Monday, February 7, 2011

Good and Bad News Bears Down on Home Loan Rates

"Bad news goes about in clogs, good news in stockinged feet." Welsh Proverb. And there was certainly both good and bad news in last week's Jobs Report. Here's what we saw...and what this means for home loan rates.

The Labor Department reported that just 36,000 jobs were created in January, with only 50,000 jobs created in the Private sector, much lower than the numbers anticipated. However, there were upward revisions to both November and December, which added another 40,000 jobs than previously reported.


But that's not the only bit of good news in the report. The Unemployment Rate fell to 9%, down from 9.4% last month, rather than increasing as had been expected. In addition, the U6 or "real" rate of unemployment, which includes discouraged workers and those who have accepted part-time employment for economic reasons, fell to 16.1%, from the previous month of 16.7%...and reflects the lowest level since April 2009!


So what does all of this mean when it comes to home loan rates?

It's important to remember two things:

First, the Fed's goals for their current Quantitative Easing policy (dubbed QE2) where $600 Billion is being injected into the economy are to (1) boost Stock prices, (2) create inflation, and (3) lower the unemployment rate.

Second, while these goals are designed to stimulate our economy and keep our recovery moving forward, they are also unfriendly to Bonds and home loan rates.

In recent weeks, we've seen evidence of all three goals: Stocks been improving, the unemployment rate has declined, and we've seen an increase in global unrest of late, not just in Egypt, but in other parts of the world as well... and much of this centers around runaway inflation in commodities and food.

This means that the old trading saying, "Don't Fight the Fed" is still ringing true. If the Fed wants to accomplish its three QE2 goals at the expense of Bonds and home loan rates, they probably will.

If you have been thinking about purchasing or refinancing a home, this is a great time to get started! Home loan rates are still very attractive, so call or email me if you want to talk about your situation.


Newsletter from Shane Atwell at Primary Mortgage

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