Looking at the average mortgage rates and talking about the latest employment numbers and what this means for you…
Well it is Friday and that means it is time to look at the average mortgage rates from the MBA, Freddie Mac and Bankrate.com for this week. Before I talk about the mortgage rates, there is something else to discuss since it is going to have an effect on mortgage rates and real estate. The big news for real estate and the economy was today’s…
March 2014 Employment Report
First things first. Earlier today the Bureau of Labor Statistics released the unemployment numbers for March 2014. Let’s look at their data:
- Total nonfarm payroll employment rose by 192,000 in March
- The unemployment rate was unchanged at 6.7%
- This is BELOW expectations
- Employment is 0.3% below the pre-recession peak
- Private employment is now above the pre-recession peak and at a new all time high
- Average hourly earnings are up 2.1% YOY
- U-6 increased from 12.6% to 12.7%
We still have a long way to go but this is a decent report even if it was below expectations. Check out the chart showing unemployment:
However, as I have said in the past it isn’t just the unemployment rate we should look at. It is also the Labor Force Participation Rate. It increased in March to 63.2% but this is still lower than what has been normal over the past 20 years.
Check out the chart:
Both of these charts do show some improvements and this could lead to a rise in mortgage rates in the coming weeks. While the increase in average hourly earnings is nice, it still is NOT enough. That is the average and many people are just barely surviving.
If we really want to hone in on some of the data that tells us more about the health of the real estate market consider this:
The number of those employed in residential construction in March increased 3.1% from February
There are about 46,000 more people employed in residential construction in March 2014 compared to March 2013
This is a good sign for real estate. I am not sure how many of these jobs are for single family homes and how many are for multi-family construction (apartments).
The bad news is that many of the jobs that were added were not high paying jobs. In March, the best paying industry groups (information, financial activities and manufacturing) added only 2,000 jobs.
The other employment statistic that I think we need to watch is the U-6 (Total unemployed, plus all persons marginally attached to the labor force, plus total employed part time for economic reasons, as a percent of the civilian labor force plus all persons marginally attached to the labor force).
It increased slightly from February to 12.7%. But it is down from the 13.9% level of March 2013 so we are headed in the right direction.
Check out the U-6 chart:
Earlier this week, ADP reported that the private sector added 191,000 jobs in March, slightly above the 12-month national average. And the Department of Labor reported that the number of unemployment claims increased after falling last week to a 4 month low.
There were also 2 reports from Gallup this week: their Payroll to Population report and their Job Creation Index. The Job Creation Index is a measure of net hiring activity and it reached a 6 year high. Which is great!
But the Gallup Payroll to Population rate (similar to labor Participation rate) declined. And that is bad.
This employment report isn’t as strong as everyone wants and in some ways, it appears that little progress is being made. We are still seeing mixed signals from all of the various reports yet it appears that progress is being made…
But it is SLOW progress!
And now let’s look at the latest reports on mortgage rates:
Freddie Mac Reported:
- 30 year fixed-rate mortgages averaged 4.41%
- This is up from last week when it averaged 4.40%
- Last year at this time, 30 year fixed-rate mortgages averaged 3.54%
- 15 year fixed rate mortgages averaged 3.47%
- This is up from last week when it averaged 3.42%
- Last year at this time, 15 year fixed-rate mortgages averaged 2.74%
These rates are from BEFORE the employment report. Check out the chart showing mortgage rates from Freddie Mac:
The 30-year fixed-rate mortgage rose 3 basis points to 4.54%
The 15-year fixed-rate mortgage rose 2 basis points to 3.58%
The average rate for a 30-year jumbo mortgage rose 1 basis point to 4.54%
The Mortgage Bankers Association Reported:
The average contract interest rate for 30 year fixed-rate mortgages with conforming loan balances ($417,000 or less) was unchanged at 4.56%, with points increasing to 0.31 from 0.29 (including the origination fee) for 80% loan-to-value ratio (LTV) loans.
The average contract interest rate for 30-year fixed-rate mortgages with jumbo loan balances (greater than $417,000) increased to 4.46% from 4.45%, with points remaining constant at 0.27 (including the origination fee) for 80% loan-to-value ratio (LTV) loans.
The average contract interest rate for 15-year fixed-rate mortgages was unchanged at 3.62%, with points decreasing to 0.23 from 0.24 (including the origination fee) for 80% loan-to-value ratio (LTV) loans.
The Take Away:
Some of the mortgage rates had increased slightly this week in anticipation of a strong Employment Report. And you see that the report was NOT quite as strong as some had hoped. The Employment Report actually came in very close to the consensus forecast of Wall Street economists.
Since the employment rate was higher than the forecast and the payroll number was weaker, we can expect this to be good for mortgage rates. Mortgage rates may increase in the coming weeks but it just won’t be quite as fast since these employment reports were weak.
So to sum up my almost 1000 words:
- Most of the mortgage rates increased last week
- I think mortgage rates will increase in the coming weeks but not an OMG fast pace
- Mortgage rates are STILL at historically low levels
- The Employment report was weak but progress is being made
As always, I am providing this to you for informational purposes only! I am not a mortgage lender and you should contact the lender of your choice directly to learn more about its mortgage products and your eligibility for such products.