After sinking Friday, shares of Washington Mutual bounced back in a major way following a report from the Wall Street Journal claiming a significant capital infusion was in the works.
The Journal reported this morning that the Seattle-based thrift is close to a deal with private equity firm TPG that would provide the ailing national bank and mortgage lender with a much needed $5 billion investment.
The deal would help the nation’s largest savings and loan navigate through the mortgage crisis, but result in further dilution for shareholders who have already lost their hats over the last several months.
The terms of the deal aren’t clear, but the $5 billion investment is expected to be structured as a common and preferred stock offering that would land TPG with a “substantial minority holding” in WaMu.
TPG is also expected to get one seat on the company’s 14-member board and the move should eliminate the likelihood of a buyout from another large bank, perhaps quelling the possibility of a Chase WaMu merger.
At the same time, concerns remain if $5 billion will be enough to buoy the struggling thrift, with much of its mortgage holdings in hotbeds like California and Florida, markets that continue to face significant downward pressure.
Late last year, WaMu took a major step back in the home lending business, cutting 3,000 jobs and closing several sales and processing centers throughout the country.
The company also cut its dividend by 73 percent and offered $2.5 billion in convertible preferred stock in a bid to raise capital.
So far 2008 has been the year of the bailout, with Bear Stearns, Thornburg Mortgage, and Washington Mutual all requiring major assistance as mortgage losses continue to pile up.
The paper noted that the government was aware of the deal, but not directly involved, such as in the case of the Chase buyout of Bear Stearns.
Shares of Washington Mutual were up $2.81, or 27.63%, to $12.98 in afternoon trading on Wall Street.
In related news, Accredited Home Lenders said today that it will resume lending after receiving a $100 million capital infusion from its parent Lone Star funds.
Even yesterday, we were already trying to reconcile the size of the bond rally relative to the underlying motivations. Then the rally picked up steam this morning despite a lack of truly compelling justifications in the economic data. While there are ways to explain the apparently outsized rally, it is certainly bigger than it needs to be ahead of the jobs report. That begs the question: does the market see/know/feel something that suggests a big picture corner has been turned? All we can really know is that the entirety of the past 3 weeks offer the most compelling potential top we’ve seen in rates since late 2022. That could be because a top is taking shape or simply because this is the most convincing trap yet. It’s not overly dramatic to say that the jobs report will cast a vote on the “realness” of this rally (if it falls far enough from forecast) and the result will be rates that are quite different than Thursday’s, for better or worse.
Jobless Claims
217k vs 210k
Continued Claims
1.818k vs 1.8k f’cast, 1.783k prev
Labor Costs Q3
-0.8 vs 0.7 f’cast, 3.2 prev
08:52 AM
Stronger overnight with additional gains after data. 10yr down 10.2bps at 4.632. MBS up half a point.
12:02 PM
Off the morning’s best levels, but still stronger. 10yr down 6.5bps at 4.669. MBS up 3/8ths
01:13 PM
Weakest levels of the day. 10yr down 3.7bps at 4.697. MBS still up on the day, but down about a quarter point from highs.
03:19 PM
Off the weakest levels and fairly flat in the PM. MBS up just over a quarter point. 10yr down 6.2bps at 4.672.
Download our mobile app to get alerts for MBS Commentary and streaming MBS and Treasury prices.
A new report released by credit bureau Equifax and Moody’s Economy.com revealed that 4.46 percent of mortgages were at least 30 days past due at the end of the first quarter, up from 3.98 percent the prior quarter and 2.92 percent a year earlier.
More troubling, the foreclosure rate surged to 1.39 percent from 1.08 percent last quarter, and was more than double the 0.58 percent rate a year ago.
The increases in both delinquency rate and foreclosure rate were the largest since the firms began reporting such data in 2000.
Florida led the nation in delinquent first mortgage payments, with 7.03 percent of borrowers falling behind, followed by Nevada at a rate of 6.59 percent and Rhode Island at 5.85 percent.
