Mortgage News 09/08/2014

We had the worst jobs report in months and it iniitially caused a rally in the mortgage backed security markets, but then it sold off. Mortgage rates continue to be caught in a sideways trading range. Most of the choppiness in the mortgage rate market has been driven by the constant flux in geo-political events.

Now this jobs report and the Labor Force Participation Rate hovering at 40 year lows there are almost 100 million people in America either unemployed, underemployed, or just given up looking for work. If people are not working they cannot obtain a mortgage and the housing “recovery” will eventually stall.

Look out below if that happens. Here is some more commentary from our friend Neil Patel over at our lending partner NYCB:

The big news last week was Friday’s disappointing employment report. U.S. job growth slowed down sharply in August and more Americans gave up the hunt for work, giving a cautious Federal Reserve more reasons to wait a bit longer before raising interest rates. Nonfarm payrolls increased 142,000 last month, the smallest increase in eight months. Economists had expected payrolls to increase 225,000 in August. This comes in the midst of an economic climate where almost all other indicators are pointing toward a strong recovery and robust growth. Employment tends to lag other measures of economic health; when business starts picking up steam, employers typically wait to see if the level of demand is sustainable over time before hiring new workers. A silver lining to the employment report is that the unemployment rate did fall one-tenth of a percentage point to 6.1 percent.

Aside from the employment report, the strong economic reports continued last week. The Institute for Supply Management’s index last month rose to 59, the highest since March 2011, from July’s 57.1. The ISM Manufacturing Index monitors employment, production inventories, new orders and supplier deliveries. The bright growth picture was supported by a report from the Commerce Department that showed construction spending increased 1.8 percent in July to a 5-1/2-year high. It was the largest monthly gain since May 2012. Private construction advanced 1.4 percent to its highest level since November 2008. Additionally, new orders for U.S. factory goods posted a record gain in July and auto sales last month accelerated to their highest level in 8-1/2 years, offering further bullish signals for the economy.

U.S. stocks erased losses and rose on Friday, with benchmark indexes extending gains into a fifth week, as investors detoured around a surprisingly disappointing jobs report. The S&P 500 rose to a fresh all-time high, finishing up 0.2 percent at 2,007. The Dow Jones finished up 0.2 percent at 17,137, less than a point from its record close. The NASDAQ gained 0.1 percent finishing at 4,583.

Mortgage rates hovered at their lowest levels of the year for the third straight week last week, according to a survey published by Freddie Mac. The average 30-year fixed rate mortgage stood at 4.1 percent for the week ending last Wednesday. Mortgage rates have drifted down in recent weeks as bond yields on 10-year Treasury notes have fallen. Investors have bought government debt amid rising concerns over geopolitical instability. One of the bigger surprises of 2014 may be that mortgage rates might end the year lower than where they began, at around 4.5 percent, even as the Federal Reserve has gradually pared back its purchases of mortgage-backed securities. Outside of the U.S. Markets, this is always a fun time of year… as football is underway!

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