FOMC meeting this weekMortgage 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 San Jose 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.

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Job growth helping housing recoveryThe 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 San Jose 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 California.

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.

Jobs data moves mortgage rates higherMortgage rates in San Jose 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. 

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Jobs report is due Friday and could move mortgage ratesMortgage bonds improved last week, pushing mortgage rates lower in California 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 San Jose 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.

Non-Farm PayrollsAccording 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 San Jose 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.

Non-Farm PayrollsFloating a mortgage rate? Consider getting locked Thursday.

ADP released its November 2012 Employment Report Wednesday in which the payroll-processing firm reported 118,000 new jobs created last month.

The company said the service sector created 114,000 new positions, the construction sector created 23,000 new positions, and goods-producing businesses created 4,000 new jobs, among others. There was a 16,000 decline in manufacturing employment.

ADP’s monthly Employment Report can influence mortgage rates. This is because it’s typically released during the same week as the Non-Farm Payrolls report from the U.S. Bureau of Labor Statistics, and can sometimes provide a preview.

The Non-Farm Payrolls report — more commonly called “the jobs report,” is a sector-by-sector breakdown of the U.S. employment situation, which includes changes in the national Unemployment Rate.

In a recovering economy, as jobs go, so goes the economy and, this month, the jobs forecast is clouded because of the effects of Hurricane Sandy.

In its Employment Report, ADP estimates that Hurricane Sandy reduced payrolls by 86,000 jobs across manufacturing, retail, leisure and hospitality, and temporary help industries.

Without Hurricane Sandy, the report may have shown north of 200,000 new jobs.

Prior to Wednesday, Wall Street expected Friday’s Non-Farm Payrolls report to show 93,000 net new jobs created in November, and no change in the U.S. Unemployment Rate. The ADP report did little to change those expectations.

Regardless, Friday’s release remains a market risk to San Jose buyers. The jobs report is closely watched because of its links to the broader domestic economy. When more workers are employed, more income is earned, and more money is spent.

This drives economic growth, of course, because consumer spending accounts for 70% of the U.S. economy and when the economy is expected to expand, mortgage rates tend to rise.

If you are currently in the market for, or are undecided about a mortgage, therefore, consider locking your mortgage rate today. If Friday’s Non-Farm Payrolls report shows more jobs created than were estimated, mortgage rates are likely to rise — maybe even sharply.

Non-Farm Payrolls is released at 8:30 AM ET.

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U.S. Non-Farm Payrolls 2010-2012

Another month, another good showing for the U.S. economy.

Mortgage rates are performing surprisingly well after Friday’s release of the October 2012 Non-Farm Payrolls report. The Bureau of Labor Statistics’ monthly report beat Wall Street expectations, while also showing a giant revision to the previously-released job tallies of August and September.

171,000 net new jobs were created last month against calls for 125,000 and revisions for the two months prior totalled 84,000.

October also marked the 25th consecutive month of U.S. job growth — a period during which 3.8 million jobs have been reclaimed. This sum represents more than half of the 7.3 million jobs lost between 2008-2009.

Nationally, the Unemployment Rate rose by one-tenth of one percent last month to 7.9%. It may seem counter-intuitive to see unemployment rates rise even as job growth soars. However, it’s a sign of economic strength.

October’s rising Unemployment Rate is the result of more workers entering the U.S. workforce and actively looking for jobs, a manifestation of rising consumer confidence levels and optimism for the future.

Typically, mortgage rates in California would worsen on a strong jobs report like this. This month, however, rates are improving. This is mostly the result of Hurricane Sandy, which is expected to create a drag on the U.S. economy with its $50 billion damage tag.

The storm has Wall Street looking past the strong jobs report, positioning itself for the next few months. Investors are moving into less risky assets until the uncertainty surrounding the storm’s effects subside. Mortgage-backed bonds are considered “safe” and are benefiting from this safe haven buying pattern.

For home owners and buyers in San Jose and nationwide, the shift is yielding an opportunity to lock mortgage rates at artifically-low levels. 30-year fixed rate mortgages remain well below 3.50% for borrowers willing to pay discount points, and home affordability is approaching an all-time high.

Home values are expected to rise through 2013 so consider this week’s low rates a gift. If you’re in a position to go to contract and/or lock a mortgage rate, you may want to take that step today.

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Unemployment RateFriday morning, the government’s Bureau of Labor Statistics will release its Non-Farm Payrolls report, more commonly called the “jobs report”.

Depending on how the jobs data reads, FHA and conforming mortgage rates may rise, or fall. This is because today’s mortgage market is closely tied to the U.S. economy, and the U.S. economy is closely tied to job growth.

Economists expect that employers have added 125,000 net new jobs to their payrolls in October 2012, up from September’s tally of 114,000 net new jobs. Jobs have been added to the economy over 24 consecutive months leading into Friday’s release, and approximately 4.7 million jobs have been created in the private sector since early-2010.

