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CCL Market Update: Unemployment, Consumer Spending, Housing Market, Mortgage Rates

Last week saw a significant drop in the number of Americans filing jobless claims, falling to the lowest level in almost 15 years. American claims for unemployment benefits dropped by 43,000 to 265,000 for the week of January 24. This is the biggest weekly decline since November 2012, and lowest level since April 2000.

The improvement in the labor market led to a notable rise in consumer confidence for January, its highest level since August 2007. Americans were much more optimistic about the economic outlook this month thanks to money saved purchasing gas, as well as the possibility of better employment prospects due to an improving job market. This is demonstrated by the 4.3% increase in consumer spending in the fourth quarter of 2014, which is the most since 2006. A survey at the University of Michigan showed that more consumers were likely to buy a car than in the last 10 years, and consumers were also more inclined to buy larger household items such as washing machines and vacuum cleaners.

On Wednesday, the Federal Reserve left policy rates unchanged as expected with the fed funds target at a range of zero to 0.25 percent. In their policy statement, they said wage growth continues to disappoint and inflation remains below the 2% target and “is anticipated to decline further in the near term”, suggesting “that it can be patient in beginning to normalize the stance on monetary policy.” The Fed is essentially watching economic developments to see what happens.

Heading into February, we will see a variety of reports important for assessing consumer spending and the direction of the economy. Included are reports on personal consumer income, motor vehicle sales, and construction spending, as well as the always anticipated employment report.


Housing Market News

According to sales reports for the first 3 weeks of January, home prices are 7.6% higher this month compared to the same time last year. While higher home prices are good for those looking to sell, the rising prices combined with the lesser supply of low-end listings have put numerous homes out of reach for some entry-level buyers. This has led a drop in the number of U.S. homebuyers making their first home purchase, bringing the 2014 first-time homeownership rate the lowest in almost 3 decades.

According to DataQuick, in California, the median home price increased by 6.3% to $388,000 in December 2014 compared to one year ago. The number of units sold was up 4.3% year-over-year to more than 36,000. San Luis Obispo County showed more modest gains during the same time period. Home prices rose just 1.1% to $470,000 and total sales actually decreased 1.9%.

While things are looking up heading toward the spring market for 2015, consider this: in order to qualify for home loans, borrowers today need higher credit scores and less overall debt than in the past, as well as complete documentation of finances.


Mortgage Rates

Rates have leveled out this week compared to the slight increase from last week. Mortgage rates for conventional loan programs such as the 30-year Fixed, 15-year Fixed, Manufactured Conventional, and Jumbo, as well as the 30-year FHA, VA, and USDA all remained relatively unchanged from the previous week. The only increases occurred in the 30-year High Balance, which rose to 3.875% (3.903% APR), and the FHA 203k, which went up to 3.375% (4.957% APR).

As a whole, rates in 2015 remain low, as indicated by Freddie Mac’s weekly survey results:


With rates this low, now is the perfect time to consider a home purchase or refinance! Give us a call at 805.543.LOAN to learn about your specialized options.

Written by Central Coast Lending - Go to Central Coast Lending's Website/Profile