Blog posted On July 02, 2018
Mortgage rates held steady last week, not moving much in either direction. This week, markets are closed on Wednesday in observance of Independence Day. In housing news, US construction spending comes out on Monday and the weekly mortgage application survey comes out on Wednesday. The ADP employment report is also scheduled for release.
US construction spending tracks total spending on private and public construction projects. Construction spending can be used to predict activity like new home sales. In April, construction spending accelerated, up 1.8% month-over-month and 7.6% year-over-year, driven by home building. Residential construction specifically saw an uptick, private residential projects improved 4.5% month-over-month, the biggest gain since November 1993. Spending on public projects decreased 1.3%, and spending on federal government construction projects fell 10.2%.
The Mortgage Bankers Association (MBA) weekly mortgage application survey shows week-to-week changes in the submission of new purchase and refinance mortgage applications. Mortgage activity slowed for the week ending 6/22. New purchase applications fell 6.0% and refinance applications dropped 4.0% for a composite decrease of 4.9%. After showing strength the previous week, home buyers are struggling to compete over limited for-sale inventory and rising home prices. Redfin head of analytics, Pete Ziemkiewicz explained, “people listing their homes for sale in higher numbers this April and May is good news for buyers, and good news for home sales.”
The ADP employment report is based on data from approximately 400,000 US businesses employing approximately 23 million workers nationwide. The labor market has been faring especially well for much of the past few years. The unemployment rate recently dropped to an 18-year-low and the market is nearing full employment. In May, the ADP employment report showed the addition of 178,000 jobs. Small businesses added 38,000 jobs, mid-size businesses added 84,000 jobs, and large firms added 56,000 jobs. Hiring was led by professional and business services, followed by leisure and hospitality, then construction, and finally manufacturing.
Heading into the second half of the year, buyer demand is high, and supply is starting to catch up. A strong housing starts report last month may indicate a reprieve for home buyers competing over limited inventory. After June’s rate hike, interest rates have started to settle amidst international trade concerns. Home buyers looking to buy, or homeowners interested in a refinance still have a chance to lock historically low interest rates this summer.