Technorati Tags: Jobs Report, Unemployment
Tag: Jobs report (page 1 of 1)
Okay, so far this morning, the market has reacted in a very volatile but not significantly changed manner to the jobs report. Essentially the jobs report came in pretty much where the market expected.
So, did I call it wrong by recommending a shorter term lock and a long term float guideline yesterday? I don’t think so for a couple of reasons:
- We’ve passed the major economic hurdle for the next few weeks without any news that is going to significantly lower rates. Between that and the fact that the new Reg Z rules essentially require locking in your rate at least 1 1/2 weeks before closing, it makes sense, if you are closing soon, to grab a rate and be done with it.
- One of the “big guys” at PIMCO was on CNBC this morning talking about how this is a “sugar high” rally that is based on inventory and cost control and stimulus funding (isn’t that what stimulus is supposed to do?) but that it won’t last. When reality hits, the stock market will adjust and the adjustment won’t be pretty. That has two potential options: 1) It would force money into the bond market driving down rates, or 2) It could cause money to jump to cash (remember last fall?) and everything would be really ugly. So I expect there is still some lower rate potential in the next 60 to 90 days.
Have a good weekend!
Thanks!
Tom Vanderwell
Given all of the discussion here lately about using video, I thought I’d post something a bit more “ordinary” than Mr. Potato Head but hopefully useful as well. The video below is some of my thoughts on what the jobs report that comes out tomorrow might mean for the mortgage world and some recommendations going forward.
Tom Vanderwell
Okay, let’s face the fact that the jobs reports and the reports from Ford and General Motors that came out today were ugly. Not just ugly, downright nasty.
In normal economic times, that sort of bad economic news would send people fleeing stocks and going into the bond market. That would in turn send bonds and Treasuries up and the rates down.
But that didn’t happen. Just looking at one indicator – the 10 year Treasuries, the yield went up by .09% today. What’s up with that?
A couple of things are keeping mortgage rates higher than what the economic fundamentals would justify:
- The amount of money the government is spending on bailouts. The Federal deficit is truly skyrocketing because of all of the bailouts, buyins, rescues, TARPS, etc. that are happening. That money needs to be financed somewhere because we don’t have the money sitting in the “bank. When the markets get flooded with additional loan demand, the “buyers” of the debt can demand a higher rate on their money. That pushes rates up.
- The concern that foreigners are not going to be able to continue to buy our debt. This is not an economic downturn that is only happening in the United States, it’s truly an international downturn. If, due to concerns about the amount of US debt or due to economic downturns in other areas, foreigners either stop or slow down the amount of US debt that they buy, that will reduce demand and push rates higher.
- The Bank of England cut rates by 1.5% this week (in their version of the Fed Funds rate). We can’t do that. Why? Because we’re already at 1.0%. So the options that the Fed has going forward are more limited than we’d like to see them.
I truly believe that if this was a “normal” economic downturn, we’d see mortgage rates at least .75% lower than we have them. I also believe that short of a major Federal “buyout” of mortgage backed securities (a topic for another post), we aren’t going to see rates substantially lower than we have them now. I also believe that it’s going to Read more