The Jobs Report Surprises Again

20140309-080351.jpgMarch 10, 2015

Daylight Savings Time is the official start of the spring real estate selling season. With the weather we have had during February, we are sure this early rite of spring caught many by surprise. But in our experience we know that things can heat up quickly. The markets will be monitoring how busy traffic is at open houses, builder sites and more when people are able to go out and drive again in certain areas of the country.

Of course, the markets are also monitoring the jobs data closely as well. The jobs data has been so strong lately that analysts now seem to be expecting around 250,000 jobs to be added each month. In February, the numbers did not disappoint these prognosticators, as the economy added just under 300,000 jobs for the month. The unemployment rate slipped to 5.5% from 5.7%, which was also better news than forecasted.

There were some aspects of the report which were considered not as strong. For one, the rise in hourly earnings was disappointing. This is good news with a meeting of the Federal Reserve Board coming up next week. The Fed will be considering the issue of raising rates and the lack of wage inflation takes some pressure off. Of course, this is bad news for workers. Also on the weaker side was the drop in the labor force participation rate. Some are theorizing that the bad weather in February may have discouraged some from coming back into the labor force. Bottom line, the economy continues to improve. Now about that weather…

Weekly Interest Rates Overview

The Markets.  Fixed rates fell for the first time in nearly a month in the past week. These numbers were released one day before the jobs report came out and pushed rates higher. Freddie Mac announced that for the week ending March 5, 30-year fixed rates decreased to 3.75% from 3.80% the week before. The average for 15-year loans fell to 3.03%. Adjustables were mixed, with the average for one-year adjustables unchanged at 2.44% and five-year adjustables decreasing to 2.96%. A year ago, 30-year fixed rates were at 4.28%, which continues to be approximately 0.50% higher than today’s levels. Attributed to Len Kiefer, deputy chief economist, Freddie Mac — “Rates on home loans fell across the board, with the 30-year fixed rate reading 3.75 percent this week. Real GDP growth for the fourth quarter was revised down to 2.2 percent. Consumer prices fell more than expected in January, tumbling 0.7 percent.”  Rates indicated do not include fees and points and are provided for evidence of trends only. They should not be used for comparison purposes.  

Current Indices For Adjustable Rate Mortgages
Updated March 6, 2015

  Daily Value Monthly Value
  March 5 February
6-month Treasury Security  0.08%  0.07%
1-year Treasury Security  0.25%  0.22%
3-year Treasury Security  1.05%  0.99%
5-year Treasury Security  1.57%  1.47%
10-year Treasury Security  2.11%  1.98%
12-month LIBOR    0.660% (Feb)
12-month MTA    0.136% (Feb)
11th District Cost of Funds    0.698% (Jan)
Prime Rate    3.25%

Real Estate NewsAmerica’s fragile housing recovery is getting a boost from military buyers using VA loans as the U.S. draws down troops after more than a decade of combat in Iraq and Afghanistan. About 4.7 million full-time troops and reservists served during the wars and many are now able to take advantage of one of the easiest and cheapest paths to homeownership. The program’s share of new home loans, at a 20-year high, is also increasing as other types of government-backed loans have grown more costly. “The reduction in uncertainty for the returning vets allows them the freedom to spend more, including buying housing,” said Sam Khater, deputy chief economist at CoreLogic Inc., an Irvine, California-based property-data firm. “VA buyers are coming into the market in higher and higher proportions and tend to be first-time buyers, one of the missing drivers in the recovery in housing demand.” VA loans accounted for approximately 8.0 percent of home loans made in 2014, up from 6.9 percent in 2013 and less than 2 percent a decade ago, according to preliminary industry statistics. There are more than 2 million VA loans, with balances in excess of $370 billion, after six years of increasing volumes. Unlike the Federal Housing Administration (FHA), which allows down payments as little as 3.5 percent, the VA doesn’t charge monthly insurance premiums, and the relatively moderate upfront cost can be rolled into loan balances. About 90 percent of VA loans don’t have down payments at all. Source: Bloomberg

Pending home sales in January surged to the highest level since August 2013 after a steep drop last month, according to the National Association of Realtors. All major regions, except for the Midwest, saw gains in activity in January thanks to improved buyer demand at the beginning of 2015. The Pending Home Sales Index, a forward-looking indicator based on contract signings, grew 1.7% to 104.2 in January, from an upwardly revised 102.5 in December, and is now 8.4% above January 2014 (96.1). This marks the fifth consecutive month of year-over-year gains with each month accelerating the previous month’s gain. Lawrence Yun, NAR chief economist, says that for the most part buyers in January were able to overcome tight supply to sign contracts at a pace that highlights the underlying demand that exists in today’s market. “Contract activity is convincingly up compared to a year ago despite comparable inventory levels,” he said. “The difference this year is the positive factors supporting stronger sales, such as slightly improving credit conditions, more jobs and slower price growth.” Yun also points to more favorable conditions for traditional buyers entering the market. All-cash sales and sales to investors are both down from a year ago, creating less competition and some relief for buyers who still face the challenge of limited homes available for sale. Source: The National Association of Realtors

Home owners are remodeling their homes at levels that haven’t been seen in decades. In fact, the home improvement business could reach record levels this year, according to a new report from the Joint Center for Housing Studies of Harvard University. What’s behind the increase? Potential trade-up home buyers are fixing up their existing homes for sale, federal and state subsidies are increasing the desire for energy-efficient upgrades, and landlords are sprucing up their properties to justify raising rents, the report notes. A strengthening job market is also helping to lead more home owners to take on home remodeling projects, following years of delaying projects. Spending on discretionary home improvement projects jumped by nearly $6 billion between 2011 and 2013 — the first rise since 2007, according to the report. The top remodeling projects continue to target the kitchen and adding a new bathroom, but baby boomers also are increasingly retrofitting their homes for better accessibility and with age-in-place features. Also, more home owners are tackling home projects centered on energy efficient upgrades, such as for windows and heating and cooling systems. Source: CNBC

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