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Home Mortgage Rates Rebound on Poor Jobs Report

Mortgage Rates Drop On Report of Meager Job Growth

Mortgage Rates Drop On Report of Meager Job Growth

Orange County, CA – Just when we were thinking more positively on the US economy and the Fed was willing to provide more color to the debate…. along comes a weak Non-Farm Payroll report.  The labor report gave a strong boost to the bond market and dropped home mortgage rates considerably this week. We will likely see the results in next week’s survey of lenders by Freddie Mac. This week saw a decrease of 0.3% on the average 30 year fixed rate mortgage.

The March labor market reports are truly disappointing with no silver lining.  Total nonfarm payrolls grew 88,000 in March, including 95,000 private payrolls and a loss of 7k government employees.  The only positive data point is the revision to the previous two months’ reports.  February payroll growth was revised up to 268k (from 236k) and January was revised up to 148k (from 119k).  This report brings the 3-month average of job growth back down to 168k which is in-line with the previous trend-rate, and not consistent with an accelerating economy.  In the household report, the unemployment rate fell to 7.6% on a massive drop in the labor force.  The number of persons not in the labor force rose 663k while the number of people employed fell 206k.  The number of people unemployed fell 290k as they apparently gave up looking.

The U.S. economy has always has always had a symbiotic relationship with the housing market and levels of national employment. Even though job growth was off significantly the housing market will continue to grow in strength. As a result of this we can expect mortgage rates to continue to push higher. Although we have seen climbing mortgage rates in very recent times, the ones we have right now may well be the best we have for some time.

The jobs report is released on the first Friday of each month, and is one of our best indicators of how the job market is changing. It shows the changes across ten different sectors which include government hiring stats and the insurance and finance sectors. In recent times almost all sectors have been on an upward trajectory.

Across 2008 and 2009, the recession hit. We saw the Lehmann Brothers failure, witnessed an overhaul of the mortgage lending industry, along with the movement of Fannie Mae and Freddie Mac into conservatorship by the FHFA. During these two years, the American economy lost over 7 million jobs.

Look a bit closer in recent history though, and the tables have turned. Since 2010, we have seen the return of over 5 million jobs. Interestingly, half of the jobs added have come since October 2011, which ties in with the bottoming out of the housing market, which happened in that very month.

Growth in the job market does two things. There’s the obvious economic lift, but it also provides a nice psychological lift. People who are uncertain about the security of their jobs don’t start hunting for homes. A healthy jobs market gives people the security to think about home purchases. Therefore, as jobs are added the housing market will get healthier as well. And as the overall economy improves mortgage rates will increase with them. So take advantage of today’s mortgage rates if you can.

We’re here to help and educate you. Contact us if you need guidance or more information.

Scott Storace

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