November jobs report likely to give Fed go-ahead to raise interest rates

Forecast calls for 200,000-plus increase, continued wage gains

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An improved labor market is giving skilled employees more leverage to seek higher pay.

WASHINGTON (MarketWatch) — The Federal Reserve appears hell bent on raising interest rates for the first time in a decade and only a lousy U.S. jobs report could put a freeze on its plans.
Don’t bet on it, though. With job openings near a record peak and hiring at an 11-month high, employment gains in November will likely be good enough to allow the Fed to act before year end.
Economists polled by MarketWatch project a 205,000 increase in newly hired workers, following a gain of 271,000 in October. That month’s tally, the biggest of 2015, eased worries after hiring briefly slowed at the end of the summer.

The unemployment rate, meanwhile, is forecast to hold steady at 5%. Don’t be surprised if it dips below that psychological barrier to 4.9%, but don’t pay it much heed, either.
“Whether it’s 5% or 4.9% doesn’t tell us anything more,” said Richard Moody, chief economist at Regions Financial. “ It just tells us we are paring down slack in the labor market.”
The government will issue the much-anticipated November employment report on Friday morning.
What could cause the central bank to waffle on rates again? Only a shockingly poor report, say fewer than 100,000 new jobs. Even then Fed VIPs would probably have to see warning signs in other surveys of the U.S. economy.
Evidence of a softening economy is hard to find.
Sure, energy producers and manufacturers are struggling in the face of cheap oil and a strong dollar. Yet the huge U.S. service sector — retailers, restaurants, banks, hospitals and the like — is spitting out plenty of new jobs. The construction industry continues to expand at a moderate pace. And even governments are spending a bit more after years of ultra-tight budgets.
The steady improvement in the U.S. economy and the well-being of consumers is showing up in paychecks. Average hourly earnings rose sharply in October to push the increase over the past 12 months to a six-year high of 2.5%. Overall incomes climbed 0.4% last month, the latest in a string of solid gains.
The rise in wages matches reports of scattered labor shortages and increasing pressure on companies to boost pay.
That’s not to say wage growth will accelerate quickly to the annual 3% to 3.5% levels typical at the height of a recovery. Companies have found a variety of ways to tame labor costs, for one thing, and they are slower to hire than they are to post job openings, a sign they will only add to payrolls if they find a great fit.
Still, the Fed is likely to view consistent wage growth, even in the 2.5% range, as a call to arms. Steady income gains are the fuel for strong consumer spending, the engine of the U.S. economy.
Another cue for the Fed will come this week from a report on the U.S. service sector compiled by the Institute for Supply Management. The ISM’s non-manufacturing index has been hovering near a 10-year high since midsummer and economists predict a similarly strong reading in November.
The strength shown by service-oriented companies has more than offset weakness among American manufacturers, a divide that shows little sign of closing.
”You are going to see continue to see those industries pulling in separate directions,” said Gregory Daco, head of U.S. macroeconomics at Oxford Economics.
No matter. Manufacturing is important to the U.S., but not nearly as influential as it was a few decades ago. The economy has enough momentum to keep the Fed on course to raise rates for the first time since 2006, even if the nation’s growth is still fairly slow by historical standards.
“The plow-horse economy continues to move forward, just not by leaps and bounds,” said chief economist Brian Wesbury of First Trust.

30-year mortgage rate dips slightly

The Associated Press 10:56 a.m. EST November 20, 2015

WASHINGTON - Average long-term U.S. mortgage rates edged slightly lower this week after two straight weeks of sharp increases. Expectations persist that the Federal Reserve may soon raise its key short-term interest rate.
Mortgage giant Freddie Mac said Thursday the average rate on a 30-year fixed-rate mortgage slipped to 3.97 percent from 3.98 percent a week earlier. The key 30-year rate was close to its level of a year ago, 3.99 percent.
The rate on 15-year fixed-rate mortgages declined to 3.18 percent from 3.20 percent.
While it kept the key rate at a record low near zero, the Fed recently signaled the possibility that a rate hike could come at its next meeting in December. Fed officials believed last month that the economic conditions needed to trigger the first interest rate hike in nearly a decade could “well be met” by that time, minutes of their October discussions released Wednesday showed.
The yield on the 10-year Treasury bond, which mortgage rates have been tracking, dropped to 2.27 percent Wednesday from 2.34 percent a week earlier. The decline followed recent weeks of soaring yields on U.S. government bonds, which move in the opposite direction of the bonds’ prices. The yield was at 2.24 percent Thursday morning.
To calculate average mortgage rates, Freddie Mac surveys lenders across the country at the beginning of each week. The average doesn’t include extra fees, known as points, which most borrowers must pay to get the lowest rates. One point equals 1 percent of the loan amount.
The average fee for a 30-year mortgage was unchanged from last week at 0.6 point. The fee for a 15-year loan declined to 0.5 point from 0.6 point.
The average rate on five-year adjustable-rate mortgages dipped to 2.98 percent from 3.03 percent; the fee rose to 0.5 point from 0.4 point. The average rate on one-year ARMs edged down to 2.64 percent from 2.65 percent; the fee increased to 0.3 point from 0.2 point.

