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Personal Income Growth,
Nominal
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|
 |
| MOST
RECENT STATISTIC: |
3.0% |
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|
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| GRADE: |
A- |
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| PERIOD
COVERED: |
July 2010 |
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|
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| Date
Released: |
08/30/10 |
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| Next
Release: |
10/01/10 |
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|
|
|
| |
07/10 |
06/10 |
05/10 |
07/09 |
07/08 |
|
| Annualized
Rate |
3.0% |
2.4% |
1.4% |
(2.1%) |
4.2% |
|
| Source:
Bureau of Economic Analysis |
Analysis for the Housing Market
By:Ken Lee
In July, personal incomes in the United States increased to $12,512.2 billion compared to a revised figure of $12,482.2 billion in June. Personal incomes are up 3.0% from $12,148.3 billion in July of last year. Personal incomes recorded its strongest annual increase in July since October 2008. Personal incomes have recorded year-over-year gains for the past eight consecutive months. However, revised figures showed that personal incomes fell slightly in June which was its first monthly decline since September 2009.
Personal consumption expenditures, PCE, increased to $10,325.5 billion. The PCE price index, which is a leading gauge for inflation, increased 0.2% from the previous month. The PCE price index excluding food and energy increased 0.1% from the previous month.
Definitions and Importance for the Housing Market
By:Ken Lee
Nominal personal income (also personal income) is the sum of wage and salary disbursements, personal dividend income, personal interest income, and transfer payments to persons. Private income not earned in production (income generated by the labor of individuals or by the capital they own) such as capital gains or the sale of assets is excluded. Personal income includes income received by non-profit institutions serving households, by private non-insured welfare funds, and by private trust funds. It differs from household income, which is the aggregate of income received by persons residing in the same housing unit.
The Bureau of Economic Analysis estimates personal income from administrative-records data and data from censuses or similar surveys. Trends in personal income growth are useful for estimating future consumer spending patterns. Additionally, the relationship between income and spending growth provides insight into consumer saving and spending patterns.
Personal income is the best measure that includes both employment income and investment income, which are both criteria used by mortgage lenders to qualify a mortgage applicant for a loan. Since so many home buyers are invested in the stock market, this statistic helps determine buyers' ability to purchase more expensive homes. The surge in stock values was a major contributor to the housing boom that occurred from 1997 through 2000, and to the rising national homeownership rate.
Included in personal income growth is the population and household growth in the country. Personal income is not "per household," which is the primary reason that the growth rate is higher than the household income growth rate.
The personal savings rate is directly impacted by rising levels of mortgage refinancing. Refinancing provides a relatively cheap method to borrow money, but in a significant number of cases it also increases mortgage balances. A high percentage of refis involve raising cash through a process known as a "cash-out refinance" and this cash is generally spent, pushing the personal savings rate lower. As the number of refi's decrease, the personal savings rate should begin to increase.
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