Potential Homebuyer’s Credit Increases

Consumer credit totaled 4.1 trillion on a seasonally adjusted basis according to the latest G.19 Consumer Credit Report from the Federal Reserve. Additionally, the Fed found that revolving debt totaled $1.1 trillion, and $3.0 trillion in nonrevolving debt, an increase of $17 billion from the previous month. Consumer credit increased at a seasonally adjusted annual rate of 5%, and nonrevolving credit increased at an annual rate of 4 percent.

According to the National Association of Homebuilders (NAHB), the nonrevolving debt increase is a good sign for sentiment of American consumers, especially for those looking to make large purchases, such as houses. Potential homebuyers are increasing their credit card purchases and opening of credit card accounts. For the first time in 5 months, as of April 2019, revolving debt increased from the previous month at a faster rate than nonrevolving debt.

“For the first time in 5 months, as of April 2019, revolving debt increased from the previous month at a faster rate than nonrevolving debt,” the NAHB states. “The trend continued in May. Interestingly, in May, there was also a series of declines in purchase mortgages, per the Mortgage Bankers Association’s weekly reports. One possibility is that the freeing of this type of nonrevolving debt has made other nonrevolving debt loans more appealing.”

According to the Fed, potential buyers are feeling more optimistic about their finances. The Federal Reserve Bank of New York’s June Survey of Consumer Expectations found that respondents were more optimistic regarding their financial situation and the labor market. Expectations on the U.S. unemployment rate, finding a job, and losing one’s job all improved.

Consumers’ expectations of an increase in the average interest rate on savings accounts over the next year declined to their lowest level since May 2015, according to the survey.

According to the Federal Reserve Bank’s survey, median expected household income growth increased to 2.9% in June from 2.8% in May. Median household spending growth expectations decreased from 3.5% in May to June’s 3.3%.