open panel of FF CEOs
• Tim Kelly CEO, - AFG Auto Financial Group - Auto Lending “Lower Payment Options”
• Bonnie Sensing - Nashville CU - BSA Certification
• Adrienne Slack VP, New Orleans Branch Federal Reserve - Federal Reserve Update
• Patti Wobbels Senior Vice President SRM, - Cryptocurrency 101
• Mike Richards, - Directors Duties and Responsibilities
  
  We will keep you up to date with the latest additions to our conference and be sure to save your seat for New Orleans Oct 5-8, 2022.

Conference Schedule        Conference Registration

Attendee Registration

NCOFCU National Board of Directors

Chairman: Michael McCormick V. Chair. San Diego Firefighters FCU
1st V. Chairman: Bonnie Sensing Exec. Admin. Nashville Firefighters CU
2nd V. Chairman: David Lantrip Director Houston Firefighters FCU
Treasurer: Gene Benick NCOFCU
Secretary: Brian Kurzel V. Chair. Charlotte Fire Dept. CU
Directors: Linda Williams CEO Akron Fire & Police CU, Michael Tobler Chairman NY Firefighters Bravest FCU, Andy Doyle Director F&A CU, John Cowin Chairman Syracuse Firefighters CU
Associate Directors: Sean Costello V. Chair. Boston Firefighters CU, Al Comeaux Chairman Baton Rouge CU

Staff: Grant Sheehan CEO 

Diana Dyksta, president and CEO of the California and Nevada leagues, has been elected as the World Council’s new chair.

 New WOCCU Chairman, Other Board Election Results

Diana Dyksta, president and CEO of the California and Nevada leagues, has been elected as the World Council’s new chair.

In addition, current directors Dallas Bergl (USA), Joe Thomas (USA) and Michael Lawrence (Australia) have been appointed to two-year terms. Jeff Guthrie, the new president and CEO of the Canadian Credit Union Association (CCUA), was also appointed to a two-year term. He replaces outgoing CCUA President and CEO Martha Durdin.

WOCCU board members Manfred Dasenbrock (Brazil), Charles Murphy (Ireland), George Ototo (Kenya) and Joseph Remy (Caribbean) were all reelected to two-year terms.

The World Council Board’s committee officers for 2022-23 are:

• Diana Dykstra (USA), Chair
• Michael Lawrence (Australia), Vice Chair/Secretary
• George Ototo (Kenya), Treasurer/Chair of Audit and Risk Committee
• Joe Thomas (USA), Chair of Governance and Elections Committee

Below, Diana Dykstra, center, appears with Elissa McCarter Laborde, WOCCU president and CEO, and outgoing chairman Rafal Matusiak from Poland.

New Orleans Firemen’s Expands FOM into Underserved Areas, With Help From CUCollaborate

METAIRIE, La.–New Orleans Firemen’s FCU (NOFFCU) has been approved by NCUA to addfive underserved areas comprising a total of 518 census tracts to its field of membership (FOM).

NOFFCU, a multiple common bond credit union and certified CDFI, has been looking to expand service beyond its now-former FOM of close to 26,000 members and 300 businesses in both Louisiana and Mississippi.

“We serve two states with some of the least prosperous residents in the nation due to high rates of poverty, income inequality, subprime credit and lack of mainstream financial services,” said President and CEO Judy De Lucca. “Expanding our FOM will allow us to now be able to offer more services to more members and further empower the communities we serve.”

New Orleans Firemen’s worked with CUCollaborate on the FOM expansion application.

The company noted that under a multiple common bond charter, an institution has the option of adding well-defined local communities and/or rural districts to an FOM, provided they qualify as “underserved.” To do so, an area must meet certain standards of economic distress, have proven unmet financial needs and be underserved by other depository institutions, said CUCollaborate, which specializes in field of membership consulting services

Meeting the Standards

In this case, the company said it worked alongside NOFFCU to prove the areas to be added indeed met all these standards, along with the institution’s ability and commitment to serving potential new members immediately.

“The credit union has a healthy financial position and demonstrated success serving underserved members in the current field of membership through all delivery channels,” De Lucca. “This is why we firmly believe in our ability to serve the proposed area, as well as maintain or raise our standards as we grow.”

