CHM Blog

Good news with an asterisk

Some news has a silver lining if you squint hard enough. March's jobs report was better than expected, but the real story is a little more complicated than the headline suggests.

According to Realtor.com’s Jake Krimmel, the Bureau of Labor Statistics reported 178,000 nonfarm payrolls added in March, with unemployment ticking down to 4.3%. On the surface, that sounds good. But February was quietly revised to a net loss of 133,000 jobs, making last month even worse than we thought. Strip away the noise and the 3-month rolling average settles in at just +68,000 — not exactly booming.

Still, the Fed can exhale a little. The stagflation scenario that had been building momentum is looking slightly less scary. Wage growth came in soft at 3.5% year over year, which doesn't do much for your grocery bill, but it does give the Fed room to stay focused on inflation without rushing to cut rates. Translation: don't expect any dramatic moves from the Fed anytime soon. They'll wait and watch.

For housing, March's survey data was largely collected before the heaviest trade war turbulence hit, so some caution is still warranted. The spring market has weathered a rough patch — mortgage rates have climbed for 5 straight weeks, creating a real headwind. But pending sales and new listings are still showing year-over-year gains, which means the market hasn't rolled over.

One bright spot Krimmel flags: construction added 26,000 jobs in March, a potential early signal that housing supply could keep moving in the right direction as the season heats up.

The fundamental challenges — affordability, uncertainty — haven't gone anywhere. But given the volatility of the past month, as Krimmel puts it, "we'll take this small win."

Realtor, TBWS

How Rates Move:

Conventional and Government (FHA and VA) lenders set their rates based on the pricing of Mortgage-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 getting some support today. The MBS market improved by +54 bps last week. This was enough to decrease mortgage rates or fees. The market experienced high volatility last week.

This Week's Rate Forecast: Neutral

These are the three things that can have the greatest impact on rates this week. 1) Geopolitical, 2) Inflation and 3) Services.

1) Geopolitical: This category will continue to dominate long bond trades. On the radar is a possible truce, higher escalation, the Straight of Hormuz, oil prices, etc.

2) Inflation: We get a lot of inflation data this week with PCE and CPI. PCE will get more weight as the Fed's key measure of inflation, Core PCE will get on Thursday.

3) Services: The ISM Non Manufacturing PMI (services) kicks off our week. This represents 2/3 of our economic engine. ISM services was reported at 54 versus expectations of 55 while Prices paid rose from 63 to 70.7.

Treasury Auction: We have a big week for longer term Treasuries.

04/07 3 year note.

04/08 10 year note.

04/09 30 year bond.

This Week's Potential Volatility: High

This morning markets continue to see some support on geopolitical concerns. Volatility has started at moderate levels but could become high at any time this week.

Bottom Line:

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 30 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.

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