Job Revisions and Rate Dips

Weekly Mortgage Update

Author

Michael Cassano
July 08, 2024

I hope you all enjoyed a relaxing July 4th weekend! As we move into this week, there’s a lot happening in the mortgage world, and I’m here to help break it all down for you. Let’s dive into the latest updates and insights to help you stay informed and ahead of the game!

Read time: ~4 minutes

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

Job Revisions and Rate Dips

I have found myself scratching my head over the first half of this year. Despite high interest rates and inflation making life tough for the average consumer, the stock market has hit new highs, and unemployment has stayed low.

In any usual market scenario, these would be celebrated as signs of a thriving economy. However, this time it’s different. The Federal Reserve began hiking rates in March 2022 to cool down the economy and bring inflation back to its 2% target. Yet, despite these measures, the economy has shown remarkable resilience. But now, we’re starting to notice some cracks.

On Friday, the Bureau of Labor Statistics released the jobs data for June, showing an addition of 206,000 jobs, surpassing the expected 190,000. Normally, this would push interest rates higher, signaling a strong job market. However, the opposite occurred due to significant downward revisions of the previous months' data:

  • May's job numbers were revised down from 272,000 to 218,000.

  • April's job figures were revised down from 165,000 to 108,000.

These adjustments removed 111,000 jobs from previous totals. It’s almost amusing how initial numbers frequently beat expectations only to be revised down later. Since January 2023, revisions to non-farm payrolls have erased 204,000 jobs in the first revision and a whopping 556,000 by the second!

The market seems to be catching on to this pattern, with the interest rate market reacting more to these downward revisions, causing rates to dip.

Key Takeaway: Rates fell to close the week due to the downward revisions in job reports. Unemployment also nudged up slightly from 4.0% to 4.1%. This rise in unemployment is actually positive news for mortgage rates. If unemployment continues to climb, mortgage rates are likely to trend downward. While the top-tier 30-year fixed rate isn't back under 7% just yet, it's getting close as of Friday."

Will This Week’s Inflation Data Trigger a Rate Cut?

This week is critical for the mortgage industry as we anticipate the CPI inflation report on Thursday and the PPI inflation report on Friday. These reports could significantly influence the Federal Reserve's next move.

Federal Reserve Chairman Jerome Powell has stressed that the Fed needs consistent positive data to feel confident that inflation is easing.

If the upcoming inflation data shows a trend towards the Fed's 2% target, it could pave the way for a rate cut as early as their September meeting. Conversely, if inflation remains stubborn or increases, we can expect mortgage rates to climb.

Key Takeaway:  This week's inflation reports might be the most important of the year. The markets are eagerly awaiting signs that the Fed might cut rates soon. A low inflation reading would provide the Fed with the confidence needed to lower rates by September. On the other hand, a high inflation report would make it challenging for the Fed to justify any rate cuts in the near future.

Recently, Tommy Choi, a top real estate agent in the Chicago area, hosted a masterclass featuring Brandi Snowden, Director of Member Research at NAR, and Dr. Lawrence Yun, Chief Economist at NAR. Their discussion provided valuable insights into the future of real estate.

Brandi Snowden highlighted some key statistics about homebuyers: 32% of recent home purchases were made by first-time buyers. Among these buyers, 59% were married couples, 19% were single females, 10% were single males, and 9% were unmarried couples. It's encouraging to see a significant number of single females taking steps towards homeownership and securing their financial future.

Another notable point from the masterclass was that 14% of homebuyers opted for multi-generational homes. This trend is often driven by the need to care for aging parents or to achieve cost savings by sharing living expenses.

Dr. Lawrence Yun shared a few optimistic observations about the current real estate market:

  • The reluctance of homeowners to sell due to low mortgage rates, often referred to as "golden handcuffs," might lessen as major life events necessitate a move.

  • Price reductions in the market are more often a result of initial overpricing rather than significant market shifts.

For those who missed it, I highly recommend checking out the recording of this masterclass. It’s packed with insights that can help you target specific client demographics and expand your knowledge to become a more well-rounded real estate professional.

Two Ways My Team & I Can Help

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