The Labor Department released their Job Openings and Labor Turnover Survey (JOLTS) for the month of June on Wednesday, reporting that job openings dipped slightly to 5.249 million from 5.357 million in May. This decrease in job openings is likely reflective of new hiring, as the hiring rate rose 1-tenth in the month to 3.7%. The layoff rate for June rose only 1-tenth to 1.3%, which points to weakness in labor demand, and the quits rate remained unchanged at 1.9%.
Jobless claims continue to be a positive in the employment category, as they continue to hold at historically low levels. Initial claims for the week of August 8 came in at 274,000, with a 4-week average of 266,250, 1,750 lower than the previous week, and the lowest level since April 15, 2000. The low initial claims numbers are a positive indication for the August employment report. With such healthy employment numbers, it is very possible that a rate hike may happen sooner rather than later.
Retail sales rose 0.6% in July while May and June sales figures were revised higher. Vehicle sales stood out in July, jumping 1.4%, nearly matching May’s historic 1.9% surge. But even outside vehicles, retail sales were strong with the ex-auto reading rising a solid 0.4%. Restaurants, in another strong signal of consumer strength, rose an outsized 0.7% following June’s 0.5 percent gain. These are very strong gains for this component.
The consumer sentiment so far in August has shown little change from the end of July, with an index of 92.9 for mid-month August vs. the 93.1 final July reading. The current conditions component was also nearly unchanged and hints at steady strength for consumer spending again this month and a possible upward revision for second-quarter GDP.
Q2 Real Estate Update
The Central Coast & San Luis Obispo County housing market continues to be largely positive through the first half of 2015.
The median home price for the county has risen 2.2% since March, and there have been 8% more home sales than in the first half of 2014. As you can see below, most statistics for SLO County for the first 6 months of this year have improved since this time last year:
- 1,349 home sales (2015) vs. 1,249 (2014)
- Only 4% of home sales distressed (2015) vs. 5% (2014)
- An average of 76 cumulative days on the market (2015) vs. 73 (2014)
- $511,000 median home price (2015) vs. $485,000 (2014)
- An average of $314.40 per square foot (2015) vs. $302.91 (2014)
Through the first half of the year, the most affordable area on the Central Coast is Orcutt/ Santa Maria, closely followed by Santa Margarita. Both cities have the least expensive median home prices by about 13%.
Mortgage rates have dropped by approximately 1/8 percentage points in all loan programs over the past week or so. The 30 year conventional is a perfect example with a rate of 3.875 (3.915 APR) on August 12, down from 4.000% (4.040% APR) on August 5. The largest rate decrease was for the 30-year FHA, dropping 0.218% to 3.375% (4.962% APR).
With rates moving downward once again, refinance applications have begun to rebound, up 3.0% in the week of August 7, their highest level since May. Purchase applications did not follow suit, falling 4.0% in the same week, although still at a level 20% higher than one year ago.
Sean Becketti, chief economist for Freddie Mac, commented on the current economy in relation to current mortgage rates:
“The jobs report for July showed that the economy added 215,000 jobs, in line with expectations. Wage growth remains modest at 2.1 percent compared to the same time last year, and another solid if not stellar employment report leaves a potential Fed rate hike on the table for September. However, this year’s theme of overseas economic turbulence continues with the focus shifting east to China. Over the past few days the Chinese Yuan has fallen sharply. In the midst of these mixed data mortgage rates inched up… Headed into the fall, we’ll likely see continued interest rate tension, with dollar appreciation weighing against possible Fed rate hikes leaving the rate outlook clouded.”