Rates – the Fed drops their Fed Funds rate by 0.5% and Mortgage Rates go up? We saw the long-anticipated Fed Funds rate cut on the 18th during their September meeting. The Fed foreshadowed this drop and the market was well prepared for it. There is a relationship between the Fed Funds rate and Mortgage rates, but the chart above shows the two don’t dance in lockstep. The Fed lever is the short-term overnight lending rate banks lend each other money at, and it has a direct impact on HELOC rates, credit card rates, commercial loan rates, and adjustable-rate mortgages. Longer term mortgage rates are more impacted by inflation, geopolitical instability, and quantitative tightening/easing. Mortgage rates are currently responding negatively to positive economic reports.
Mortgage Rates bounced up over the previous week in response to a strong Job’s report and the Fed Chair Jerome Powell’s optimistic tone about the economy and labor markets. Rates are down approximately 0.5% from this time last year.
Jobs – the BLS released their September Job’s report which reported 254,000 job creations as well as revising the September and July reports higher as well adding a total of 72,000 jobs. The Leisure/Hospitality sector gained 78,000 jobs, Healthcare added 45,000, and Government hired 31,000. Average weekly earnings were flat month over month and year over year they are up 3.4%, a slight moderation from the previous report of 3.5% increase. The headline unemployment figure fell from 4.2% to 4.1% and the U-6 or all-in unemployment rate declined from 7.9% to 7.7%
Rents – Apartmentlist released their monthly rent report which showed that new rents declined 0.5% in September and are down 0.7% year over year. It is common to see rents dip this time of year. Hopefully this will filter into inflation reports and help with pressure on Mortgaged Backed Securities.
Home Values – CoreLogic reported that home prices fell 0.1% in August, showing that appreciation games have moderated but remain strong. Year over year, values are up 3.9% which is a moderation from the previous month’s report of 4.3% annual gain. CoreLogic forecasts an annual gain of 2.3% over the next 12 months and historically they are very conservative in their predictions.
Manufacturing – the ISM manufacturing Index remains in contraction at 47.2. The employment component fell from 46 to 43.9.
Mortgage Applications – to purchase homes increased 1% last week and are up 9% year over year. Refinances fell 3% week over week but are up 186% from this time last year. Refinances are making up approximately 55% of all applications.