Weekly Economic Review: Mortgage Rates Continue Climbing, Pending Home Sales Slow

Posted by Laine Smith on 12/2/16 1:10 PM

Topics: Economy

This week's economic review includes mortgage rates, which reached highs not seen in over a year. Meanwhile, employment reports indicated strength in payroll growth while the unemployment rate fell.

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Image courtesy of ddpavumba at FreeDigitalPhotos.net

The release of the ADP Employment Report on Wednesday forecasted strong private payroll growth with an estimated 216,000, which is well above consensus levels.

Friday’s Employment Situation report confirmed strength in payroll growth. Nonfarm payrolls increased 178,000 in November. The unemployment rate dropped a sizable 0.3 percent to 4.6 percent. While the unemployment rate is the lowest reading since August 2007, the monthly decrease is attributed to a decline in the participation rate, which fell 0.1 percent. Another negative in the report was a decline in the average hourly earnings, down 0.1 percent in the month, for the first negative reading of 2016.

Despite October existing home sales reaching peak levels not seen since 2007, the pending home sales index nudged upward by only 0.1 percent in October. The small increase in signed contracts indicates the likelihood of a sales plateau through the end of the year. Still the pending home sales index sits 1.8 percent higher than October 2015.

Gross domestic product (GDP) expanded to an annual rate of 3.2 percent in the third quarter, marking the fastest pace the economy has grown since 2014. Consumerism picked up momentum as personal spending rose at a 2.8 percent pace throughout the quarter.

In November, consumer confidence had a considerable increase, up 6.3 points to 107.1, which is the best reading since July 2007. The current conditions component jumped 7.2 points to 130.3 with many respondents says jobs are plentiful and business conditions are positive. In the expectations component, the index rose 5.7 points to 91.7 due to decreasing negative outlooks on jobs.

This week in the economy:

  • The 30-year fixed-rate average climbed again this week to 4.08%, hitting a level not seen in over a year, according to Freddie Mac.
  • In the November 30 week, purchase applications fell just 0.2 percent despite rising mortgage rates, according to MBA Mortgage Applications data. Refinance applications, though, dropped a sharp 16 percent from the prior week. Year-over-year purchase applications are up just 3 percent despite experiencing double-digit gains earlier this year.
  • Jobless claims jumped sharply in the November 26 week by 17,000 to a higher-than-expected level of 268,000.
  • The Bloomberg Consumer Comfort Index increased slightly to 44.9 in the November 27 week.

What’s on economic calendar for the week of December 5, 2016:

  • Monday – Gallup US Consumer Spending Measure
  • Wednesday – MBA Mortgage Applications, Gallup U.S. Job Creation Index, JOLTS, Consumer Credit
  • Thursday – Jobless Claims, Bloomberg Consumer Comfort Index
  • Friday – Consumer Sentiment

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