Alongside declining lending volumes, nonbank mortgage jobs dropped slightly in August, which may be a start of a trend that will continue into the fall, analysts said.

Housing finance payroll employment decreased to 390,200 from July’s downwardly revised 391,400 but the number was up from 333,100 a year ago, according to the Bureau of Labor Statistics. The overall U.S. nonfarm hiring total — reported with less of a lag than the nonbank mortgage-specific job numbers — increased by 194,000 in September, representing the lowest gain in jobs since January, when only 49,000 were added. By contrast, August had an upwardly revised 366,000 new jobs.

But September’s overall job number was enough to bring the unemployment rate down to 4.8% from 5.2% the month prior. Declining unemployment is a trend expected to continue over the next year, which will also stoke mortgage rate growth, according to Mortgage Bankers Association Senior Vice President and Chief Economist Mike Fratantoni.

“With respect to implications for the housing and mortgage markets, the drop in the unemployment rate below 5%, and the other indicators of job market strength, are likely to be sufficient for the Federal Reserve to move forward with tapering their asset purchases,” Fratantoni said in a press statement Friday. “This will likely lead to modest increases in interest rates, putting additional pressure on housing affordability at a time home-price appreciation is still very high.”

The impact these factors should have on the broader housing market will be twofold. While climbing interest rates will deter some potential home buyers, more consumers with jobs and September’s 4.6% year-over-year average wage growth will keep housing demand high. The market’s intense buyer demand and extreme price appreciation persisted with inventory and average mortgage rates at all-time lows over the past 18 months.

However, the housing supply started to make gains and construction spending rose again in August to $1.584 trillion in August from $1.569 trillion in July and $1.563 trillion in June. But September’s residential construction numbers were not as strong as August’s.

“We note that residential construction employment (including specialty trade contractors) grew by just 3,400 in September, a marked deceleration from August’s pace,” Doug Duncan, Chief Economist at Fannie Mae wrote in a released statement. “More robust job growth will be needed to help builders work through their current backlog of orders, which we believe should help to ease supply constraints in this sector.”

Deputy chief economist at First American Odeta Kushi echoed that sentiment, but noted other numbers that provided some reason for optimism.

“Attract and retain — this labor-intensive industry needs more hammers to build more homes,” she said in a press statement. “The average hourly earnings of production and non-supervisory employees in construction are up 5.8% on a year-over-year basis in September – that’s the highest growth since 1982. Residential building is up just over 5% compared with pre-COVID, while non-residential building remains 4.7% below its pre-pandemic level.”

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