Last week we received data on Construction Spending, Core Inflation, Non-Farm Payrolls and the National Unemployment Rate.
Construction spending fell in June after the May reading was revised upward to 1.80 percent from the original reading of 0.80 percent. Spending for residential construction rose by 0.40 percent. Construction spending was restrained by a 0.5 percent drop in private construction spending; the largest decrease since June 2014. The seasonally-adjusted annual outlay for construction was $1.06 billion in June.
Housing analysts point toward construction of smaller residential units including condominiums and apartments, with an emphasis on rental properties and indicates that would-be home buyers continue to set on the fence to see how factors like rising home prices, fluctuating mortgage rates and stagnant wages will affect their housing opportunities.
Consumers remain cautious despite positive growth in the U.S. and local economies, according to the July 2015 Consumer Expectations survey completed by the Federal Reserve Bank of New York.
The survey results suggest relatively stable expectations about the economy with job growth, unchanged inflation, while household income and earnings that remain largely flat. The one glaring statistic noted in the survey was median household spending growth expectations that have recently sunk to their lowest level since the survey began in 2013.
In a recent survey of loan officers some banks surveyed reported easing mortgage approval standards, but fewer lenders eased standards than in the first quarter. A Fed survey also reported that large banks were easing consumer credit standards for auto loans and credit cards and we can only hope they ease the mortgage approval process, although HUD had been cracking down on many community back on poor mortgage loan quality being generated. Until lenders feel comfortable that the FHFA will ease up on loan deficiencies audits home buyer will continue to pay the price by having to over document their ability to repay their mortgage, so don’t blame your loan officer, blame Hollywood East for a difficult application process.
Freddie Mac reported once again average mortgage rates fell across the board last week with the average rate for a 30-year fixed rate mortgage lower by seven basis points to 3.91 percent; the average rate for a 15-year fixed rate mortgage fell by four basis points to 3.13 percent, and the average rate for a 5/1 adjustable rate mortgage was unchanged at 2.95 percent. Discount points for all loan types were unchanged at 0.60 percent for 30 and 15-year fixed rate mortgages and 0.40 percent for 5/1 adjustable rate mortgages.
Weekly jobless claims rose from the prior week’s reading of 268,000 new claims to 270,000 new claims, which matched analysts’ expectations. In other labor-related news, the government reported a national unemployment rate of 5.30 percent in July; this was unchanged from June’s reading.
According to July’s Non-farm Payrolls report, 215,000 new jobs were added in July as compared to expectations of 220,000 jobs added. For June, the Labor Department announced 223,000 jobs added; a figure that was revised upward to 231,000 in the latest report. The unemployment rate declined slightly, to 5.3 percent in that month.
The Federal Reserve’s Federal Open Market Committee (FOMC) is closely monitoring job growth and inflation rates as it considers raising the target federal funds rate in September. The FOMC recently cited the committee’s concerns about labor markets and lagging inflation.
U.S. inflation is it has run below the Federal Reserve’s 2 percent objective for 38 straight months.
The Commerce Department’s report on U.S. personal consumption expenditures (PCE) included details on monthly inflation trends, which are tracked closely by the Federal Reserve. The PCE price index excluding the volatile food and energy sectors – a measure of “core” inflation the Fed uses to track underlying consumer price trends – ran at 1.3 percent from a year earlier for each of the first six months of the year. Nearer-term PCE price index measures show signs of lifting. In the second quarter, the PCE price index excluding food and energy increased at a 1.8 percent annual rate compared to the first quarter and not far from the Fed’s 2 percent goal.
What’s Ahead for the Week?
We’ll get Retail Sales and Consumer Sentiment report and as usual Freddie Mac’s Mortgage Rate Survey and New Jobless Claims.
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