Is there good news at last for the mortgage realm?
It’s fair to say that the mortgage market has been searching for silver linings amid what has been a cloudy – if not stormy – couple of years for the sector. So now, is it possible that two rays of sunlight have appeared in the same week?
Just days after the US Federal Reserve gave its clearest indication yet that a rate cut is coming in September, the latest US jobs report appears to indicate a potential turnaround for the housing market may be imminent.
What does the US jobs report show?
The US Bureau of Labor Statistics issued its report on employment conditions during July and noted a definitive slowdown. In fact, the US unemployment rate reached its highest level for three years.
That may not sound like good news on the surface – but the fast deterioration should indicate that the Federal Reserve is solidly on that path to a September rate cut.
In fact, nonfarm payrolls climbed by 114,000 after downward revisions during the previous two months. Meanwhile, average hourly earnings also came in lower than expected. It means the unemployment rate has climbed for a fourth month – now standing at 4.3%.
What does this mean for the mortgage market?
Disappointing data should prompt concerns of a downshift in the economy – and that may prompt Fed officials into action. It could be perceived that their actions are cooling the labor market instead of reverting it back to its pre-pandemic trend.
Reacting to the figures, MBA SVP and chief economist Mike Fratantoni noted that more people are struggling in the jobs market and that could be a catalyst for change.
“The Federal Reserve kept the federal funds target unchanged at its July meeting but hinted at a cut in September,” he said. “The weakness in this report including the slower rate of wage growth and the higher unemployment rate certainly support such a cut, but the next inflation report needs to confirm that price growth is also slowing.
“The market is moving ahead of the Fed, bringing down longer-term rates including those for mortgages, which should lead to both more home purchases and a pickup in refinance activity.”
