Important Fed Meeting & Jobs Report...How Will Rates React?
As has been the new trend, mortgage rates again moved up slightly last week as we watched the 10-year Treasury yield percentage move up as well. Optimism is building as we’re seeing new covid cases declining and consumer optimism increasing.
Even as mortgage rates are rising slowly, we continue to see a brisk housing market with existing home sales up 7 percent according to last week’s numbers. Homes are spending an average of only 17 days on the market before going under contract.
We’ve certainly been spoiled with this long run of all-time-low rates but let’s keep things in perspective. According to Freddie Mac, average rates for a 30-year are in the 3.14 range this week, which is still a very low rate environment.
We have an important Fed Meeting midweek and we anticipate the Fed is going to announce that it will be tapering its bond buying program; however we don’t see this impacting rates hugely. Even still, analysts anticipate that rates will remain below 4 percent for the remainder of this year.
All that to say, if you’re considering a purchase this year or wanting to refinance and get access to all the equity built up in your home, it’s not too late. Let’s discuss your options!
As for what I’m watching this week…
In addition to an important Fed Meeting this week, we also have the monthly Jobs Report coming out on Friday as well as the Fed’s favorite inflation indicator. All of these factors point to some increased volatility in markets and particularly interest rates.
Mortgage rates tend to move in tandem with inflation and we’ll not only see the PCE Index, which the Fed uses as its standard inflation tracker, but also potential wage inflation in Friday’s Jobs Report. If there are any surprises in either place, bond prices and mortgage rates could see some additional volatility.
Wednesday we get the first look at the jobs numbers with the ADP report on private sector job creation. The consensus is calling for 400k new jobs created as compared with last month’s number of 568k.
As for Friday’s Jobs Report, the new job creation number is expected to show 400,000 new jobs created in October, as compared to 194,000 created last month. Also expected to grow to 61.8 percent is the Workplace Participation Rate, which tracks the percentage of Americans that are working. The unemployment rate is predicted to fall to 4.7 percent from 4.8.
We will be watching the hourly earnings trend in the Jobs Report as well. Wage inflation is another factor that could cause mortgage rates to rise. It’s expected to rise from 4.6 to 4.8 percent. Any surprises here could spark some rate volatility.