The federal homebuyer tax credit expired at the end of April for home purchase contracts which must be closed/settled by the end of June.  Now there is mounting concern about how much demand had been forwarded into April from the coming summer months.  According to the Mortgage Bankers Association, purchase application activity has declined for five consecutive weeks since the tax credit expired.  Their seasonally-adjusted purchase index is at its lowest level since December 1996, and this despite near-record low mortgage rates.  If that is any indication of where housing demand currently stands, the housing market could be in for a rough summer. 

Employment data and comments out of the Federal Reserve dictated equity market action over the past week.  A weaker than expected May employment situation report sent the market into a freefall last Friday while trading remained relatively bearish through most of this week.  Further pressure was put on equities yesterday when Fed Chairman Ben Bernanke stated that “Jobs will be weak for a while.”  He also hinted that tighter fiscal policies may be forthcoming, stating “support to economic growth from fiscal stimulus is likely to diminish in the coming year…”

The Economy
The U.S. economy added a seasonally-adjusted 431,000 jobs in May which was weaker than most industry watchers had anticipated.  Adding to the concern was that 411,000 of those 431,000 jobs were temporary Census positions which would’ve meant that the economy only added about 20,000 jobs in May.  However, this still marks the fifth straight month that the U.S. economy has increased payrolls which is a positive sign that employment conditions are stabilizing.

The nation’s unemployment rate eased slightly in May to 9.7% from 9.9% in April.  The hiring of temporary Census workers and a slowly improving labor market helped push the unemployment rate lower last month.  Current levels of unemployment remain at their highest since 1983 which will likely be a drag on consumer spending and confidence in the near-term.

Weekly jobless claims fell 3,000 to a seasonally-adjusted figure of 456,000 in the week ending June 5.  This is the third straight week that initial claims have declined.

Housing Market
National average mortgage rates declined from the previous week to 4.72% in the latest Primary Mortgage Market Survey released weekly by Freddie Mac on June 10th.  Rates have recorded weekly declines in seven out of the past nine weeks.  Fixed mortgage rates are now just slightly higher than the all-time low of 4.71% set in December 2009.

In the week ending June 4th, the MBA’s seasonally-adjusted purchase index declined 5.73% from the previous week and was down 38.01% compared to the same time last year.  This is fifth straight week that the purchase index has declined and the lowest it has been since December 1996.  Despite record-low mortgage rates, both refinance and purchase activity dropped last week.

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