The national default rate for closed-end second mortgages was 5.36 percent, with 11.98 percent in default in California, followed by 11.41 percent in Florida and 9.87 percent in Nevada.
Home equity lines of credit weren’t half as bad with a national default rate of 2.37 percent, but Alaskan borrowers led the nation at a rate of 5.15 percent, followed by Nevada at 4.97 percent and Florida at 3.75 percent.
Bucking the trend was North Dakota, which had the lowest first mortgage default rate at just 1.40 percent, a default rate of zero on home equity loans, and the lowest closed-end second mortgage default rate in the nation at just 1.51 percent.
In terms of overall delinquency rate, Florida, Nevada, and Mississippi fared worst, while North Dakota, South Dakota, and Wyoming performed the best.
Meanwhile, a record $715 billion in consumer debt is now delinquent or in default, up from $300 billion three years ago, proving that a spillover is a very real problem.
Entering the holiday season with high-interest debt or financial struggles can put you at risk for a debt hangover that could linger for years.
It’s a crossroads that many will unfortunately encounter this holiday season. Credit card balances rose to over $1 trillion in the second quarter of 2023, according to a report by the Federal Reserve Bank of New York. The average rate for credit cards assessed interest as of August 2023 was 22.77%, according to data by the Federal Reserve. Compared with previous years, that rate is alarmingly high.
With interest rates sky-high, this is one of the worst times to charge expenses to credit cards that you can’t pay off quickly. Before you shop for the holidays, consider these ways to help you get clear on your goals and protect your finances.
1. Find a way to lower high-interest debt
If you’re already carrying debt, consider ways to save money on interest. Depending on your credit, some options may include:
A 0% introductory APR balance transfer credit card: This card lets you move debt onto it from a different account to get the lower interest rate. The ideal card has no annual fee and a balance transfer fee of 3% or lower. Compare the cost of the fee with the projected interest payments on your current card to determine if it’s worth paying.
A personal loan: For multiple debt balances, a personal loan that consolidates debts into a single low-interest fixed payment can simplify your finances.
A debt management plan: If you’re struggling to keep up with bills, a counselor at an accredited nonprofit credit counseling agency can determine your eligibility for a debt management plan that consolidates balances into a single low-interest fixed payment, for a fee. A lower interest rate is possible because these organizations have relationships with creditors, says Madison Block, a product marketing manager at American Consumer Credit Counseling.
Also explore your budget for opportunities to save, removing unnecessary expenses and swapping others for less costly alternatives. Then put any savings toward your debt, and contribute enough money each month to pay it down by the desired deadline. Commit to prioritizing your debt over the holiday season and tailor your purchases to facilitate that goal.
2. Create a holiday list
Building holiday spending into your year-round budget is a good way to prepare for seasonal expenses. But even if you know how much you have to spend, holiday shopping can overstuff your budget quickly if you’re not careful. One simple but powerful tool can help. Make a list and use the amount you have available to determine how much to spend on gifts, decorations, food, travel and any other holiday purchases.
Every Christmas, Lizbet Barajas, a Texas resident, sticks to a holiday list of expenses to stay on track with her goal to pay down student loan debt. With her husband, she budgets for gifts year-round for two kids, ages 3 and 6, and both sides of their family.
“Having that list early on makes it easier to know exactly what I’m buying them without having to do last-minute shopping, which then causes you to overspend,” says Barajas, a content creator of the YouTube channel Lizbet Talks Money.
Robyn Goldfarb, a Florida resident and blogger at A Dime Saved, also budgets year-round for Hanukkah to avoid taking on debt. With her husband, she budgets $50 per gift for their three kids, ages 2 to 10, and she only gives gifts on one of the eight nights of Hanukkah.
“One night we’ll do donuts, one night we’ll do cookies, so there’s something exciting happening every night, but it’s not necessarily a gift or something expensive,” she says.
