Consumer Confidence Down, Job Growth Slows,
Consumer Confidence Down, Job Growth Slows,
California Associaton of Realtors
COVID-19 plays a role. With Delta variant cases continuing to rise throughout the U.S., the negative economic effect of the COVID-19 re-emergence has become more obvious in the past couple weeks.
In its most recent Market Minute report, the California Association of Realtors (C.A.R.) reports that consumer confidence has dipped to its lowest level since February, while jobs growth slowed sharply last month.
The speed bump for the economic recovery, however, is good news for homebuyers as the Fed will likely delay tapering and mortgage rates will be low for a little longer. With housing supply expected to improve in the fall, demand should stay solid as the lending environment remains favorable.
Residential construction spending on the rise. Total construction spending went up 0.3% in July from the prior month and was 9.0 percent higher than expenditures in July 2020.
Residential construction was the primary contributor to the year-over-year gain as spending in the category soared 27% from last year. On a year-to-date basis, residential spending was 25.7% ahead of last year, with single-family rising 38.3 percent from a year ago.
Despite signs of momentum slowing in the past few months, strong housing demand fueled by low rates and the work-from-home effect will likely result in more increase in spending in residential construction in coming months.
Jobs growth slowed in August: Hiring got hit hard last month as employers only added 235k new jobs onto their payroll, far lower than the revised 1.05M jobs recorded in July.
The slowdown in jobs growth was especially pronounced in the leisure and hospitality sector which added zero jobs after gaining an average of 350k jobs a month over the past six months.
The sharp decline in jobs growth was attributed primarily to the surge in delta variant cases in recent months. Businesses that require in-person contact held off on hiring as the pandemic uncertainty heightened, while job seekers were slow to return to the labor market as health concerns lingered on.
Unemployment e dipped to 5.2% in August though, reaching a pandemic low. The weak job report today will likely keep the Fed waiting a little longer before they start tapering.
Consumer confidence drops to a six-month low. The surge in Delta variant cases brought back the reinstatement of mask mandates and other pandemic restrictions that weighed on the consumer collective psyche in August.
The conference board’s Consumer Confidence Index hit the lowest level since February, with both the present situation index and the expectation index down sharply from the prior month. Rising inflation concerns and the turmoil in Afghanistan also have affected the outlook of the economy and consumer optimism.
Mortgage rates remain virtually unchanged. The average 30-year fixed rate reported by Freddie Mac has been essentially flat in the past four weeks, with rates changing by one basis point or less since August 12. While rate fluctuations could be observed on a daily basis, the movement has been relative stable with the 10-year treasury yield staying within a 15-basis point range between 1.23% and 1.36% in the past four weeks.
Despite a growing economy and an acceleration in inflation, concerns about the pandemic situation continue to weigh on rates and will likely keep them low in the short term.
Final month in forbearance for 400,000 homeowners: Of the 630,000 forbearance plans slated for review in September, Black Knight estimated that 400,000 will have reached the end of their forbearance eligibility unless the term is extended.
The month of August ended with a significant decline in forbearance numbers, with plans declining by 53,000 over the week ending Aug. 31.
The number of plans has declined 9 percent since the end of July. Of the 53 million outstanding mortgages, 3.2 percent or 1.71 million borrowers remain in forbearance. C.A.R. still expects the end of forbearance to have minimal effects on the state housing market.
COVID-19 cases could rise. The 7-day average for new COVID-19 cases was 11,742 as of last Thursday, Sept. 2, This marks a slight decline from the average of 12,275 recorded at the end of August. The number of cases, however, could rise during the Labor Day weekend as Americans travel.
The positivity rate, while improved, remains elevated at 4.9 percent, while the number of hospitalized patients continue to stay near recent highs and above 8,600.
More work needs to be done to keep the pandemic under control as we enter the fall.