True confession here – I’m an Economics Junkie. I’m not proud of it, but I’ve been watching mortgage rates, and economics for so long – it’s just kind of who I am. My birthday happens to fall at the beginning of the month (the 2nd actually), and one year, as a surprise, Steve took me to Washington, DC to literally “be there” when the Jobs Report was being announced. It was one of the BEST birthday presents EVER! LOL!
The non-Farm payroll numbers and the wage reports that go along with the report is one of the MOST important pieces of Economic data we get each month. The report comes out on the First Friday of the month.
When it comes to Mortgage Rates – it can literally be a guide to what direction mortgage rates will likely take for the next few weeks! Right now, the Federal Reserve is especially eyeing the labor market as a key signal for the economy, and ultimately for the start of an interest rate “normalization” process – meaning when are they going to begin RAISING mortgage rates!
Based upon earlier released numbers, most Economist felt it was a foregone conclusion that The Fed would begin to raise mortgage rates – perhaps as early as June. However, on Friday a much softer-than-expected employment report for March hit the headlines, and the timeline to the first change to Fed policy seemed to stretch out further. Mortgage rates dipped some on the news.
Was this weak report only a stumble in an otherwise solid pattern, or is it something more? It’s hard to know at this point, but at least for a short while, this evident job market softening should produce more downward pressure on mortgage interest rates.
According to the CFPB site for the Southeast, the overall average rate for 30-year fixed-rate mortgages remained unchanged this week, holding steady at an average 3.81 percent. Popular with first-time home buyers, rates on fully insured FHA-backed 30-year mortgages remain well below their conforming counterparts but sported a decline of just two basis points this week, easing to an average rate of 3.63 percent. These mortgage products are either at or very near 2015 lows as the traditional spring home buying season begins to kick in. (The CFPB does not provide APR data for their published mortgage rates).
After months and months of solid job growth averaging well over 200,000 new hires and an unemployment rate in fairly steady decline, the 126,000 new jobs created in March was waaaay off the estimates. As a matter of fact, it wasn’t even better than half of February’s number, a figure itself revised downward by 31,000 jobs. January’s reported figure was trimmed by 38,000 jobs as well.
Meaning that the labor market at the beginning of 2015 certainly isn’t as strong as had been believed. With the small increase in hiring, the unemployment rate held at 5.5 percent for the month.
There were also fewer folks in the market for a job last month. The labor force participation rate edged back down to 62.7 percent, a rock-bottom figure which has appeared more often than not during both the recession and recovery. The employment report also detailed softness in the average number of hours worked.
The soft jobs report didn’t come in isolation, either. We already knew that with a decelerating domestic economy and a stronger dollar, manufacturers have been having an increasingly rough time of it.
The increasing strength in the Dollar may be one of the most important things to watch in coming months. The stronger dollar means fewer folks abroad are interested in buying our goods, and this can be seen in the latest report from the Institute for Supply Management.
The ISM report covering manufacturing interests shed another 1.4 points in March, landing at a just-above break-even value of 51.5 for the month. This continues a fairly steady decline for manufacturing, which began last October. Sub-components of the indicator told of a slowing in orders, a thinning of inventories and employment that has fallen to a level of no gains at all.
In the week ending March 28, just 268,000 new applications for unemployment assistance were filed, the second lowest number of the year. As well, a measure of announced layoffs tracked, also retreated in March. The number of announced job layoffs slipped to 36,594 terminations, down from readings of over 50,000 in each of the first two months of 2015.
Fewer people being laid off but also fewer being hired may be indicating that economic growth has stagnated to a greater degree of late.
Here are what the “tea leaves” are telling us about Mortgage Rates in April 2015… watch these 2 things:
- The price of gas you pay at the pump. If there are big drops, if the deal with Iran goes through and they cause pressure on oil prices – mortgage rates should follow suit. If your price of gas is going UP, then you could see HIGHER mortgage rates. The way they mix gas is different in the Summer than the Winter – so this won’t work as a great indicator once we get further into May…
- Watch the dollar, and especially the earnings announcements by LARGE international companies at the end of April. Companies should start reporting earnings for the first quarter around the 23rd, 24th of the month. If you see “misses,” on projected earnings that are blamed on the Strong Dollar (like we saw for the 2014 Year End earnings), then you could see the projection for Fed Rate Hikes pushed out further.
IN GENERAL – you can go by this mantra… Bad news for the Economy, is GOOD NEWS for mortgage rates. Whether June, July, September or even later, the Fed has made it as clear as it can that rates will be rising before long. Even without knowing the EXACT date of when they pull the trigger, there will be a starting point before long, and mortgage rates WILL go up as the Fed makes their move.
This news alone, is sufficient to keep mortgage rates from falling by much (absent some new economic calamity, domestically or elsewhere). There could be some softness for mortgage rates as we move through this week. There’s probably not enough Economic data due out this week to cause a huge lift in rates, so we’re more likely to see mortgage rates flat where we are.
If you are looking for a house, or want to know if this is the right time for your to refinance – please call Steve and Eleanor Thorne 919 649 5058. We’d love to connect with you, find us on Twitter or Facebook! Remember, if you have not owned a house during the past 3 years – you might qualify for a Mortgage Grant to help cover your down payment!
Mortgage Rates change daily (sometimes more than once a day) and this is not a commitment that we will have the rate or the mortgage product that suits your situation.