3. Explore money-saving alternatives
Consider which expenses are negotiable and which aren’t. If necessary, stretch your dollars by changing expectations with friends and family this year. With prices still high due to inflation, they might welcome a more budget-friendly option, like a potluck, a secret gift exchange, gifts for kids only or a price limit for gifts.
Supplementing your income over the holiday season can also help you avoid debt for those must-have purchases.
“One thing people can do is potentially take on a seasonal part-time job or a side hustle,” Block says. “If you have some unused items or old furniture or things around your house that you aren’t even using, selling that on Facebook Marketplace or Craigslist could be potentially a good way to get a little bit of extra cash for the holiday season.”
Creativity can also lead to savings. It’s how Goldfarb saves on decorations.
“I’ll have my kids make things and I save them from year to year,” Goldfarb says. “There are so many ideas online.”
4. Set guardrails to stick to your budget
Switching your payment method temporarily to debit or cash can protect finances from debt. In previous holiday seasons, Barajas used a version of the cash envelope system to stay on track. By having an envelope with a fixed amount of money for every categorized holiday expense, like gifts, meals and travel, you can prevent overspending.
“It’s more visual,” Barajas says.
5. Look for deals
Scavenge for the best deals. Using browser extensions or apps, like Honey, Flipp or CouponCabin, may help you find coupons or potential savings on different items. Some large retailers such as Amazon, Walmart and Best Buy also have online outlets and open-box deals that may offer items at lower costs. Compare prices to know if it’s a good deal.
Did you know that for the median sale price in Spokane on a 30-year fixed-rate loan will cost buyers more than one million dollars?
SPOKANE, Wash. — Interest rates, home prices, and a lack of inventory are some of the reasons lenders said are why fewer people are applying for home loans in the last year. This means, for the median sale price in Spokane on a 30-year fixed-rate loan will cost buyers more than one million dollars.
A new snapshot report from the Spokane Association of Realtors shows inventory of homes on the market was up 2% in the month of September, despite the small increase, there is still not enough supply.
“There’s not enough homes on the market right now, to be able to drive down the prices,” said Troy Clute, Senior Vice President of Numerica’s Home Loan Center.
Clute said climbing interest rates are causing a trickle down effect, potential sellers who don’t want to let go of their low rates and buyers waiting for more options to open up.
“So a lot of people are on the sidelines, and they’re just going to wait until rates start to come down before they put their house on the market. So that continues to keep inventory at a low,” Clute said.
If interest rates are causing sellers and buyers to holdout, the question is, are rates today really out of the ordinary? Rocket Mortgage has tracked interest rates since the early 70’s.
You may be surprised to learn rates in the past have been much higher.
In the early 80’s interest rates nearly reached 13%, then through the early 2000’s interest rates actually hovered between 8-9%.
It wasn’t until the 2010’s when interest rates drop to 5% and then to, as low as 3% in the early 2020’s.
We have a whole generation now of people that that’s all they know, because it’s been a couple of decades. And these people entering the market right now are not conditioned to, to those types of rates. And neither is the market,” said Jennifer Hentges, SNAP Housing Counseling Program Manager.
It’s this shock, Hentges hears from people coming into SNAP for help buying a home.
“We have a lot of people coming in to the home buyer education courses, and they’re all enthusiastic. And when they start learning what it’s going to take, they get discouraged.”
The U.S. Census Bureau reports the average household income in Spokane is about $64,000.
For those looking to buy a home with that income Hentges said people will not be approved for the median home price.
“That income will buy you probably somewhere between 250 and maybe not even $300,000 house,” Hentges said.
This is the challenge for home buyers, the Spokane Association of Realtors report the median home price as of September was $409,000.
“The house payment for that amount at today’s rates is about $3,335, which is a huge payment,” Hentges said.
Hentges said this means a household needs to make about $115,000 to afford a home. However, it’s not just the monthly payment, over the life of the loan people will pay a lot more in interest.
The median home price in Spokane in September of 2020 was $315,000. The interest rate then was 2.93% for a 30-year fixed-rate loan.
This means over the life of the loan someone would pay about $474,000 with a monthly payment of about $1,300.
