December jobs report shows promising signs for mortgage rates – Mortgage Professional
December jobs report shows promising signs for mortgage rates Mortgage Professional
December jobs report shows promising signs for mortgage rates Mortgage Professional
Today’s mortgage and refinance rates Average mortgage rates edged modestly lower yesterday. That was a pleasant surprise for me because I’d thought they might rise. So far this morning, it’s […]
The Federal Reserve (aka “The Fed”) has a parrot problem, and it’s on a crash course with economic reality… maybe. The Fed sets policies that impact interest rates in an attempt to keep inflation in check without crippling the economy. After arguably leaving rate-friendly policies intact too long in 2021, they scrambled to put the brakes on inflation in 2022 with aggressive rate hikes (higher rates leave less money to buy other “stuff,” thus hopefully lower inflation by decreasing demand). For months on end, almost every Fed speaker has parroted a version of the same few thoughts: Inflation is too high Rates need to go higher still Once rates are as high as they can be, we need to keep them there for as long as we can We don’t mind doing some economic damage if it means controlling inflation We’d rather do damage and beat inflation than protect the economy and risk another inflation spike We don’t want to repeat the mistakes of the early 80s. That last bullet point has obviously been a guiding principle for the Fed–repeated by almost every member. It refers to a Fed rate cut in 1980 following a big drop in inflation. Before that, inflation had spike at an unprecedented level and the Fed hiked rates at an unprecedented level to fight it. In short, it looked like they won. They cut rates accordingly, but it proved to be too soon. Monetary scholars think the subsequent rate hikes to the highest levels ever could have been avoided if the Fed didn’t declare victory so soon.
Today’s mortgage and refinance rates Average mortgage rates rose yesterday, over this week, and over this year. They fell across the whole of December, but not by much. Once again, […]
In this week’s Housing Market Tracker, Lead Analyst Logan Mohtashami shows how total inventory could break under 1 million.
The housing market saw inventory fall 4% last week and is on the cusp of breaking under 1 million total active listings.
The most basic way to think about interest rate movement is to assume that a strong economy pushes rates higher and vice versa. There are many other considerations that end up taking precedence at times, but today was a good, old-fashioned, boring, logical day in that regard. There were three separate employment-related reports out in a short window of time early this morning. All of them were stronger than expected. Strong jobs data does a few things. It suggests a strong economy (which is more capable of supporting higher rates). It suggests upward pressure on wages (which, in turn, drives inflation higher, and high inflation = high rates). But most importantly, it fuels the expectation among investors that the Fed will draw similar conclusions about the economy and inflation. We care an awful lot about the Fed’s take on such matters because if they’re concerned about inflation or if they think an extra strong jobs market allows them some wiggle room to be extra aggressive in fighting inflation, they will err on the side of hiking rates a bit higher than they otherwise might. They’ll also try to keep rates at the ceiling level for longer than they otherwise might. All of this is more important of a consideration than normal today because tomorrow morning brings the Employment Situation–the big “jobs report” that causes more market movement than any other labor market data. As for today, the trifecta of lesser reports was enough for some modest upward pressure with the average lender back up to 6.5% for a top tier 30yr fixed scenario. Things could change appreciably tomorrow, depending on the outcome of the data.
Here’s a puzzler–at least at first glance. This morning’s much-anticipated jobs report came out stronger than expected with nonfarm payrolls at 223k vs a median forecast of 200k. The unemployment rate dropped to 3.5% vs a forecast of 3.7%. These developments would normally be associated with some bond market weakness, but the initial reaction–while modest–has been decidedly positive. The reason for the paradox is simple. Wage growth slowed more than expected and last month’s steamy number was revised sharply lower. This allays some of the Fed’s concern that high inflation could drive wage inflation, thus feeding the dreaded “wage price spiral.” This is exactly what the market is trading this morning. The Fed specifically mentioned wanting to see a slower pace of wage growth. That’s what today’s report shows. So the market is trading a slightly friendlier stance from the Fed, evident in stronger stocks and bonds. This may look like a meaningful move on the chart above, but the bigger picture hasn’t changed much. Next week’s CPI data has more of a chance to effect such changes.
We ended 2022 on a solid note as 4.5 million jobs were created â and we still have more than 10 million job openings.