Market Recap: Refinance Applications Up, Jobless Claims Down, Consumer Credit Expands

Blog posted On February 08, 2019

Mortgage rates trended downward this week, following Federal Reserve Chair Jerome Powell’s comments after the Federal Open Market Committee meeting at the end of January.  Refinance mortgage application submissions inched upward, but new purchase application submissions are down.  Jobless claims dropped from the previous week.  Total outstanding consumer credit exceeded $4 trillion for the first time. 

The Mortgage Bankers Association (MBA) weekly mortgage application survey was mixed for the week ending 2/1/19.  New purchase applications declined 5.0%, but refinance applications improved 0.3% for a composite decrease of 2.5%.  MBA economist Joel Kan commented, “despite more favorable borrowing costs, and after a three-week surge in activity, purchase applications have slowed over the past two weeks.”  However, the favorable labor market conditions and a recent slowdown in home price appreciation are still good signs for the coming Spring home buying and selling season. 

The weekly jobless claims report has registered record lows for much of the past few years.  For the week ending 2/2/19, initial jobless claims declined to a seasonally adjusted 234,000 and continuing claims fell to 1.74 million.  Although jobless claims data may be volatile during November and December, with some businesses staffing up with temporary workers during the holiday shopping season, this week’s data combined with the 304,000 jobs added in January suggest the 2019 labor market is expected to be strong.

Total outstanding consumer credit broke the $4 trillion threshold for the first time ever in December.  Revolving credit, like monthly credit card debt, increased by 2% month-over-month.  Nonrevolving credit, like student loans and auto loans but not mortgage debt, increased by 2.75%.  Although consumer credit continues to expand, overall growth has slowed, due to low unemployment and steady wage growth.  In 2018, consumer credit increased by only 4.9%, down substantially from 2014’s 7.2% annual gain. 

Housing market conditions are setting the stage for a favorable Spring for home buyers and homeowners looking to refinance.  Mortgage rates have leveled off and many markets are seeing home price appreciation settle. 

Sources: CNBC, MarketWatch, MarketWatch, MarketWatch, Mortgage News Daily