Market Forecast: Job Openings, Mortgage Applications, and Consumer Credit

  • June 04, 2018

Mortgage rates have started to level off after climbing most of the first half of the year. This week will be a slow week for economic news, the only housing report scheduled is the weekly mortgage application survey on Wednesday.  In employment news, the Labor Department will release its Job Openings and Labor Turnover Survey (JOLTS) on Tuesday.  The consumer credit report comes out on Thursday.

The Labor Department’s JOLTS tracks job openings, hirings, and voluntary quits.  Jobs reports are especially important to the health of the housing economy because employment growth typically correlates with positive housing activity.  Job openings surged to a level of 6.550 million in March, a record high.  Hiring dropped to a rate of 5.4 million and the quit rate rose to 2.3% accounting for more than half (62%) of all separations in March.  This high quit rate is likely to put upward pressure on wages, as most workers change jobs because they are offered a higher salary.

The Mortgage Bankers Association (MBA) weekly mortgage application survey has shown a slowdown in mortgage application submissions this year, as mortgage rates climb higher.  Even last week’s interest rate reprieve did not spur more mortgage activity.  New purchase application submissions declined 2.0% and refinance application submissions declined 5.0% for a composite decrease of 2.9%. 

Consumer credit is a ledger of total outstanding credit debt segmented by revolving and nonrevolving credit.  Revolving credit counts monthly debt like credit card payments and nonrevolving credit includes longer-term debt like student loans and car loans but excludes mortgage debt.  In March, consumer borrowing slowed, climbing by $11.62 billion to a level of $16.0 billion.  Revolving credit decreased 3% month-over-month and nonrevolving credit increased 6% month-over-month for a composite increase of 3.6%.  Relief from tax cuts may have lessened the need for consumers to use credit over cash to make purchases. 

With mortgage rates expected to continue rising this year, most analysts expect home price appreciation to start to ease.  The labor market is the strongest it has been in decades with unemployment recently dropping to an 18-year low.  Tax cuts plus pressure on businesses to raise wages will likely spur economic momentum and housing activity into the coming months.  The biggest pressure prospective home buyers are facing is lack of for-sale inventory.  One way for home buyers to stay competitive is to get preapproved before shopping for a home.  Mortgage preapproval shows sellers that you are ready to make an offer and expedite the transaction.   

 

Sources: Bloomberg, MarketWatch, Mortgage News Daily, Nasdaq

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