In each Economic Update, the Research staff analyzes recently released economic indicators and addresses what these indicators mean for REALTORS® and their clients. Today’s update discusses ADP employment numbers and mortgage purchase applications.
- More evidence of the economy hitting a soft patch appeared today. Employment is expanding, but at a slower pace than before. ADP, a firm that processes payroll checks for many of the companies in the country, reported a job gain of only 119,000 in April. That is only the half the rate of the 220,000 monthly average job creation in the six prior months.
- This job data is not ‘official’ since it misses out on the many companies who do not use ADP services. However, it has been a reasonably good leading indicator for the official employment data released by the government, which is set for this Friday.
- In separate data news, mortgage applications to buy a home rose 5% in the final week of April. It marks two consecutive weeks of increase. However, this data points to no measurable pick-up in home sales over the past 12 months, contrary to rising home sales figures. The applications data has no information about the approval rates and also there have been a sizable number of all-cash deals, which would not be picked up from mortgage data.
- Refinancing activity slid for the second straight week. Mortgage bankers may need to increase staff time dedication to home purchases rather than refinances, particularly in the upcoming months. When the mortgage rates rise, refi activity will quickly dry up. The only source of mortgage business will be from home purchases. (This reallocation of staff time may also imply that a moderate rise in mortgage rates could be good for the housing market. The rising rate will force banks to dedicate more staff time in processing home purchase loans.)