Fed Rate Cuts, Election Jitters, and Jobs Data—Why This Week Matters

Hello everyone! This week is shaping up to be a whirlwind: the markets are still digesting Friday's jobs report, the Fed’s big rate cut decision is now set for Thursday (moved from Wednesday), and, if that weren’t enough, we have a presidential election in the mix.

 By the time Friday rolls around, we might all be in serious need of a vacation! Expect significant volatility this week, but no worries—my team and I have you covered!

Read time: ~4 minutes

Rates ended HIGHER compared to last week, and volatility was HIGH. Rates are in the high 6’s/low 7’s for most loan types without paying discount points. Paying discount points can get you in the mid 6’s.

October Jobs Report Falls Short of Expectations

The October jobs report, the last one before the presidential election, came in significantly below forecasts, delivering a surprising blow to economic expectations.

Nonfarm payrolls showed an addition of only 12,000 new jobs, a sharp decline from September’s figures and far below the anticipated 100,000. Meanwhile, the unemployment rate remained steady at 4.1%.

This shortfall is being partially attributed to disruptions from the recent hurricanes and the ongoing Boeing strike. Adding to the disappointment, 112,000 jobs were revised out of the August and September reports, further weakening the overall picture.

Notably, if we exclude government jobs added in October, the economy actually experienced a net loss of 28,000 private sector jobs. Such a negative figure in nonfarm private payrolls is rare, as shown in the accompanying chart.

This underwhelming jobs report likely cements the case for at least a 25bps rate cut by the Federal Reserve at their upcoming announcement on Thursday.

Despite the weaker jobs data, mortgage rates held steady on Friday. The flat unemployment rate likely prevented a more significant rate shift. Had the unemployment rate ticked higher, we might have seen mortgage rates decline slightly in anticipation of a more aggressive rate cut by the Fed later this week.

“I am NOT Buying a Home if my Candidate Loses!”

Over the past couple of weeks, while speaking with agents, it seems like everyone has at least one client saying they are waiting until after the election to buy and will only purchase if their candidate wins. The question that has been dominating these conversations is: “What do I tell clients who say they won’t buy a home if the other candidate wins?”

It’s not surprising—this election is highly emotional and contentious, and many clients are letting their political preferences shape their homebuying decisions. But here’s the reality: if their candidate loses, it won’t spell doom for the housing market. We've all experienced elections where our preferred candidate didn’t win, and yet, life—and the economy—continued on.

Here’s what to tell clients worried about an economic downturn if their candidate doesn’t win:

“That’s actually good news for interest rates.”

A slowing economy typically results in lower interest rates as the government takes measures to stimulate growth. We’ve seen this pattern play out during past economic downturns, like the Great Recession of 2007-2009, the Dot Com Bust, and even the Covid-19 crisis. In each of these cases, the Federal Reserve responded by slashing rates, making borrowing cheaper and more accessible.

Expanded Appraisal Waiver Eligibility Coming Soon

Exciting news from the Federal Housing Finance Agency (FHFA): appraisal waiver eligibility is expanding! Starting in early 2025, properties with up to 90% loan-to-value (LTV) will qualify for appraisal waivers, up from the current cap of 80% LTV.

The FHFA is also introducing inspection-based appraisal waivers for properties with up to 97% LTV, although many lenders may not adopt these inspection-based reviews just yet.

Why does this update matter?

• Lower Closing Costs: In an expensive market, buyers can save $500-$750 at closing, making homeownership a bit more affordable.

• Quicker Loan Closings: Eliminating the need for appraisals can help lenders speed up the underwriting process.

• Enhanced Pre-Approval Letters: Appraisal waivers noted on pre-approval letters can be a major plus, catching the attention of listing agents and signaling a smoother transaction.

These changes apply to Conventional loans only, and once they’re in effect, lenders can use automated underwriting systems to determine waiver eligibility for loans with down payments as low as 10%.

Two Ways My Team & I Can Help

1. Lets collaborate- Schedule a zoom meeting

2. Tough Deal? Let us know if we can help