CHM Blog

Mixed bag: job openings are plentiful, while unemployment figures drop. But what about housing?

That old saying, “It ain’t over ’til it’s over” has never been more true than when applied to this pandemic. Realtor’s Chief Economist Danielle Hale reports, “As signs of a turn in the Delta wave of the COVID pandemic emerged, the administration announced new vaccine rules for Federal workers and employees at larger companies. Estimates suggest that these rules will likely apply to more than half of U.S. employees.”

She goes on to say that this announcement followed data showing job openings in July hit a new high for the 5th month in a row. “With plenty of companies looking to hire, the rate at which workers are leaving jobs voluntarily remains high–this is the 8th month in the last 10 that the quits rate has equaled or exceeded pre-pandemic highs. In other words, massive turnover in the labor market continues.”

Weekly jobless claims offered a glimpse of hope, however, dropping to their lowest level since mid-March 2020 and registering just slightly above the 300,000 level that might be considered relatively normal. It could be that those re-entering the workforce are becoming more selective regarding pay and benefits.

As for housing data, Hale reports that mortgage rates rose just one basis point this past week and have trended flat for roughly the last month. “Steady rates help homebuyers better predict what their monthly payment will be for any given purchase price and still-low rates create opportunities for existing owners to refinance.”

In the meantime, homes continue to sell quickly and for higher prices as the number of homes for sale remains limited. "Of note, the number of homeowners listing a home for sale this week was 8 percent lower than last year–the first drop in 9 weeks though only the 4th decline in the last 6 months. We’ve seen temporary dips before and this could be similar, but since finding a home to buy remains a key buyer hurdle, we’re watching this metric closely,” she says.

Why is finding a home such a challenge? Hale and her colleagues looked at how construction has tracked against household growth and admitted their findings were revealing. “Single-family home construction has lagged household formation by more than 5 million over the last decade. While recently slower household formation and strong construction have started to close the gap, we’d need completions to double and household formation to stay near this recent slower pace to close the gap in 5 to 6 years.”

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 trending unchanged this morning.  Last week the MBS market was essentially unchanged.  The MBS market was fairly calm 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) Retail Sales, and 3) Geopolitical

1) Inflation: Last week's PPI of 8.3% was very scary, will that translate to a big spike in Consumer Prices? The headline CPI is projected to hit around 5.3% which is more than double the Fed's target rate of 2.0%.

2) Retail Sales: Retail Sales are expected to decline again, this time by -0.8%. Of course a big chunk of that is Autos. Ex-Autos, Retail Sales are expected to decline by -0.2%.

3) Geopolitical: This is really a grab-bag full of different things. We have the continued surge of the Delta Variant, along with (at least) 2 new variants that are making headlines, after last week's Treasury auctions, we are fast approaching our debt ceiling while the $3.5T infrastructure bill continues to concern markets with the newly proposed higher corporate tax rate of 26.5%.

This Week's Potential Volatility: Neutral

This morning we're expecting to stay within our narrow trading channel. Volatility should remain moderate pending developments with Covid or Congress.

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 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.