U.S. housing gains look fat on global scale

Nov. 15, 2015

Updated 12:00 p.m.

REGISTER FILE PHOTO

The swift rebound of U.S. home prices looks a bit rich when you place the gain on the world stage.
More than a few folks are squeamish about our housing recovery’s durability, with nerves on high alert after the wild gyrations in real estate before, during and after the Great Recession.
To get some context, I filled my trusty spreadsheet with a collection of global home-price indexes from U.K.-based real estate tracker Global Property Guide that were adjusted for local inflation. I learned that the U.S. home price upswing looks fairly strong – and that is both good and a tad worrisome.
U.S. housing was up 17 percent after inflation, the eighth best in my global ranking of 33 nations. Two-thirds of this group – nations with data published for the past four years ending in 2015’s first half – registered price gains over that period, and the median inflation-adjusted increase was 9.2 percent.
As we often observe when discussing Orange County housing trends, real estate can be a very local business. That’s also true when you look across the world, where you can see global economic patterns influencing home- price movements.
Take the rising commodity prices that fueled many top global housing markets. That upswing has now ended, and soft commodity markets have become a cause of concern for entire national economies, no less their housing markets.
Look at the world’s top housing market over the past four years – the United Arab Emirates, which was up 56 percent. Oil wealth drives that economy, and oil’s recent misfortunes have hurt: UAE home prices dropped 12 percent in past 12 months.
Or ponder the economy of Brazil, which has gyrated up and down with suddenly weakened commodity prices. Its 24 percent, four-year home-price gain – sixth best – still includes a 3.5 percent drop in the past 12 months.
China’s powerful economy swings national economies, and housing, too.
The neighboring city-state of Hong Kong ranked second in global home-price gains, up 38 percent in four years. It has benefited from China’s boom, so far.
Taiwan has somewhat similar economic attributes to Hong Kong. Its home prices rose 28 percent since 2011 but fell 2 percent in the past 12 months.
China’s home-price gains, by the way, look pretty middle-of-the pack – up 9 percent in four years – as its economy struggles with an era of fast, but not spectacular, growth.
Not every regional economic engine drives nearby housing markets, however.
Estonia, ranked third, is perhaps the most pro-business economy in the Russian sphere. Its housing prices have enjoyed a boost – up 37 percent since 2011 – by somehow avoiding Russia’s economic woes, ranging from mismanagement to energy-price fluctuations.
Russian home prices are down 24 percent in four years. Only two nations fared worse by my count – the long-running economic disasters of Greece (home prices off 31 percent since 2011) and Cyprus (off 25 percent).
So what does this mixed bag of global results say about U.S. housing?
You could argue that U.S. housing’s outperformance is largely due to the relative strength of the national economy. Domestically, there’s plenty of disappointment in the slow and modest U.S. recovery. Still, our business expansion is one of the globe’s best bursts of growth in recent years.
It’s worth noting that the recent four-year, 17 percent rebound for U.S. home prices was preceded by a 9 percent drop in the 12 months through June 2011, as the recession ended.
And the future of U.S. housing is not risk-free.
Overall economic strength is critical. And does the slow-but-steady growth we’ve gotten used to provide enough muscle to keep the market aloft?
The confidence of American house hunters will be tested in coming months by expected hikes in mortgage rates. Also, how will the high level of economic-anxiety chatter during the 2016 presidential campaign affect homebuyers and sellers alike?
Will rising skittishness mix well with pricey American housing? Two global home-value measures by the International Monetary Fund show U.S. homes priced well above average in relation to national income and compared with typical rents.
Don’t forget that the entire globe can be wrong about housing, too. Four years ago, 19 of the 33 national markets I reviewed had falling home prices – and four of those losses were double-digit dips (Ireland, Greece, Portugal and the Netherlands).
So far in 2015, the American love affair with housing has plenty of company around the globe. How long the infatuation will last is the grand question.

Mortgage Rate Panic: Time to Lock in a Low-Interest Loan?

By Brian O'Connell

| 11/10/15 - 08:35 AM EST

A highly positive October jobs report, with 271,000 new jobs created, shows the U.S. economy picking up speed, and that can mean good or bad news for the residential real estate market, depending on whether you're a seller or a buyer.


Realtor.com estimates the strong employment report will boost U.S. home sales activity and will also hike U.S. mortgage rates above 4%.