Today the median home price in Spokane is about $410,000. The interest rate is about 8.6% for a 30-year fixed-rate loan. A large portion is interest and the monthly payment more than doubled from 3 years ago, now more than $3,000 per month.
This is the number that may surprise you, at today’s interest rates you’ll pay more than one million dollars over the life of the loan.
“That’s not to say they can’t refinance. But it does make a very big difference in what they can expect to pay over the life of the loan,” Hentges said.
Lenders say you shouldn’t bank on it, and expect to pay the rate you receive for a while. The good news, homes in this market continue to appreciate in value.
“So I think getting in right now and buying a home. Even with a higher interest rate, you have the option of refinancing later,” Clute suggested.
SNAP offers home buyer education courses to help people navigate the process and connect them to down payment assistance programs.
“It’s amazing to watch people get a home when they didn’t think they were going to have a home, save their home from foreclosure when they thought there was no hope,” Hentges said.
Lenders said the days of 3% interest are behind us, it could be a while before we see rates like that again, if ever.
Their best advice to home buyers, ask for help from a loan counselor and make the move when the numbers make sense for your budget.
Watch the full interview with Troy Clute, Senior VP of Numerica Home Loan Center
The average top tier 30yr fixed mortgage rate was over 8% as recently as October 19th. At the start of the present week, things weren’t much better at 7.92%.
What a difference a few days make–especially the last 3. The improvement seen on Wed-Fri is the 3rd biggest in well over a decade. And if we throw out March 2020 (as we often do, due to unprecedented volatility relating to the onset of the pandemic), we’re left with only one other example back early November of 2022.
So is this some kind of seasonal pattern? You’d be forgiven for drawing that conclusion, but in both cases, rates had recently surged to new long-term highs and then encountered surprisingly friendly economic data.
Last November it was a low reading in the Consumer Price Index (CPI) that gave investors hope regarding a shift in inflation. Unfortunately, that shift proved to be a head-fake and rates continued lower into February of 2023, it’s been up, up, and away since then.
This time around, scheduled data gets the credit again, but there’s a more robust assortment. The good times began to roll on Wednesday after Treasury announced lower-than-expected auction amounts (lower supply of bonds relative to expectations means lower rates, all other things being equal). The rally gained momentum with economic data at 10am and again with the Fed announcement in the afternoon.
Thursday was mild by comparison, but kept the trajectory intact with help from slightly higher Jobless Claims data, and especially from traders exiting bets on higher rates. In the bond market, the simple act of “no longer betting on higher rates” forces a trader to effectively enter a bet on lower rates.
This morning’s jobs report was in a unique position to cast a deciding vote on the past 2 days of potential exuberance. If jobs came in higher than forecast, the drop in rates would indeed have seemed overly exuberant and we would likely be seeing a decent push back. As it happened, jobs were weaker than forecast. Additionally, the unemployment rate ticked up more than expected and the past few months of jobs gains were revised lower.
To be sure, the labor market is still exceptionally strong, but the rate market had been pricing in something even stronger. Today’s jobs numbers increasingly paint a picture of a labor market that is cooling back down to more historically normal levels. Some economists and pundits are concerned about even more weakness, but we’re not here to pontificate on the future.
All we know is that this has been some of the best 3 days of news for mortgage rates and bonds that we’ve seen since rates first began to launch higher 2 years ago. Granted, the magnitude of the drop is greatly facilitated by the fact rates were at multi-decade highs in the past few weeks, but we’re not complaining.
The average conventional 30yr fixed rate is now back below 7.5% for top tier scenarios. You may see a very wide variety of rates today and early next week. This sort of volatility makes lender offerings more stratified than normal. Some of the lenders quoting rates with discount points are already able to do so in the high 6’s. Laggards are still near 8%.
As always, keep in mind that rate indices assume a flawless scenario and most scenarios aren’t flawless. The best way to use such an index is to track the day-over-day change from a known quote or baseline.
