Market Forecast: Mortgage Applications, ADP Employment Report, and Consumer Credit

Blog posted On March 05, 2018

Last week, mortgage rates trended slightly upward.  This week, there are no significant housing reports, aside from the weekly mortgage application survey.  Other notable economic reports include the ADP employment report and consumer credit.  Job creation and consumer spending strengthen the overall economy, including housing activity. 

The Mortgage Bankers Association (MBA) releases a weekly mortgage application survey showing week-to-week changes in new purchase and refinance mortgage application submissions.  For the week ending 2/23, new purchase applications strengthened, up 6.0%, while refinance applications declined slightly, down 1.0%, for a composite increase of 2.7%.  Some housing professionals suspect spring buying and selling has started early, with home buyers looking to lock lower mortgage rates before the forecasted federal interest rate hikes.

The ADP employment report tracks hiring trends for approximately 400,000 private-sector businesses employing approximately 23 million employees nationwide.  In January, the report showed the addition of 234,000 jobs, a solid gain to start the year.  The job market has been strong, the unemployment rate is near a 45-year low, and market analysts expect job creation to continue into 2018. 

Consumer credit measures the total outstanding balance of consumer debt divided by revolving and nonrevolving credit.  Revolving credit includes regular monthly bills like credit card payments and nonrevolving credit includes longer-term debt like car loans and student loans.  In December, consumer borrowing was strong.  Revolving credit increased 6% month-over-month, and nonrevolving credit increased 5.7% month-over-month, for a composite annual increase of 7.7%.  Consumer borrowing can be a sign of economic strength, as consumers are confident they will be able to repay debts, but too much borrowing can be a sign of trouble to come, as consumers borrow to offset lack of wage growth and savings.

Spring and summer tend to be busier seasons for housing activity.  Although the housing market has endured an inventory crunch, as construction picks up there may soon be more available homes for sale. 

Sources: Bloomberg, CNBC, MarketWatch, Mortgage News Daily, USA Today