CHM Blog

Job market's health check gives housing market a headache

Good news for some doesn’t necessarily spell good news for others in the real estate industry. While we can celebrate a healthy, promising jobs report even when it’s not as robust as the month before, it can have the effect of backfiring into the faces of borrowers waiting for interest rates to come down. Why? Because the Feds see no need for a reduction to stimulate an economy that appears to be on an acceptable trajectory.

RealEstateNews’ Dave Gallagher reports that while roughly 143,000 jobs were created in January, monthly wage growth came in stronger than forecast and the unemployment rate ticked down. Translation? No reason for short-term rate cutting by the Feds accompanied by the very cautious approach it has taken over the past few months.

"The Fed has emphasized the need for either 'real' inflation progress or 'some' labor market weakness before delivering additional rate cuts, and the January jobs report provided neither," said Sam Williamson, senior economist at First American, adding that rates cuts would likely remain "off the table until May/June at the earliest."

Gallagher says that while not directly tied to mortgage rates, the continued pause in short-term interest rate cuts should keep the 30-year mortgage rate pretty much unchanged for the coming weeks. The question becomes whether pent-up demand can help determine whether homebuyers will jump into the market even at current rates.

"With more jobs being added in relatively high-wage sectors, and overall earnings on the rise, prospective home buyers will feel more confident heading into the spring housing market," said Lisa Sturtevant, chief economist at Bright MLS. Her caveat, however, is that elevated rates will still be challenging from an affordability perspective.

Inventory is building, however. Gallagher reports that early 2025 housing data indicates there will be more choices this spring compared to recent years. Citing Realtor.com’s latest report he says, “Newly listed homes in January are up 10.8% compared to a year ago while homes actively for sale are up 24.6% year-over-year.

That same report also found that homes are spending 73 days on the market on average, making this January the slowest since 2020, but also keeping inventory levels steadily increasing as we head into spring.

"While rates remain elevated, it is possible that we might be seeing that chiseling effect starting as sellers may grow tired of waiting for significant changes in rates," according to the report, authored by economists Danielle Hale and Sabrina Speianu.

RealEstateNews, 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 support today. The MBS market improved by +4 bps last week. This was not enough to decrease mortgage rates or fees. The market experienced high volatility last week.

This Week's Rate Forecast: Neutral

Three Things: These are the three areas that have the greatest ability to impact rates this week. 1) Inflation, 2) The Fed and 3) Retail Sales.

1) Inflation: We will get several key inflation related data releases this week with CPI, PPI and Import Prices with the most weight being given to Core CPI on Tuesday.

2) The Fed: We will hear from Fed Chair Powell twice this week as he gives his semi-annual testimony to the House and Senate. We also have a packed week of Fed speakers:

02/11 Hammack, Williams, Powell

02/12 Bostic, Bowman, Powell

3) Retail Sales: We will get January Retail Sales on Friday and is expected to contract by -0.1% on a MOM basis for the headline number.

Treasury Auction: Here is this week's Treasury auction schedule.

02/11 3 year note

02/12 10 year note

02/13 30 year bond

This Week's Potential Volatility: High

This morning markets saw some support. Volatility has started high with lots more to come with the pending inflation data.

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.

MLO of record MLO.100007700 / NMLS#233568 / CHM NMLS#127716.