While high mortgage rates are keeping everyday working Americans out of the housing market, wealthy buyers with the means to buy multi-million dollar homes in cash are doing just fine.
In fact, luxury home prices, sales and inventory are all outpacing the regular real estate market, a reversal from last year when high-end buyers pulled back.
That’s according to a new report from Redfin, which shows the median price of luxury U.S. homes rose 9% year over year to $1.1 million in the third quarter, while the median price of non-luxury homes climbed only 3.3% to $340,000. Both hit their highest level of any third quarter on record.
The Redfin analysis defines luxury homes as those estimated to be in the top 5% of their respective metro area based on market value, and non-luxury homes were defined as those estimated to be in the 35th to 65th percentile based on market value.
The luxury housing market’s resilience in today’s chilled real estate environment is likely due to wealthy home buyers’ ability to buy with cash and avoid today’s 7% to 8% interest rates.
Almost 43% of luxury homes that sold in the third quarter were purchased in cash, up from nearly 35% a year earlier, according to Redfin. Contrast that with just 28% of all-cash purchases of non-luxury homes, which remains essentially unchanged from the third quarter of 2022.
Homes in the Upper Avenues neighborhood of Salt Lake City are pictured on Friday, Nov. 3, 2023. Luxury home prices, sales and inventory are outpacing the regular real estate market, a reversal from last year when high-end buyers pulled back.
Laura Seitz, Deseret News
“Wealthy home buyers have more tools to weather the storm of high mortgage rates,” said Jason Aleem, senior vice president of real estate operations for Redfin. “Many of them can afford to pay in cash, meaning they’re escaping high mortgage rates altogether.”
Aleem said other buyers are choosing to take on a higher rate and refinance down the road — “an expensive option that isn’t feasible for a lot of lower-income consumers.”
“Affluent Americans are still spending big, in large part because of pandemic savings and resilient housing and stock values,” he added.
The trend, however, may not last, according to Redfin chief economist Daryl Fairweather.
“While many luxury buyers have the resources to forge ahead even when mortgage rates are elevated, stubbornly high rates and home prices will likely push some affluent house hunters to the sidelines in the coming months,” he said. “High costs, along with the uptick in the number of high-end homes for sale, could cause luxury price growth to cool.”
For now, though, luxury inventory is holding up well compared to other segments of the housing market. The total supply of luxury homes for sale grew almost 3% from a year earlier compared with a record 20.8% decline in the supply of non luxury homes, Redfin reported. New luxury listings rose 0.3% while new non-luxury listings fell 22%
Luxury home sales are sluggish compared to last year, but they’re not as down compared to other homes. Luxury sales dropped 10.6% year over year compared to a 17% drop in non-luxury sales, according to Redfin.
A home in the Federal Heights neighborhood of Salt Lake City is pictured on Friday, Nov. 3, 2023. Luxury home prices, sales and inventory are outpacing the regular real estate market, a reversal from last year when high-end buyers pulled back.
Laura Seitz, Deseret News
Where luxury home sales jumped the most
In Tampa, Florida — home to many cash buyers — luxury home sales surged by almost 36% year over year, according to Redfin, the biggest increase in the country. Luxury new listings also rose almost 14% year over year in the third quarter, the biggest increase in every metro other than New York.
Next came Las Vegas (33.4%), Austin, Texas (14.5%), Sacramento, California, (10.1%) and San Francisco (9.6%).
“It’s an opportune time to be a cash buyer, and there are a lot of cash buyers in Florida,” said Eric Auciello, Redfin Tampa sales manager. “We’re still seeing many affluent house hunters move in from the Northeast and West Coast because they want lower taxes, different politics and/or to be closer to family. Tampa also has a ton of new construction, a lot of which is high-end condos.”
The 10-year yield has had a wild ride this week, especially during overnight trading. The 10-year yield hit a high of 4.93% after hourson Halloween, then dropped as low as 4.48% on Friday. As I have stressed, mortgage rates move with the 10-year yield, and we saw a noticeable move lower this week.
