Another rise in the National Association of Realtors’ Pending Home Sales Index for April confirmed that demand for housing remained high in the days leading up the expiration of the federal homebuyer tax credit.  The index in April reached its highest levels since October 2009 when the original federal homebuyer tax credit was set to expire.  While a fall in Purchase Mortgage Applications suggests some drop off in May, National Association of Realtors Chief Economist believes that the housing market has stabilized, stating it “appears to be in a good position to return to sustainable levels even without government stimulus, provided the economy continues to add jobs.”

So the X-factor remains the erratic job market.  Despite adding over half a million jobs in the past three months, the nation’s unemployment rate is still sitting at 9.9%.  The number of unemployed people who previously exited the job market are now returning as jobs become more abundant which will likely cause the unemployment rate to rise to 10% and beyond in the coming months.  While the economy seems to be showing signs of mending after posting three straight quarters of positive economic growth, recent economic turmoil in Europe will pose a threat to further expansion.  Employers have already been hesitant to add payrolls with the expectations of a sluggish recovery but renewed fears of a double-dip recession will add even more caution.

Early indications show that another month of positive jobs data is on the way with the government’s May employment situation report on deck for tomorrow morning.  The ADP jobs report released Thursday showed that 55,000 private-sector jobs were added in May which was the fourth straight monthly increase.

The Economy
Weekly jobless claims fell 10,000 to a seasonally-adjusted figure of 453,000 in the week ending May 29.  Despite the slight decline last week, jobless claims remain elevated and still do not suggest any significant improvement in the labor markets thus far.

In April, personal incomes in the United States increased to $12,265.2 billion compared to a downwardly revised figure of $12,210.8 billion in March. Personal incomes are up 2.5% from $11,969.8 billion in April of last year. This is the fourth straight month that personal incomes have recorded a year-over-year increase and the sixth consecutive month that personal incomes have increased.

Housing Market
The National Association of Realtors’ Pending Home Sales Index increased 6.0% in April to a reading of 110.9.  This was the third straight month that the index has increased and the highest it has been since October 2009.  The index is now 22.4% higher than it was last April when it stood at 90.6.

National average mortgage rates increased slightly from the previous week to 4.79% in the latest Primary Mortgage Market Survey released weekly by Freddie Mac on June 3rd.  This is the first time in the past eight weeks that mortgage rates have posted a weekly increase, albeit a minimal one.  Mortgage rates are still at historically low levels.

In the week ending May 28th, the MBA’s seasonally-adjusted purchase index declined 4.15% from the previous week and was down 33.51% compared to the same time last year.  This is fourth straight week that the purchase index has declined and the lowest it has been since April 1997.  An increase in refinance activity due to lower mortgage rates last week helped offset declines in purchase activity which led to slightly higher overall mortgage application volume.

This is now the fourth straight week purchase mortgage applications have declined since the expiration of the federal homebuyer tax credit which leads to further concern over May home sales data and if a housing recovery is sustainable without government stimulus.  The majority of mortgage application over the past few weeks has been refinances as homeowners are taking advantage of record-low rates.  The refinance share of mortgage activity increased to 73.8% in the week ending May 28th compared to 72.2% during the previous week, according to the Mortgage Bankers Association.

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