Discussing this week’s mortgage rate reports, the big jobs report and consumer sentiment
Freddie Mac reported:
- 30-year fixed-rate mortgages averaged 4.46% with an average 0.5 point
- This is up from last week when it averaged 4.43%
- Last year at this time, 30-year fixed-rate mortgages averaged 4.21%
- 15-year fixed-rate mortgages averaged 3.94% with an average 0.5 point
- This is up from last week when it averaged 3.90%
- Last year at this time, 15-year fixed-rate mortgages averaged 3.42%
Len Kiefer, Deputy Chief Economist at Freddie Mac, said:
The 10-year Treasury yield has been bouncing around in a narrow 15 basis point range for the last month. While the yield on the 10-year Treasury is currently below the high of 2.95 percent reached two weeks ago, mortgage rates are up for the ninth consecutive week. The U.S. weekly average 30-year fixed mortgage rate rose 3 basis points to 4.46 percent in this week’s survey, its highest level since January 2014.
Ouch… for the 9th time ouch. Check out the chart:
The Mortgage Bankers Association reported:
The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($453,100 or less) increased to 4.65% from 4.64%, with points decreasing to 0.58 from 0.63 (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 $453,100) decreased to 4.56% from 4.57%, with points increasing to 0.52 from 0.51 (including the origination fee) for 80% loan-to-value ratio (LTV) loans.
The average contract interest rate for 15-year fixed-rate mortgages increased to 4.11% from 4.07%, with points increasing to 0.64 from 0.59 (including the origination fee) for 80% loan-to-value ratio (LTV) loans.
Not quite as bad as what Freddie reported. It looks like we are seeing mortgage rates increase like we kept hearing for the past several years.
However, the fact is that mortgage rates are still low IF you look way back in time. The combination of rising home prices with rising mortgage rates should motivate anyone wanting to buy.
February 2018 Jobs Report
The BLS just reported:
Total nonfarm payroll employment increased by 313,000 in February, and the unemployment rate was unchanged at 4.1 percent, the U.S. Bureau of Labor Statistics reported today. Employment rose in construction, retail trade, professional and business services, manufacturing, financial activities, and mining.
In February, construction employment increased by 61,000, with gains in specialty trade contractors (+38,000) and construction of buildings (+16,000). Construction has added 185,000 jobs over the past 4 months.
Manufacturing added 31,000 jobs in February. Within the industry, employment rose in transportation equipment (+8,000), fabricated metal products (+6,000), machinery (+6,000), and primary metals (+4,000). Over the past year, manufacturing has added 224,000 jobs.
In February, average hourly earnings for all employees on private nonfarm payrolls rose by 4 cents to $26.75, following a 7-cent gain in January. Over the year, average hourly earnings have increased by 68 cents, or 2.6 percent. Average hourly earnings of private-sector production and nonsupervisory employees increased by 6 cents to $22.40 in February.
This was a very strong report and should give the Fed more incentive to raise rates. Wage growth was weaker than we want and may prevent the Fed from making 4 increases this year.
The increase in construction jobs was the biggest increase since 2007. While this does NOT guarantee we will see more home being built, it has to help.
NAR Chief Economist Lawrence Yun said:
The strong job growth assures at least three interest rates hikes by the Federal Reserve in 2018. Because of the low unemployment rate, further normalization in monetary policy should be expected in 2019 as well, meaning another three or four rate hikes next year. Mortgage rates will therefore rise and rise. That in itself hurts housing affordability. But factors that can help with affordability are more income to households (possibly a second income earner getting a job) and if home prices can finally moderate. For slower home price growth, more home construction is needed. Job openings in the construction industry remain at historic highs. It is now a matter of providing necessary skills to go into the industry.
I hope Yun isn’t suggesting that households should add a second income solely to buy a home. If one of the incomes stops suddenly for whatever reason, then making the mortgage payment will become VERY hard to make.
I really excited to see such a positive Jobs Report despite the weak wage growth. As the labor market tightens, it should cause wages to increase as employers are forced to pay more to retain employees.
However, the labor-force participation rate did increase. This is a signal of slack in the workforce and could prevent wage growth.
The U-6, which I think is more accurate indicator of the level of people working, was unchanged. The U-6 combines the unemployed, people working part time but wanting full time work, and the people that have stopped looking for a job.
Yesterday I shared that the ADP report and the latest unemployment claims report were both good. So I think we are almost guaranteed to see the Fed increase their benchmark rate at their next meeting.
Consumer Comfort Increases
Americans’ sentiment rose last week to the second-highest level since 2001, as the benefits of increased take-home pay from tax cuts outweighed concerns about stock-market volatility, according to the weekly Bloomberg Consumer Comfort Index released Thursday.
This is a great sign for the economy and very encouraging!
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