Jan 28, 2013 | Mortgage Rates
Mortgage rates rose last week as investors gained confidence in the global economy. China and Europe posted better-than-expected manufacturing rates, U.S. Jobless Claims fell for the second straight week, and the worst of the European debt crisis appears to have passed.
Last week’s economic news provided further evidence of a strengthening U.S. economy.
The National Association of REALTORS® released its Existing Home Sales report, which indicates that existing home sales improved by 13 percent on a year-over-year basis and are now at their highest point since 2007. The group expects sales of existing homes to increase by 9 percent in 2013.
The Commerce Department released its monthly New Home Sales report; while new home sales for December fell short of Wall Street’s expectations, sales of new homes are almost 20 percent higher than they were one year ago.
Growing demand for homes coupled with lower inventories of available homes suggests that the days of rock-bottom home prices and low mortgage rates are dwindling.
According to Freddie Mac, the average mortgage rate for a 30-year fixed rate loan was 3.42 percent with borrowers paying 0.7 percent in discount points plus closing costs. The average rate for a 15- year fixed rate mortgage was 2.71 percent with borrowers paying 0.7 percent in discount points plus closing costs.
While slight, the week-over-week increase in mortgage rates in Worcester County area could become a trend.
Weekly Jobless Claims fell below Wall Street forecasts for the second week in a row. 330,000 new jobless claims were filed; far fewer new claims were filed than the 360,000 new jobless claims expected by investors. New jobless claims also fell below the prior week’s 335,000 new jobless claims. Fewer jobless claims are a sign of a stabilizing economy.
Mortgage rates typically rise as investors gain confidence in the economy and financial markets.
This week’s economic news calendar is jam-packed.
Investors await the outcome of the Federal Open Market Committee’s first scheduled meeting of 2013, treasury auctions are scheduled for Tuesday, Wednesday and Thursday, and the Pending Home Sales Index will be released.
Plus, the Department of Labor’s Non-farm Payrolls Report and Unemployment Report will be released Friday morning.
Jan 9, 2013 | The Economy
The Bureau of Labor Statistics (BLS) Non-Farm Payrolls report for December exceeded Wall Street’s expectations by 5,000 net new jobs, showing 155,000 positions created in December.
The December tally raised the economy’s 12-month total to 1.84 million net new jobs created nationwide. Jobs added in December mark the 27th consecutive month of job growth.
Job sectors showing the strongest growth to close out 2012 included:
- Health Care
- Drinking and Eating Establishments
- Construction
- Manufacturing
Private-sector hiring is driving the jobs market, too. 168,000 new private sector jobs were added in December. Government jobs fell by thirteen thousand.
Monthly job creation has averaged +153,000 jobs since 12 months ago. It’s a fine measure of growth but economists believe it’s not enough job creation to significantly reduce the national unemployment rate. 14.4 percent of workers are categorized as under-employed.
December’s national unemployment rate was 7.8 percent, representing 4.8 million job seekers. This figure matched Wall Street’s expectations and was equal to November revised unemployment rate of 7.8 percent.
The improving jobs market and national unemployment rate make an impact on both mortgage rates and Worcester County area home prices.
Job creation suggests an expanding economy, which typically leads mortgage rates higher. In addition, with more employed persons nationwide, the potential home buyer pool grows larger, which introduces new demand to the housing market. With more demand, all things equal, home prices rise.
Job growth is one reason why home values climbed more than 5 percent in 2012, according to the Federal Home Finance Agency; and why the national housing supply would be exhausted in fewer than 5 months, at the current sales pace. Demand for homes is high and today’s low mortgage rates are extending buyer purchasing power in Worcester County area.
For home buyers, the expanding U.S. economy and steady job growth suggests that home prices may not rocket higher this year, but will continue to increase, little by little.
Jan 7, 2013 | Mortgage Rates
Mortgage rates in Massachusetts rose during the first week of 2013.
The fiscal cliff crisis was resolved prior to the market’s opening Wednesday, when legislators voted to approve a deal. While many tax cuts were extended for taxpayers earning less than $450,000 annually, other facets of the fiscal cliff issue are yet to be addressed, including budget cuts for federal government agencies.
Investors were surprised to learn that the Fed may end its third round of quantitative easing (QE3) sometimes in 2013. The FOMC meeting minutes for December 2012 suggested that Fed support for its QE3 program has waned as the economy has improved.
First-time jobless claims increased for the week ending December 29, 2012 to 372,000 from the prior week’s 350,000, worse than Wall Street’s consensus opinion of 360,000 new jobless claims.
The December 2012 Non-Farm Payrolls surpassed analyst expectations, posting 155,000 net new jobs for the month. The report also showed the national Unemployment Rate rising one-tenth of one percentage point to 7.8%. When the jobless rate falls to 6.5%, the Federal Reserve is expected to begin raising the Fed Funds Rate from its current target range near zero percent.
