September 10th, 2018 12:06 PM by Richard Sardella MLO.100007700/NMLS 233568
Construction jobs are thriving:
According to the National Association of Homebuilders (NAHB), the month of August saw residential building industry jobs increase by 201,000, with unemployment in that arena remaining at 3.9%. Employment in residential construction continued to trend up.
“Over the month of August, total non-farm payroll employment rose by 201,000, after the increase of 147,000 jobs in July, according to the Employment Situation reported by the Bureau of Labor Statistics (BLS),” the report said. “The July increase was revised down from its original estimate of a 170,000 increase. Job gains have averaged 207,000 a month this year, faster than the first eight months’ averages of 189,000 in 2017 and 199,000 in 2016.”
The number of unemployed persons decreased by 46,000 during the month of August. Monthly employment data released by the BLS Establishment Survey indicates that the number of residential construction jobs rose by 12,900 in August, after the 6,800 increase in July, putting smiles on the faces of many a builder/developer.
The report cites, “Residential construction employment now stands at 2.83 million in August, broken down as 802,000 builders and 2 million residential specialty trade contractors. The 6-month moving average of job gains for residential construction is 5,383 a month. Over the last 12 months, home builders and remodelers have added 136,600 jobs on a net basis. Since the low point following the Great Recession, residential construction has gained 851,700 positions.
The unemployment rate for construction workers dropped to 4.0% on a seasonally adjusted basis, from the 4.4% in July, now at its lowest rate since 2001.
Source: NAHB, TBWS
How Rates Move:
Conventional overnment (FHA and VA) lenders set their rates based on the pricing of Mortgageand G-Backed Securities (MBS) which are traded in real time, all day in the bond market. This means rates or loan fees (mortgage pricing) moves throughout the day, being affected by a variety of economic or political events. When MBS pricing goes up, mortgage rates or pricing generally goes down. When they fall, mortgage pricing goes up. Tracking these securities real-time is critical. For more information about the rate market, contact me directly. I’m among few mortgage professionals who have access to live trading screens during market hours.
Rates Currently Trending: Neutral
Mortgage rates are trending sideways this morning. Last week the MBS market worsened by -23bps. This was enough to move rates higher for the week. There was a great deal of mortgage rate volatility on Friday.
This Week's Rate Forecast: Neutral
Three Things: These are the three areas that have the greatest ability to impact mortgage rates this week: 1) Trade Wars, 2) Central Bank and 3) Domestic
1) Trade Wars: Tensions between the U.S. and China increased on Friday when President Trump threatened taxes on practically all Chinese imports, threatening duties on $267 billion of goods over and above planned tariffs on $200 billion of Chinese products and that is on top of the $60B in tariffs already in place. In total, this adds up to slightly more than ALL of the Chinese goods imported into the U.S. in 2017. China has said it will respond "in kind," but they don't import nearly that much from the U.S., so it is unclear what (if any) leverage they have. NAFTA is still in limbo as Canada, and the U.S. are still trying to hammer out terms.
2) Central Bank: The European Central Bank will take center stage, they are expected to hold their interest rate at 0.0%. However, the markets will be focusing on ECB President Mario Draghi's live press conference afterward to see if there's any slant towards the timing of their first rate hike and if their plans to end their QE bond-buying program by the end of this year is still on track. We also will get a rate decision out of the Bank of England. Our own Federal Reserve will release their Beige Book which is compiled to be used in their next Fed meeting.
3) Domestic: We have several key reports this week that have the gravitas to move mortgage rates. On the inflation front, we get both PPI and CPI - the bond market will focus the most on CPI YOY ex-food and energy. Retail Sales on Friday will also get a lot of attention.
Treasury Auctions this Week:
This Week's Potential Volatility: Average
Mortgage rates ticked higher last week on elevated volatility on Friday. Look for rates to move sideways ahead of inflation numbers and retail sales on Friday. Of course, anything new on the trade front could cause volatility.
If you are looking for the risks and benefits of locking your interest rate in today or floating your loan rate, contact your mortgage professional to discuss it with them.
Richard Sardella has been actively managing and providing services in the mortgage industry for over 27 years. Richard serves on the board of directors as President of Colorado Home Mortgages Inc.
All information furnished has been forwarded to you and is provided by thetbwsgroup only for informational purposes. Forecasting shall be considered as events which may be expected but not guaranteed. Neither the forwarding party and/or company nor thetbwsgroup assume any responsibility to any person who relies on information or forecasting contained in this report and disclaims all liability in respect to decisions or actions, or lack thereof based on any or all of the contents of this report.
MLO of record MLO.100007700 / NMLS#233568 / CHM NMLS#127716.