Net new jobs (2009-2011)Friday is a pivotal day for mortgage markets and conforming mortgage rates across Virginia. At 8:30 AM ET, the government will release its March Non-Farm Payrolls report.

More commonly known as “the jobs report”, the monthly Non-Farm Payrolls is a market-mover and home buyers would do well to pay attention. Depending on the report’s strength, mortgage rates could rise, or fall, by a measurable amount tomorrow morning.

It’s because so much of the today’s mortgage market is tied to the economy, and economic growth is dependant on job growth.

With more job growth, there’s more consumer spending and consumer spending accounts for the majority of the U.S. economy. Additionally, it generates more payroll taxes to local, state and federal governments. This, too, puts the broader economy on more solid footing.

Between 2008 and 2009, the economy shed 7 million jobs. It has since recovered 1.5 million of them. Friday, analysts expect to count another 190,000 jobs created. If the actual figure falls short, expect mortgage rates to ease.

Otherwise, look for rates to rise. Probably by a lot.

If you’re shopping for a mortgage right now, consider your personal risk tolerance. Once the BLS releases its data, it will be too late to lock in at today’s interest rates. If the idea of rising mortgage rates makes you nervous, execute your rate lock today instead.

On a 30-year fixed rate loan, each 1/8 percent increase to rates adds roughly $7 per $100,000 borrowed.

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Rent is risingHome sales data is easing so far in this calendar year. Home resales and new construction have dropped to multi-month lows and, in many cities, home supplies are rising. One housing sector that’s not slowing, however, is rentals.

The rental market is booming.

As reported by the Wall Street Journal, the average apartment vacancy rate is 6.6% nationwide, down from 8.0% last year. In addition, the number of occupied apartments rose by more during Q4 2010 than during any comparable period of the last 10 years.

It’s a major reason why rents are up 2.3%.

Some areas, however, fared worse than others. This study of rent increases as published on MSNBC, for example, lists the 10 U.S. cities in which rents increased the most last year. And they may not be the cities you’d expect.

In order:

  1. Greenville, SC (+11.2%; $669 average monthly rent)
  2. Chattanooga, TN (+10.4%; $726 average monthly rent)
  3. Savannah, GA (+8.4%; $866 average monthly rent)
  4. Portland, OR (+8.1%; $875 average monthly rent)
  5. San Jose, CA (+8.0%; $1,716 average monthly rent)
  6. Nashville, TN (+8.0%; $786 average monthly rent)
  7. Tacoma, WA (+8.0%; $900 average monthly rent)
  8. Denver, CO (+7.5%; $873 average monthly rent)
  9. Washington, DC (+7.4%; $1,473 average monthly rent)
  10. Raleigh, NC (+7.4%; $785 average monthly rent)

Big cities New York (#18), San Francisco (#19), and Chicago (#24) showed modest gains, by comparison.

Rents are also up in the Richmond area where apartments in Short Pump are renting for close to $2,000 per month.  Not everyone across Virginia wants to be a homeowner, but renters are facing a squeeze. With mortgage rates historically low and home values slow to recover, in many cities, the cost-benefit analysis is shifting toward buying.

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    In an announcement this morning the US Government said to will begin selling off the mortgage backed securities it has purchased starting in 2008 to keep rates low.   The sale of some $142 billion in securities will begin this month.  The price of mortgage backed securities fell on this news meaning rates will higher this morning.

     

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    Existing and new home sales are the main focus but unlikely to show any change in the trend of weak sales that has been the situation for two years. Japan’s problems with their nuclear reactors remain but the latest reports imply some progress on a couple of reactors while  another reactor is weakening. In Libya the UN forces clobbered Libyan positions with heavy use of missiles but Qaddafi remains defiant. Treasuries and mortgage rates are likely to stay within a tight range as long as there is no change in the situations in Japan and in the Mideast.

     

    Date Time (ET) Statistic For Market Expects Prior
    03/21/11 10:00:00 AM Existing Home Sales Feb 5.05M 5.36M
    03/22/11 10:00:00 AM FHFA Housing Price Index Jan NA -0.30%
    03/23/11 10:00:00 AM New Home Sales Feb 287K 284K
    03/24/11 08:30:00 AM Initial Claims 03/19/11 384K 385K
    03/24/11 08:30:00 AM Durable Orders Feb 1.10% 3.20%
    03/24/11 08:30:00 AM Durable Orders ex Transportation Feb 1.80% -3.00%
    03/25/11 08:30:00 AM GDP – Third Estimate Q4 2.90% 2.80%
    03/25/11 08:30:00 AM GDP Deflator – Third Estimate Q4 0.40% 0.40%
    03/25/11 09:55:00 AM Michigan Sentiment – Final Mar 68 68.2

     

    The stock market, after the strong selling on panic moves is likely to rebound and recover most of the losses on the indexes. Gold and oil prices are likely to increase after a volatile last week. Through the week as long as investors return to equity markets the bond and mortgage markets will see prices fall and yields increase. The week is very likely to be volatile from day to day with unfolding news out of Japan and the Mideast. We do not expect interest rates to increase a lot, but we also don’t see any major decline this week. Still suggest using the recent rate decline to get deals done and not get enthused about lower rates. Interest rates are not likely to fall much while the wider perspective is still bearish as the US economy improves and the ECB likely to raise rates.

     

    All this volatility means Richmond area mortgage rate shoppers should consider locking this week.  Call me at 804-433-1510 to discuss locking a mortgage rate

     

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    Unemployment Rate 2008-2011Mortgage rates could move higher beginning tomorrow morning. The Bureau of Labor Statistics releases its February jobs report at 8:30 AM ET.

    Home buyers and rate shoppers in Henrico would be wise to take note. The jobs report is almost always a market-mover.

    Consider last month.

    Although net job creation fell well-short of expectations in January — just 36,000 jobs were added — the national Unemployment Rate dropped to 9.0%, its lowest level in 2 years. The marked improvement surprised economists and sparked inflationary concerns within the investor community.

    This, in turn, caused mortgage rates to rise.

    In the days immediately following the jobs report’s release, conforming rates across Virginia jumped 0.375 percent. That’s equivalent to a mortgage payment increase of $22 per month per $100,000 borrowed.

    A similar spike could occur tomorrow.

    Wall Street scrutinizes job growth because with more working Americans, there’s more consumer spending, and consumer spending accounts for 70% of the U.S. economy. A blow-out number tomorrow would change expectations for the future, and lead rates higher again.

    The economy shed 7 million jobs between 2008 and 2009 and has barely made 1 million of them back. Tomorrow, analysts expect to see 183,000 jobs created. If the actual reading is lower-than-expected, mortgage rates should fall and home affordability will improve.

    Anything else and mortgage rates should rise. Likely by a lot.

    Therefore, if you’re shopping for a mortgage right now, consider your risk tolerance. Once markets open tomorrow, you can’t get today’s rates.

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