Mortgage News

The BLS Jobs Report is a revisionist’s dream. January job estimates were originally 170,000, but the actual number came in at 143,000. However, revisions for November and December added 100,000 jobs, shifting the narrative.

Average hourly earnings rose 0.5% in January, triggering a strong reaction from the bond market— and not in a good way. Higher earnings mean more money to spend, which fuels inflation concerns.

But looking deeper, there’s a key detail being overlooked: average weekly hours worked declined from 34.3 to 34.1 in January.

What’s frustrating is that the headlines paint one picture, while the real story lies in the details— details the media and bond markets seem eager to ignore.

Rates have improved over the past few weeks and we think this BLS Blip is just a Blip and the bond market will adjust.

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The U.S. carries a significant amount of debt, and to finance it, the government issues Treasuries, which the bond market must absorb. This process can put upward pressure on interest rates.

However, since the Treasury is not increasing auction sizes, longer-term bonds—such as the 10-year Treasury—have rallied, leading to lower interest rates.

Despite a strong ADP Employment Report, the bond market remained steady.

Rates are beginning to decline again—though not yet at September levels, there’s always hope for further improvement.

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This morning, I wasn’t quite sure what to expect regarding the tariffs announced on Friday.

Typically, a “flight to safety” occurs, meaning investors move to the bond market, which usually drives mortgage rates lower. On the flip side, the stock market was almost certain to react negatively—and it did.

What was surprising, however, was that the bond market didn’t respond as I had anticipated. With stocks taking a significant hit across the board, the question remains—where is the money flowing?

The answer is the stock market rebounded while the bond market yawned.

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When seeking advice from someone, think about who it benefits.

It’s been an eventful week for the bond market, which has responded positively. Inflation remains persistent but stable at 2.6%, while Personal Consumption Expenditures (PCE) are in line with expectations.

Income increased by 0.4%, spending rose by 0.7%, and the savings rate declined from 4.1% to 3.8%.

In December, pending home sales dropped by 5.5%, influenced by mortgage rates that averaged above 7%. However, mortgage rates have steadily improved in recent weeks, and this trend is expected to continue.

Graph below, up is lower rates so we are headed in the right direction.

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A picture is worth a thousand words, and today, I’m keeping it simple. Here’s the takeaway: home sales are down, as interest rates stay stubbornly stubborn.

What does this mean for you?

For Sellers: With fewer homes on the market, your property has a better chance to stand out.

For Buyers: There’s less competition, giving you more options and negotiating power.

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Shelter is the largest single component within the inflation reports. Which makes sense because your house payment or rent payment is the biggest component of your monthly outlay.

Real Time data from Realtor.com and Zillow rental report we have a blended rent rise of 1.25%. CoreLogic’s Blended rate is 1.7%.

The issue is the Government data which affects the Consumer Price Index CPI is 4.6%. The Government is always three months behind the real-time numbers.

With shelter and potentially oil prices dropping we could see inflation close to 2.0%.

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The new administration plan to increase US supply of Oil are expected to cause oil prices to fall.

A significant driver of inflation is oil prices. Consider this: it impacts transportation—not just fueling your car but also delivering that Amazon package or taking a flight from Chicago to Palm Springs to escape the cold. It also affects the production of goods. In essence, oil influences almost everything. Even the electric vehicle in your garage depends on oil indirectly, as electricity must be generated from some source.

Another whew moment for the bond market was the lack of Tariffs on Canada and Mexico as Tariffs is seen as inflationary.

Bonds are currently trading at roughly 4.5%, give or take. The new administration aims to bring that down to 3.5%. It’s a delicate balancing act of tradeoffs. You can’t have your cake and eat it too, no matter how much you stomp your feet or hold your breath.

Mortgage rates improved today coming off of a nice rally last week. Get out there and start looking at homes and call us if you have any questions or need to get pre-qualified. http://www.YourApplicationOnline.com

We have contrasting views on inflation from Fed President Beth Hammack and Fed Governor Christopher Waller. Hammack considers inflation an ongoing concern, opposed the December rate cut, and even supports the possibility of a rate hike this year.

In contrast, Waller, who I heard yesterday on CNBC, sounded much more dovish. He expressed openness to rate cuts as early as March.

My concern with high interest rates isn’t that they weren’t necessary at some point, but that the solution is starting to feel worse than the problem. It’s the small business owners, not the big corporations, who are unable to expand due to these high rates.

And it’s everyday people—trying to make ends meet or hoping to buy a home—who are being squeezed out of the market.

Each dot on the graph below (the Fed Dot Plot) represents a Fed President’s forecast for the future Fed Funds Rate. The trend is heading downward—great news!

I’m on a bit of a rant today—got up way too early, a full two hours before sunrise, and have been stewing over this ever since. Thanks for coming to my TED Talk. Wishing you a great weekend!

When we look at the Manufacturing Index graph we can almost correlate interest rates inversely against the rise in manufacturing. Which would be good news.

Manufacturers are hedging and producing more than usual to compensate for potential Tariffs.

The challenge is uncertainty. Tariffs will create higher prices translating to higher inflation and higher mortgage rates, or not. That’s the problem.

Uncertainty and global economic and military tensions creates a flight to safety being Bonds.

The higher demand for bonds the higher the value and lower the yield i.e. lower interest rates.

Regardless, get out there and start looking for your first or next home. With less competition and sellers willingness to negotiate especially for closing costs, you might just find the right house at the right price.

The December Consumer Price Index (CPI) showed that overall inflation rose 0.4% for December 0.1% higher than expected.

Energy rose 2.6% which is 40% of the CPI increase. Food also increased by 0.3% higher than expected.

The Core rate, which strips out food and energy prices only increased 0.2%, lower than the 0.4% expected. Lodging is down, Air Fares are up due the above mentioned energy prices.

The Core is what triggered the Bond market to react in a Rate Positive direction. see below.

If you follow my post, this would be counter intuitive. Enjoy the Graph below. Remember, up is lower rates.