So what happened triggered the drop? Three of the four labor reports were softer than anticipated on jobs week. At this stage of the economic cycle, softer labor market data is vital not only for the Fed to pivot, but for the 10-year yield and mortgage rates to go lower.
Job openings data was fine, but the ADP jobs report came in as a miss, jobless claims came in worse than anticipated, and the jobs Friday report showed a slowdown in job and wage growth.
The Fed had its meeting on Wednesday and didn’t hike rates, but added the term that financial conditions and credit conditions now will lead to lower economic activity in the future. These variables put together sent bond yields and mortgage rates lower, and the slow dance between the 10-year yield and mortgage rates continued as it has since 1971.
Weekly housing inventory data
All I want for Christmas is one week of active inventory growth to be between 11,000-17,000 and not even Santa Claus can help me out here because the inventory growth rate has slowed down once again. I am running out of time as seasonality is kicking in, which means we are getting closer to the seasonal inventory decline for 2023. It looks like I will bat a whopping 0 in 2023 for my higher rates inventory growth level forecast.
Last year, the seasonal peak for housing inventory was Oct. 28, according to Altos Research. We might have reached the peak in inventory last week or next week.
Weekly inventory change (Oct. 27-Nov. 3): Inventory rose from 562,556 to 566,882
Same week last year (Oct. 28-Nov. 4): Inventory fell from 578,089 to 574,973
The inventory bottom for 2022 was 240,194
The inventory peak for 2023 so far is 566,882
For context, active listings for this week in 2015 were 1,140,753
New listings data has been trending at the lowest levels ever for 15 months now, and not too much has changed from that trend. Six weeks ago, I talked about the new listings data and how we should have some flat to positive year-over-year prints on CNBC. That has happened, but I caution people not to read too much into this. We need to find growth in this data line during the spring and early summer months of the year so we can regain the levels we had in 2021 & 2022.
Weekly new listings data for this week:
2023: 51,986
2022: 51,144
Traditionally, one-third of all homes have price cuts before they sell. When mortgage rates rise and demand decreases, the percentage of homes with price cuts can grow. This is the crazy stat for 2023: even with higher home prices and higher speeds, not only is inventory still negative year over year, but the price cut percentages are still running 4% below last year. Here are the price cut percentages for this week:
2023: 39%
2022: 43%
2021: 28%
Purchase application data was down 1% last week versus the previous week, making the year-to-date count 18 positive prints, 23 negative prints, and one flat week. If we start from Nov. 9, 2022, it’s been 25 positive prints versus 23 negative prints and one flat week.
The week ahead: Will mortgage rates keep falling?
We won’t have a lot of economic data this week, but after the wild week we just had, the one thing I will be watching is whether the bond market gives back some of its gains and whether we see a noticeable boost in purchase application data. The bar is low for purchasing apps to grow. This is similar to what happened a year ago when rates started to fall, but then we rates were falling for some time. For purchase applications to grow, we need mortgage rates to fall and stay low with duration.
UBS today released a shareholder report outlining the many causes that led the Swiss bank to write down billions in U.S. subprime mortgage-related losses.
The 50-page report attributed the $18.7 billion in residential mortgage losses reported in 2007 to things like poor risk control and management, lack of in-depth data, over reliance on AAA-ratings, poorly conceived trading incentives, and the severe dislocation of the credit markets last summer.
UBS said approximately two-thirds of the bank’s total losses were attributable to the CDO desk, much of it via CDO Super Senior positions, the highest AAA-rated tranche of a CDO.
In 2005, the CDO desk generally sold most of these positions to third party investors, but after the first few deals, began retaining the Super Senior positions on its books because of their “attractive source of profit.”
This in turn became a huge problem after the credit markets became illiquid beginning in August of last year.
“MRC (Market Risk Control) appears not to have substantively challenged the CDO desk when significant limit increases for the RMBS warehouse were requested initially in late 2006, and then again in Q2 2007, when the Subprime CDO business was undergoing significant growth,” the report said.
