Mortgage Market Update
Mortgage Market Update- May 5th, 2013
There was a great deal of economic data released this week, and the bond markets initially did not move much in anticipation of the jobs report which was due out on Friday. Friday provided a bit of a rude awakening when the jobs numbers were finally released, for two reasons: First the new numbers were far better than expected but, prior months numbers were adjusted significantly upwards. Of course, as we’ve talked about before, good economic news is bad for bonds.
Behind the numbers
The jobs report actually provided a mixed bag of information, depending on who was reading the information. While the overall unemployment rate dropped to 7.5 percent, this number is somewhat misleading for a number of reasons including:
- Participation – Only slightly more than 60 percent of the eligible labor pool is currently participating in the job market either by holding a job or seeking a job. This means that while the overall rate of unemployment is down, more people have given up looking for jobs
- Sectors – Government jobs continue to decline at a rapid rate. According to the most recent number, more than 11,000 jobs in government were shed during April. Over the last three months, there have been more than 25,000 government jobs lost
- Manufacturing – Manufacturing jobs are barely creeping along. Service sector jobs are increasing but these are typically lower-paying jobs. This trend is disturbing for overall income stability
- Wage growth – Wages are currently growing at less than two percent
This weeks jobs report provided plenty of excitement on the stock market with stocks closing the week nearly two percent higher. Intraday, the market rose above 15,000 for the first time ever. This is never good news for the bond market although the better news is the numbers that changed the employment rate are still well below the threshold to consider ending the bond buyback program.
News on auctions
News that may help homeowners who are currently dealing with underwater mortgages was announced on Friday as well. The FHA plans to begin offering an auction of home mortgages with the servicers agreeing to NOT foreclose on homeowners for a period of at least six months. This time frame will hopefully give lenders the incentive to negotiate a loan modification with homeowners and because they will be sold at a discount, some homeowners may be offered principal reductions. These auctions will take place in late June and early July.
This week will be rather quiet for economic news so we should not anticipate much in the way of news that impacts the bond market. However, because rates are now back at a three-month high, consumers should consider locking in rates in anticipation of any positive news either economically or out of Washington. If you are currently considering refinancing, this may be the time to do so. Core Mortgage Financial is available to help you determine if this is the right time to consider locking in your rate for a home purchase or deciding if this is the time to refinance to a lower rate. Call us today.