ShareEach day the Research staff takes a look at recently released economic indicators, addressing what these indicators mean for REALTORS® and their clients. Today’s update highlights personal income.
- On a down note this morning, personal income continued its 6-month pattern of easing to a gain of just 0.1% in June. Not surprisingly, personal spending followed suit as it has been limited by the decline in income growth and turned negative (-0.2%) in June.
- The personal saving rate rose for the 4th consecutive month to 5.4% in June from 5.0% a month earlier. However, under the qualified residential mortgage (QRM) regulation, even at this unsustainable rate of savings, it would take 13 years for a household with the median income of $52,000 to save the 20% downpayment on the median priced home of $184,300. All the while, this family would be forced to forgo saving (or spending) on other large expenditures like schooling, childcare, cars, or retirement.
- On a positive note, the muted spending and slight moderation in gas prices caused core price index associated with this release, the personal consumption expenditures chain price index is another measure of inflation like the CPI, to ease to 0.1%. Slack prices and concern about the budget debate have caused the 10-year Treasury bond to fall to roughly 2.7%...a remarkably low figure. Since the 30-year fixed rate mortgage closely tracks the 10-year Treasury, it too has fallen and is near historic lows. As the budget picture and bond market’s response to it become clearer, rates are likely to rise suggesting that today’s low rates are an opportunity that will not last long.
- The economy continues to sputter, but has created an opportunity at the same time with mortgage rates at remarkably low levels for those with stable employment. However, the proposed QRM regulation could create a hurdle for the housing market in the future if regulators leave it unchanged.