"We should see continuing strong demand for housing in the months ahead if today's strong jobs report reflects a true return back to a strong growth trend we've seen over the last few years," says Jonathan Smoke, chief economist at Realtor.com. "The healthy strong employment results for the past two years created an uptick in household formation, which has driven increased demand for home purchases and rentals."

"The jobs report will influence the long-term bond market, so mortgage rates will increase in response," he adds. "The average 30-year conforming mortgage rate was 3.99% yesterday, having increased nine basis points in one week due to the consensus view of a strong, but not this strong, employment report. The 30-year conforming rate will likely top 4% as a result of this news."

If the Federal Reserve was waiting for proof of an economic rebound, some experts say the latest jobs number fits the bill.

Robert R. Johnson, CEO of The American College of Financial Services, says the Fed has been looking for strong evidence that the economy is recovering prior to increasing the fed funds target rate, and the jobs number should "push up" the date when the Federal Reserve raises interest rates, likely in December.

"This development is not good news for people looking to take out mortgage debt in the near future," Johnson says. "Once the Fed starts raising rates, interest rates throughout the economy, including mortgage rates, auto loan rates and other loan rates will trend upward. I believe that anyone thinking about refinancing a mortgage or buying a home and taking out an initial mortgage should not wait, as rates will rise."

Like Smoke, Johnson also believes the jobs number will boost home sales. "Many potential homebuyers may see an opportunity to buy a home and take advantage of current low mortgage rates," he adds.

There is some history on the link between a stronger jobs climate and higher mortgage rates. "In 2004, when the Fed increased interest rates for the first time in four years, it caused the booming real estate market to get more manic," says John Wake, the so-called geek-in-chief at Real Estate Decoded and a realtor with HomeSmart in Scottsdale, Ariz. "Many people expected the increase to be the first of many so they became even were more desperate to buy a house right away."

Wake says they were right, as the Federal Funds Rate increased from 1% in the summer of 2004 to 5% in the summer of 2006. "Sure, in the long run higher rates hurt the demand for homes, but in the short and medium run they can stoke demand," he says. "It all depends on what people think an interest rate increase today means for interest rates tomorrow."

Right now, some real estate insiders say higher mortgage rates are on the way, with the booming October jobs number insuring that day comes sooner than people might think.

You can contact Robert Darvish of Platinum Lending Solutions, for any mortgage and refinance needs

Mortgage rates surge in anticipation of Federal Reserve rate hike

 

(Andrew Harrer/Bloomberg)

Mortgage rates surged this week, according to the latest data released Thursday by Freddie Mac.
Home loan rates began moving higher after the Federal Reserve signaled last week that a December interest rate hike was a possibility. What the Fed does with interest rates doesn’t have a direct relationship to mortgage rates since they are more closely tied to long-term U.S. Treasury yields. Bonds are more likely to move ahead of a Fed action than in response to it.
Still, a lot can happen before the Dec. 16 Fed meeting that could affect home loan rates. Friday’s monthly jobs report could not only strengthen or lessen the chances of a Fed rate hike, it also could have an impact on mortgage rates.

[Fed less worried about risks from China’s slowdown]

The 30-year fixed-rate average jumped to 3.87 percent with an average 0.6 point. (Points are fees paid to a lender equal to 1 percent of the loan amount.) The 11-basis point rise — a basis point is 0.01 percentage point – was the biggest one-week spike since June. The 30-year fixed rate was 3.76 percent a week ago and 4.02 percent a year ago.
The 15-year fixed-rate average climbed to 3.09 percent with an average 0.6 point, rising above the 3 percent mark for the first time in three weeks. It was 2.98 percent a week ago and 3.21 percent a year ago.
[New rules for lenders seem to be raising costs for mortgage consumers]
Hybrid adjustable rate mortgages also rose. The five-year ARM average grew to 2.96 percent with an average 0.4 point. It was 2.89 percent a year ago and 2.97 percent a year ago.
The one-year ARM average increased to 2.62 percent with an average 0.2 point. It was 2.54 percent a week ago.
“Treasury yields climbed nearly 20 basis points over the past week, capturing the market movement following last week’s [Federal Open Market Committee] meeting,” Sean Becketti, Freddie Mac chief economist, said in a statement.
“Recent commentary suggests interest rates may rise in the near future.  Janet Yellen referred to a December rate hike as a ‘live possibility’ if incoming information supports it. The October jobs report to be released this Friday will be one crucial factor influencing the FOMC’s decision.”
[What the new mortgage closing process means for consumers]
Meanwhile, mortgage applications were flat this week, according to the latest data from the Mortgage Bankers Association.
The market composite index — a measure of total loan application volume – slipped 0.8 percent from the previous week. The refinance index dropped 1 percent, while the purchase index decreased 1 percent.
The refinance share of mortgage activity accounted for 59.7 percent of all applications.