So, what does this mean for home buyers and refinancing households throughout San Jose ? It means that mortgage rates may get volatile beginning tomorrow morning.

Improving jobs numbers tend to push mortgage rates up, as it signals to investors that the U.S. economy is strengthening. If the actual jobs reports shows more than 125,000 net new jobs created, therefore, look for mortgage rates to rise.

Conversely, a weaker-than-expected report injects fear into the market, causing investors to purchase safer assets including U.S. Treasury bonds and mortgage-backed bonds. This moves mortgage rates lower.

Markets will also watch for the monthly Unemployment Rate. After falling to a 4-year low of 7.8 percent in September, economists anticipate that October’s unemployment rate will rise 0.1 percentage point to 7.9%.  

The good news for rate shoppers is that mortgage rates remain low. Freddie Mac’s weekly mortgage rate survey puts the 30-year fixed rate mortgage below 3.50% nationwide for borrowers willing to pay 0.7 discount points. Furthermore, a forecast from the Mortgage Bankers Association predicts that the 30-year fixed rate will remain below 4% for at least the next 8 months and low mortgage rates help to keep home payments low.

The Bureau of Labor Statistics releases the jobs report at 8:30 AM ET Friday.

Rates rising on economyMortgage markets worsened last week for the first time in a month as the U.S. economy showed signs of improvement, and the Eurozone stepped closer to launching its $500 billion euro rescue fund.

Conforming mortgage rates in California rose last week on the whole — even though Freddie Mac’s Primary Mortgage Market Survey proclaimed that they fell

This occurred because Freddie Mac’s weekly mortgage rate survey is conducted between Monday and Tuesday each week and, last week, mortgage rates were lower when the week began. Through Wednesday, Thursday and Friday, however, they rose.

According to the Freddie Mac survey, the average 30-year fixed rate mortgage slipped to 3.36 percent nationwide last week, while the 15-year fixed rate mortgage fell to 2.69 percent. Both rates required 0.6 discount points and both marked all-time lows.

As this week begins, to gain access to the same 3.36% and 2.69% mortgage rates from last week, San Jose mortgage applicants should expect to pay more closing costs and/or higher discount points.

Improving U.S. employment data is partially to blame.

Friday morning, the Bureau of Labor Statistics released its September Non-Farm Payrolls report. More commonly called “the jobs report”, the monthly issuance details changes in U.S. employment by sector and reports on the national Unemployment Rate.

In September, accounting for upward revisions to data from July and August, 200,000 net new jobs were created — far exceeding Wall Street’s estimates for 120,000 net new jobs created. Furthermore, the Unemployment Rate unexpectedly dropped to 7.8%.

Jobs are considered a keystone in the U.S. economic recovery. As a result, when the jobs numbers hit Friday, mortgage rates worsened, building on momentum built earlier in the week as Greece moved steps closer to accepting aid from the Eurozone.

In general, since 2010, weakness in the Eurozone has helped push U.S. mortgage rates lower. As Europe regains its footing, therefore, domestic mortgage rates are expected to rise.

This week, in a holiday-shortened week, there will be little new data to move mortgage rates. The Federal Reserve’s Beige Book is released Wednesday and some key inflation data is due for Friday release. Beyond that, mortgage rates will continue to take cues from the Eurozone.

Mortgage rates remain near all-time lows.

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Estimated Non-Farm Payrolls September 2012

It’s a dangerous time for home buyers in San Jose to be without a locked mortgage rate.

Friday morning, at 8:30 AM ET, the government releases its Non-Farm Payrolls report for September. More well-known as “the jobs report”, Non-Farm Payrolls data has the power to move mortgage rates up or down.

Unfortunately, ahead of the release, we can’t know which.

Last year, job growth more than doubled between August and September. If this year shows that same growth, California mortgage rates are expected to rocket higher.

The connection between rising jobs and rising rates is a chain reaction-type link, and is often quite tight.

Jobs are a growth engine for the U.S. economy and mortgage rates are “made” based on future expectations for the U.S. economy. In general, when the economy is improving, it draws Wall Street into “risky” investments and away from “safe” ones.

Meanwhile, mortgage-backed bonds — especially those from Fannie Mae and Freddie Mac — are considered to be among the safest investment assets available. Therefore, as the size of the U.S. workforce swells, and economic projections increase, Wall Street tends to divest itself of its mortgage bond holdings which, in turn, increases the supply of mortgage-backed bonds for sale.

With more supply, all things equal, mortgage bond prices fall and this causes mortgage rates to rise.

This is why the September jobs report is important to today’s home buyers and mortgage rate shoppers. A better-than-expected tally will result in higher mortgage rates. 

In August 2012, the government reported 96,000 net new jobs created — a sharp decrease from the month prior and a figure just shy of the metric’s six-month moving average. The Unemployment Rate fell one-tenth of one percent in August to 8.1%.

For September, economists expect to see 120,000 net new jobs created, and no change in the national Unemployment Rate.