“There was considerable reliance on AA/AAA ratings and sector and concentration limits which did not take into account the fact that more than 95% of the ABS Trading Portfolio was referencing US underlying assets (i.e., mortgage loans, auto loans, credit card debts etc.).”
UBS also noted that the CDO origination team and the CDO desk that purchased the Super Seniors operated on the same reporting line, which could have led to “misincentives regarding investment strategy.”
“Essentially, bonuses were measured against gross revenue after personnel costs, with no formal account taken of the quality or sustainability of those earnings.”
A further 16 percent of the losses stemmed from the firm’s failed hedge fund, Dillon Read Capital Management, which closed last May.
The report also claimed that specific information regarding the quality of mortgage securities was not readily available, and attempts to communicate the severity of the mortgage crisis fell on deaf ears.
“Neither risk management nor the control functions had readily accessible data upon which to perform fundamental analysis of the securities in the portfolio, for example vintage, 1st or 2nd lien or FICO score.”
“A number of attempts were made to present Subprime or housing related exposures. The reports did not, however, communicate an effective message for a number of reasons, in particular because the reports were overly complex, presented outdated data or were not made available to the right audience.”
UBS plans to meet with the Swiss Federal Banking Commission to formally discuss these matters and will report such action to shareholders.
See also: What is the definition of a subprime mortgage?
Nonbank mortgage lenders and brokers collectively shed more than 7,000 positions between August and September as they headed into seasonally weaker months, according to Bureau of Labor Statistics estimates.
Job numbers in these employment categories fell to 331,300 from 338,400 during the period. Industry employment was last this low in June 2020. Broker job numbers have been slightly more resilient than positions at lenders in recent months, but both categories fell in September.
While the reduction in jobs to levels last seen at the beginning of the pandemic suggests progress has been made in adjusting capacity for current loan volumes, the Mortgage Bankers Association recently estimated that the industry is only about two-thirds done with its cuts.
And how well employment is correlated with business volumes at lenders depends on where interest rates are headed.
Employers in the broader economy, which the bureau reports with less of a lag, added 150,000 positions in October. Unemployment inched up to 3.9% from 3.8%.
Investors initially read the overall job gains as relatively low and likely to signal an eventual drop in rates, but economists’ interpretation of the numbers varied.
“The key benchmark 10-year Treasury yield slid down to 4.55% and is below a recent high of 5%. That means mortgage rates will be coming down,” Lawrence Yun, chief economist at the National Association of Realtors, said in an emailed statement sent around 9:30 a.m.
But CoreLogic Chief Economist Selma Hepp considers the latest additions to employment a sign the economy remains resistant to the pressure the monetary policymakers have been putting on it in an effort to slow inflation.
“Today’s jobs report confirms the nation’s economy is still resilient despite rapid and appreciable tightening of financial conditions,” Hepp said in an email.
Monetary policymakers put rate actions on hold Thursday but indicated that could change in response to strong employment numbers.
Federal Reserve Chair Jerome Powell warned the market yesterday that future signs of “tightness in the labor market … no longer easing could put further progress on inflation at risk and could warrant further tightening of monetary policy.”
Some economists issued statements interpreting the latest job numbers as an indication the Fed’s actions are having a limited impact but one in line with its goals.
“Today’s report shows a healthy but slowing labor market, and, especially given the decelerating job growth figures, this is not a report that we would consider consistent with robust inflationary pressures,” Fannie Mae Chief Economist Doug Duncan said Friday.
Meanwhile, other industry-specific numbers in the jobs report bode well for builders, which have become increasingly important in a housing market where the recent runup in mortgage rates has limited resale supply, according to the MBA.
“Construction hiring increased for the seventh consecutive month, and the sector has added 148,000 jobs so far this year,” said Joel Kan, a vice president and deputy chief economist at the association, commenting on October numbers for the sector.
Policymakers’ recent decision to put rates on initially boosted builder and real-estate investment trust stocks, according to Bloomberg.