The field of membership expansion for NOFFCU will add three underserved local communities covering portions of the New Orleans–Metairie–Hammond CSA, along with two adjoining rural districts. The combined area, with an estimated population of over 1.72 million, has the potential to increase NOFFCU’s field of membership “exponentially,” said CUCollaborate Founder and CEO Sam Brownell.

‘Entirely New Scale’

“We are thrilled to have been a part of New Orleans Firemen’s FCU’s expansion,” said Brownell. “Most importantly, the credit union has now substantially increased its potential field of membership, which will allow it to keep offering its excellent services, only now on an entirely new scale. This progress is key for any institution looking to grow and again we are grateful they trusted us to be a part of the process.”

For info: www.cucollaborate.com

Home Prices Increased at Annualized Rate Near 20% in Q2

 WASHINGTON—Single-family home prices increased at the annualized rate of 19.4% in Q2, down slightly from the previous quarter’s upwardly revised 20.5%, according to Fannie Mae’s latest Home Price Index (FNM-HPI) reading.

The HPI is a national, repeat-transaction home price index measuring the average, quarterly price change for all single-family properties in the United States, excluding condos.

On a quarterly basis, home prices rose a seasonally adjusted 4.3% in Q2 2022, Fannie Mae said.

‘Near-Historic Pace’
“Home prices maintained a near-historic pace of appreciation in the second quarter, as low levels of housing inventory continued to support price growth,” said Doug Duncan, Fannie Mae senior vice president and chief economist. “At the end of 2021 and extending into 2022, we believe many homebuyers pulled forward their purchase plans to avoid expected increases in mortgage rates, contributing to demand for homes and strong price appreciation. Given the sharp rise in mortgage rates since that time, and the resulting negative impact on affordability to potential homebuyers, we expect purchase demand to cool in the quarters ahead, and for home price appreciation to moderate as a result.”

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Markets, Analysts Increasingly See a Full Percentage Point Rate Increase at Next Fed Meeting

 WASHINGTON–Many analysts have been forecasting a 75-basis-point increase in the Fed Funds rate when the Federal Open Markets Committee meets July 26-27, but now the markets are predicting it could be a full percentage point increase.

The forecasts are coming after the latest Labor Department’s June Consumer Index report showed inflation in June jumped a record 9.1%, the biggest monthly increase since November 1981.

“Fed funds futures for July immediately rose to 81 basis points, meaning investors were pricing in 0.81% in rate hikes from the Fed on July 27. And by the afternoon, market expectations continued to grow, with the fed funds futures pricing in 93 basis points of a hike in July, according to BMO,” CNBC reported. “The market had previously anticipated a rate hike of 0.75 percentage points, but the high reading on the July contract indicates many investors are bracing for a 1% hike. That would be extremely aggressive on top of June’s three-quarter point hike, the largest increase since 1994.”

The fed funds rate range target is currently 1.5%-1.75%.

Edging Higher

Global rate pressure is certainly one reason expectations have kept edging higher, as well as comments from a Fed official.

Andrew Brenner, head of international fixed income at National Alliance Securities, added in comments to CNBC, “You had the Bank of Canada, out of nowhere, went from the solid 75 basis point expectation, which was already high ... and they did 100 basis points.”

Fed President Adds Fuel

Brenner further noted comments from Atlanta Fed President Raphael Bostic also helped send expectations higher, after he said the latest CPI report is a “concern” and everything is “in play.”

Ben Jeffery, rate strategist at BMO, told CNBC the market was now pricing for a fed funds rate of 2.51% in July, but October futures also pointed to a bigger hike in September.

The September contract was priced for fed funds at 3.23% by October.

As CUToday.info reported here, CUNA is forecasting the Fed funds rate will be 3.15% at year-end 2022 and 3.25% at year-end 2023. 

Mortgage Rates

Meanwhile, mortgage rates are again raising, after posting a drop last week.

The 30-year fixed-rate mortgage averaged 5.51% in the week ending July 14, up from 5.3% the week before, according to Freddie Mac. That mark is significantly above where rates stood at the same time in 2021, when the 30-year stood at 2.88%.

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