The U.S. housing sector was ready to rebound while the construction industry continued to struggle on the jobs front, said U.S. mortgage giant Freddie Mac on Wednesday in a report.
Record low mortgage rates, supported by the Federal Reserve’s ” Operation Twist,” had fueled housing demand and led to a pickup in housing starts, home sales, and even house prices in many markets, said the report.
According to a weekly survey by Freddie Mac, the U.S. average 30- year fixed-rate mortgage (FRM) was 3.62 percent in the week ending July 5, matching or hitting a new record low in 10 of the last 11 weeks.
With lower rates, borrowers can substantially lower their monthly mortgage interest payments. These lower payments mean that homeowners have more funds left over each month to support either consumer spending or savings.
As consumer expenditures represent close to 70 percent of the U. S. gross domestic product, an improved household balance sheet and increased consumer spending will support economic activity in the second half of 2012 and a pickup in labor force growth, noted Freddie Mac.
Housing starts over the first five months of 2012 had averaged an annual rate of 719,000 units, a 26-percent jump from the year- ago period. New home sales went up 17 percent and existing home sales rose 7 percent, comparing January-to-May 2012 with the same period last year.
In June the U.S. housing production continued its upward trend with a seasonally adjusted annual rate of 760,000 units, up 6.9 percent from the previous month. This is the fastest pace of new- home construction since October 2008, according to data from the Department of Housing and Urban Development.
In addition, the U.S. nationwide median existing-home price for all housing types rose 7.9 percent to 182,600 dollars in May from a year ago, the third consecutive month of year-over-year price gains, said the U.S. National Association of Realtors, a leading trade association in the housing industry.
“While housing may not have played its traditional role coming out of the Great Recession, at the end of the day, it has turned a very large corner and now it’s time to get this sector back to work whether through construction jobs, remodeling, or home brokerage,” said Frank Nothaft, Freddie Mac’s vice president and chief economist.
However, the latest labor market reports showed that job creation continued but at a slower-than-expected pace during the second quarter. Overall, there was a net gain of 80,000 payroll jobs in June, bringing the total for the second quarter to 225,000, the lowest quarterly gain in employment in nearly two years and a lackluster result when compared to the first quarter’s 677,000 job boost.
Employment in construction and mortgage finance continues to lag behind job gains elsewhere. Over the past 12 months, overall payroll employment across all industries was up 1.8 million, yet construction employment was up a mere 13,000, well below the sector’s share of total employment — about 4.3 percent.
While the U.S. unemployment rate remained elevated at 8.2 percent in June, the jobless rate for the construction sector was 12.8 percent.
But housing demand has helped increase hiring in the construction sector on a year-over-year basis, and the unemployment rate for construction workers has fallen by 2.8 percentage points since June 2011.