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Mortgage Rates Rise on Positive Employment Data

National home price data is published on a lag, so when we hear that the S&P Case-Shiller index showed July home prices up 6.7% yearly and down 0.5% monthly, a natural response would be “ok, but what about September?” In general, these trends (however outdated) can give us a broader market picture.

For one, rising home prices, rising mortgage rates, and fewer foreclosures, have helped reduce the “affordability” of for-sale real estate. Bargain pricing (and historically low mortgage rates) helped fuel the housing market turnaround, and that fuel is starting to appear burnt out. Thus: the S&P Case-Shiller price index shows a month-over-month slowdown.

The good news: new home sales rose 18% month-over-month. Builders have reacted to the high demand environment and have built new properties to add to the supply pool. This is a healthy step for the real estate market, which appears ready to balance out and get back to a steady pace of growth.

And speaking of steady growth, let’s talk about employment. Jobless claims continue to push pre-recession lows. After reaching a 14-year low two weeks ago, claims for unemployment benefits have continued to decline. Continuing claims fell 20,000 to 2.441 million to reach a new recovery low.

Last (but not least), payrolls added 248,000 positions in September. Equally important, the August total was revised from 142,000 to 180,000. Combine the strong September numbers with the previous month’s upward revision, and it appears that August’s low initial reading was simply an outlier.

The nation’s unemployment rate fell 0.2% to 5.9%. Central Coast Lending co-owner Jason Grote noted that the number is even stronger than it looks:

“Half of the 0.2% dip came because people gave up and left the workforce, and the other half came because more jobs were created. Lately, the unemployment rate drops have occurred because 80% were giving up and 20%  were getting jobs. This 50/50 balance is much better.”

Digging deeper, we find another positive tidbit from the quality of the jobs being added. Business services (“white collar”) added 81,000 jobs in September, compared to an average of 34,000 over the past 12 months. The increase in these “head of the household”-type jobs gives us another reason for optimism.


Mortgage Rates

Last week started out favorable for interest rates.

Freddie Mac Rate Movement copy

“I think honestly the fears over Ukraine, Syria, Hong Kong, and even ebola were a big part of it,” said Grote.

As the week progressed with positive data, however, mortgage rates increased.

“When the future is bright, bets move to the stock market,” said Grote. “There is a pull back from bond markets.”

When bond markets sink, interest rates typically rise.


Loan Program Update

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Central Coast Lending is a California mortgage broker and direct lender based on the Central Coast of California in San Luis Obispo County. Call us today at 805.543.LOAN or email us here to set up a free pre qualification. We are The Mortgage Experts: ask us anything!

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