Overall, mortgage rates rose by as much as 0.25 percentage points last week. However, because the increase occurred wholly between Wednesday and Friday, Freddie Mac’s weekly mortgage rate survey failed to include it.
Freddie Mac reported the previous week’s average rate for a 30-year fixed rate mortgage was 3.34 percent for borrowers paying 0.7 percent discount points plus closing costs. The average rate for a 15-year fixed rate mortgage was 2.64 percent for borrowers paying 0.7 discount points plus closing costs.
As this week opens, mortgage rates are considerably higher.
This week’s scheduled economic news includes Treasury auctions on Tuesday, Wednesday and Thursday; weekly Jobless Claims report on Thursday; and not much else. There will be planned speeches, however, from five members of the Federal Reserve, including Richmond Federal Reserve President Jeffrey Lacker.
Fed President Lacker was the lone dissenting vote among voting FOMC members in each of last year’s policy votes.
Dec 31, 2012 | Mortgage Rates
Mortgage bonds improved last week, pushing mortgage rates lower in Massachusetts and nationwide.
Positive economic news and strong housing data was trumped by ongoing Fiscal Cliff discussions on Capitol Hill.
The “Fiscal Cliff” is meant to represent January 1, 2013 — the date on which mandatory spending cuts are enacted by Congress and on which tax rates increases for many U.S. taxpayers.
Some analysts believe that if these two events are to occur simultaneously, it would derail the current U.S. economic expansion and revert the economy back into recession. That concern has spurred a flight-to-quality which has benefited mortgage bonds and, therefore, U.S. mortgage rates.
For example, last week, Freddie Mac reported the average 30-year fixed rate mortgage rate at 3.35 percent nationwide for borrowers willing to pay an accompanying 0.7 discount points plus a full set of closing costs. This is a 0.02 percentage point reduction from the week prior.
The average 15-year fixed rate mortgage rate was unchanged last week at 2.66 percent for borrowers paying an accompanying 0.7 discount points plus closing costs.
In this holiday-shortened week, mortgage rates may fade again.
Congress convened over the weekend in order to discuss the impending Fiscal Cliff, and ways to avoid it. Talks have been ongoing since this year’s election yet it appears unlikely that the simultaneous expiration will be avoided.
How this would affect the economy is unknown but mortgage markets would witness an immediate boost of demand, leading Massachusetts mortgage rates lower. Conventional, FHA and VA mortgage rates would all likely benefit.
And then, Wall Street will turn its attention to Friday’s December Non-Farm Payroll report.
Mortgage rates are expected to make big moves upon the report’s release. This is because, earlier this month, the Federal Reserve said it would begin raising the Fed Funds Rate only after the Unemployment Rate reaches 6.5 percent. Currently, the Unemployment Rate is 7.7 percent. If December’s jobless rate slips, moving closer to the Fed’s stated target, mortgage rates are expected to rise.
Similarly, if the Unemployment Rate rises, mortgage rates are expected to drop.
Dec 12, 2012 | The Economy
According to the Bureau of Labor Statistics (BLS) and its November 2012 Non-Farm Payrolls report, the U.S. economy added 146,000 net new jobs last month.
November’s job growth exceeded Wall Street expectations of 90,000 jobs added for the month, and was a small increase from October’s 138,000 jobs added.
Three job sectors in which employment rose in November include :
- Retail : 58,000 jobs added
- Business and Professional Services : 43,000 jobs added
- Healthcare : 20,000 jobs added
It appears that the effects of Hurricane Sandy were muted, although they may be temporarily overshadowed by seasonal factors.
After losing more than 7 million jobs in 2008 and 2009, the U.S. economy has since recovered more than 4.6 million jobs. Job growth has reached 26 consecutive months and is expected to remain consistent through 2013.
In addition, the BLS report showed the national unemployment rate dropping 0.2 percentage points in November to 7.7 percent. This is the lowest Unemployment Rate since January 2009.
Growing employment is a strong indicator of economic expansion, which traditionally leads to rising mortgage rates.
When mortgage people work, more income is earned and more taxes are paid. This often leads to higher levels of both consumer spending and government spending, both of which spur additional hiring and economic expansion.
When the economy is in expansion, equity markets often gain and bond markets often lose. When bond markets are in retreat, mortgage rates in Massachusetts rise. This relationship takes on added importance this week with the Federal Reserve’s Federal Open Market Committee (FOMC) scheduled to adjourn.
The Non-Farm Payrolls Report is a top economic indicator and is a key part of economic and policy decision made Capitol Hill and within the Federal Reserve. As one example, recent Federal Reserve stimulus has been specifically aimed at lowering the national Unemployment Rate. As the economy improves and as jobs are regained, the Fed may be less likely to support low rates.
If you’re floating a mortgage rate, consider locking in. Rates can’t stay low forever.
