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Make A Mortgage Rate Plan BEFORE Friday’s Jobs Report

Thursday, March 3rd, 2011

Unemployment Rate 2008-2011Mort­gage rates could move higher begin­ning tomor­row morning. The Bureau of Labor Sta­tis­tics releases its Feb­ru­ary jobs report at 8:30 AM ET.

Home buy­ers and rate shop­pers would be wise to take note. The jobs report is almost always a market-mover.

Con­sider last month.

Although net job cre­ation fell well-short of expec­ta­tions in Jan­u­ary — just 36,000 jobs were added — the national Unem­ploy­ment Rate dropped to 9.0%, its low­est level in 2 years. The marked improve­ment sur­prised econ­o­mists and sparked infla­tion­ary con­cerns within the investor community.

This, in turn, caused mort­gage rates to rise.

In the days imme­di­ately fol­low­ing the jobs report’s release, con­form­ing rates jumped 0.375 per­cent. That’s equiv­a­lent to a mort­gage pay­ment increase of $22 per month per $100,000 borrowed.

A sim­i­lar spike could occur tomorrow.

Wall Street scru­ti­nizes job growth because with more work­ing Amer­i­cans, there’s more con­sumer spend­ing, and con­sumer spend­ing accounts for 70% of the U.S. econ­omy. A blow-out num­ber tomor­row would change expec­ta­tions for the future, and lead rates higher again.

The econ­omy shed 7 mil­lion jobs between 2008 and 2009 and has barely made 1 mil­lion of them back. Tomor­row, ana­lysts expect to see 183,000 jobs cre­ated. If the actual read­ing is lower-than-expected, mort­gage rates should fall and home afford­abil­ity will improve.

Any­thing else and mort­gage rates should rise. Likely by a lot.

There­fore, if you’re shop­ping for a mort­gage right now, con­sider your risk tol­er­ance. Once mar­kets open tomor­row, you can’t get today’s rates.

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Unemployment Rate Drops To Lowest In 2 Years

Friday, February 4th, 2011

Non-Farm Payrolls (2009-2011)Amer­i­cans are get­ting back to work. Sort of.

This morn­ing, at 8:30 AM ET, the Bureau of Labor Sta­tis­tics released its Non-Farm Pay­rolls report for Jan­u­ary 2011. More com­monly called “the jobs report”, the government’s data showed a large decrease in the num­ber of work­ing Amer­i­cans as com­pared to Decem­ber, but a siz­able drop in the Unem­ploy­ment Rate.

The job growth fig­ures were much lower than con­sen­sus estimates:

  • Expected job growth in Jan­u­ary : +148,000 jobs
  • Actual job growth in Jan­u­ary : +36,000 jobs

January’s Unem­ploy­ment Rate sur­prised ana­lysts, too, but not in a bad way, falling from 9.4 per­cent in Decem­ber to 9.0 per­cent last month. This is the nation’s low­est Unem­ploy­ment Rate in nearly 2 years.

Today’s jobs report is rough news for home buy­ers and rate shop­pers. Shortly after the report’s release, Wall Street is attribut­ing the low jobs num­ber to “bad weather” and is choos­ing to focus on the strong Unem­ploy­ment Rate instead.

U.S. stock futures are now ris­ing ahead of open, an increase that will come at the expense of the bond mar­kets. Indeed, mortgage-backed bonds are los­ing this morn­ing already.

Con­form­ing mort­gage rates are expected to start the day at least +0.125% from Thursday’s close and, if momen­tum continues, could tack on an addi­tional +0.125% before today’s clos­ing bell.

The government’s report is an excel­lent exam­ple of how impor­tant jobs data can be to home afford­abil­ity — espe­cially in a recov­er­ing economy.

The econ­omy shed 7 mil­lion jobs between 2008 and 2009 and fewer than 1 mil­lion of those were recov­ered in 2010. It’s a data point Wall Street watches closely because more work­ing Amer­i­cans means more con­sumer spend­ing, and more con­sumer spend­ing means more eco­nomic growth. Con­sumers account for 70% of the U.S. econ­omy, after all.

More work­ers also means more taxes paid to fed­eral, state and local gov­ern­ment, and, in the­ory, fewer loan charge-offs from banks. These, too, keep the eco­nomic engine mov­ing for­ward, spurring more spend­ing and job growth. 

If you have not yet locked a mort­gage rate, con­sider lock­ing one today. On the heels of today’s jobs data, 30-year fixed rates will scratch at their high­est lev­els of the year.

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December’s Job Report : Good For Home Affordability

Friday, January 7th, 2011

Non-Farm Payrolls (Jan 2009-Dec 2010)On the first Fri­day of each month, the Bureau of Labor Sta­tis­tics releases its Non-Farm Pay­rolls report.

More com­monly called “the jobs report”, the government’s data include raw employ­ment fig­ures and the Unem­ploy­ment Rate.

The jobs report hit the wires at 8:30 AM ET today. It’s mak­ing big waves in the mort­gage mar­ket and may help home afford­abil­ity for buy­ers this week­end, and would-be refinancers.

For this month, and for the rest of 2011, employ­ment data will fig­ure big in mort­gage markets.

7 mil­lion jobs were lost in 2008 and 2009. Fewer than one mil­lion jobs were recov­ered in 2010. For the econ­omy to fully recover, ana­lysts believe that jobs growth is paramount.

Con­sider how job cre­ation influ­ences the economy:

  1. More jobs means more income and more spending
  2. More spend­ing means more busi­ness growth
  3. More busi­ness growth means more job creation

It’s a self-reinforcing cycle and, as busi­ness grows, the econ­omy expands, push­ing stock mar­kets higher. This tends to lead mort­gage rates higher, too, because bonds can lose their appeal when stock mar­kets gain.

Accord­ing to the gov­ern­ment, 103,000 jobs were cre­ated in Decem­ber, and October’s and November’s fig­ures were revised higher by a net 50,000 jobs for a total of 153,000 new jobs cre­ated. Econ­o­mists expected a net gain of 135,000.

The Unem­ploy­ment rate fell to 9.4, its low­est level since mid-2009.

Wall Street is vot­ing with its dol­lars right now. Mort­gage bonds are improv­ing, point­ing to slightly lower mort­gage rates today.

The Decem­ber jobs report was “aver­age”, and home afford­abil­ity is improving.

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