Blog posted On July 13, 2018
Mortgage rates did not move significantly up or down this week. It was a light week for housing news, but the Mortgage Bankers Association (MBA) weekly mortgage application survey showed a surge in new purchase mortgage applications. Consumer credit also increased substantially. The Labor Department’s Job Openings and Labor Turnover Survey (JOLTS) cooled down after reaching a record level in April.
Consumer credit expanded significantly in May. Total outstanding consumer credit grew by $24.6 billion to a seasonally adjusted level of $3.9 trillion. Revolving credit, like regular monthly credit card debt, increased 11.4%, much higher than April’s 1.3% increase. Nonrevolving credit, like student loans and auto loans, increased by 6.3%, compared to April’s 3.9% increase. The data shows much of the credit increase was driven by consumer spending. Consumer spending accounts for about two-thirds of Gross Domestic Product (GDP) growth. This quarter’s consumer spending strength will likely translate into positive gains for GDP.
In May, the number of open positions fell slightly to a level of 6.638 million. Hiring increased at a rate of 3.9% to a level of 5.75 million. Voluntary quits are also up at a rate of 2.4% to a level of 3.56 million, a 17-year high. Layoffs declined significantly from 1.73 million to 1.59 million. The JOLTS report is used to determine the overall stability of the labor market and the confidence of American workers. The increase in voluntary quits shows that workers are optimistic they will find comparable employment if they choose to leave their current position. The labor market is the strongest it has been in decades. A strong labor market will typically translate into a strong housing market.
For the week ending 7/6, the weekly mortgage application survey rebounded, driven by gains in new purchase applications. New purchase application submissions increased 7.0% and refinance application submissions decreased 4.0%, for a composite increase of 2.5%. MBA chief economist Mike Fratantoni attributes the recent gains to labor market strength. He told CNBC, “the strong job market continues to bolster demand for homes.”
Although the housing market continues to grapple with low supply, construction activity has started to pick up. Housing inventory has continued to decline, but at a less rapid pace. Realtor.com chief economist Danielle Hale explained, “Before we see inventories increase, we need to see them slow, and the data has shown four months of deceleration (smaller year-over-year declines)."