Mortgage Market Update
Mortgage Market Update- April 7, 2013
The unanticipated tick down in the unemployment rate should have theoretically been good for the stock market and bad for the bond market. However, one has to dig into the numbers to see why the opposite occurred, that is the stock market fell and the bond market got better for those who are interested in refinancing or buying. Keep in mind we always tell people what’s good for the economy in general is not good for the bond market. This jobs report proves just that.
What actually happened
Jobs grew at a slower pace than expected with only 88,000 jobs created in March. While the unemployment rate dropped to 7.6 percent, this was because more people stopped looking for work not because of a stellar jobs report. This is why mortgage rates dropped to their lowest levels since last June. One of the reasons this came as such a shock as the markets were particularly focused on the debacle in Cyprus last week, meaning most people were not paying attention to what was happening at home. For job seekers, this could be a signal of an overall weakness in the job market that could make getting that new job harder. Also keep in mind that this also means the Fed is likely to keep their bond-buying program active due to this news making it even better news for mortgage borrowers.
Other news contributions
Believe it or not, bad employment data wasn’t the only news that had an impact on our bond prices. Gold prices tumbled as well, recording pricing of just under $1,550 an ounce which is the lowest number we’ve seen since last May. On top of that the European Central Bank (ECB) made no rate changes (which is usually good for our bond markets) and Japan has stepped up their own bond-buying program which was also good news for our bonds. When you take all these factors into consideration, it’s all good news for mortgages here.
What about next week?
Next week we’ll have three more auctions from the Treasury and some financial data that may spook investors who are not already overly-concerned about the jobs numbers. Watch for the Fed minutes on Wednesday followed by a few financial reports including import prices on Thursday and more importantly, watch for reports due out Friday including Producer Price Index (PPI), Consumer Sentiment and more importantly, Retail Sales reports. Let’s not forget that if retail sales are down, this could be a signal that bond prices may drop lower since these sales account for more than 70 percent of our economic activity
During the next week those who are considering a mortgage refinance or those who have active purchase and sales agreements may want to consider locking in their rates, especially if they can take advantage of this weeks lower than expected rates. Contact Core Mortgage Financial and we can help you evaluate your current mortgage and see if it makes sense to consider refinancing or if you have a new loan pending, whether this is the time to lock your rate.