January 11, 2016

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As we moved in our first full week of 2016 few reports on housing or mortgage related news was reported. We did, however, get data on Construction Spending and some labor reports.

Both of these sectors in our economy have profound impacts on housing. Construction Spending provides indications of future housing supply, as well as Builder Confidence. Data coming for the labor markets gives us a sense of economic conditions overall and how those factors influence would-be home buyers.

In the report released by the Commerce Department, construction spending dropped by 0.40 percent in November to a seasonally adjusted annual reading of $1.12 trillion. November’s reading was short of the expected reading of 0.90 percent, which was based on October’s original reading of a 1.00 percent increase in construction spending. October’s reading was later revised downward to 0.30 percent. Even with the unexpected decline, November’s construction spending was 10.50 percent higher year-over-year.

Private construction spending decreased by 0.20 percent in November, but it’s up 12.10 percent year-over-year. That’s good news, considering that the housing markets have been hard squeezed due to short supplies of available homes. New construction of affordable housing is a key factor to ease the shortage and should motivate would-be home buyers to stop renting and taking advantage of many of the great opportunities out there to purchase a home.

Fortunately, residential construction was up 0.30 percent in November and increased 10.80 percent year-over-year, but we are still well off our peaks before the housing bust in 2007.

According to the Labor Department, 292,000 new jobs were added in December, which resulted in the fifth consecutive year where jobs grew by 2 million or more year-over-year! Upward revisions to the jobs reports for October and November supported stronger economic conditions. October’s reading was adjusted from 298,000 new jobs to 307,000 new jobs; November’s original reading for new jobs was raised from the 211,000 jobs added to 252.000 jobs added.

Last week’s positive jobs reports were released against the turmoil in the Chinese market and concerns the China’s economy is slowing. As the second largest global economy, China’s economy could influence global financial markets and economic conditions if it experiences serious difficulties.

New weekly jobless claims fell to 277,000 as compared to expectations of 275.000 and the prior week’s reading of 287,000 first-time claims. Fewer first-time claims for jobless benefits point to stronger economic conditions in general as evidenced by expanding job markets. National unemployment held steady 5.00 percent, which met expectations and the same as November’s reading.

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Freddie Mac’s survey of lenders and interest rates were mixed. The average rate for a 30-year fixed rate mortgage dropped four basis points to 3.97 percent; the average rate for a 15-year fixed rate mortgage rose two basis points to 3.26 percent and the average rate for a 5/1 adjustable rate mortgage rose by one basis point to 3.09 percent. Last week’s discount points averaged 0.60 percent for 30-year fixed rate mortgages, 0.50 percent for 15 year fixed rate mortgages and 0.40 percent for 5/1 adjustable rate mortgages.

What’s Ahead for the Week?

This week we’ll get economic reports that include job openings, retail sales the Federal Reserve’s Beige Book report, Freddie Mac’s Lender Interest Rate Survey, New Jobless Claims, and Consumer Sentiment. 


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