Jobs Report Brings "Upside Surprise" - Time to Get Off the Fence

The much anticipated Jobs Report arrived with an upside surprise, showing 54,000 jobs lost during August, quite a bit better than the consensus estimates of 120,000 jobs lost. While the number still shows jobs lost, let's remember that a big part of this decline was from the elimination of 114,000 temporary census worker positions. There was a lot of anticipation about the jobs created in the private sector - and this number also surprised to the upside with 67,000 job creations, far better than the 44,000 originally forecast.

A deeper look at the Jobs Report also showed some significantly positive revisions, which added 123,000 for the past two months reports. The Unemployment Rate did tick up to 9.6%, but was inline with expectations, and this includes 550,000 people re-entering the work force - as we said in yesterday's Update, likely due to the expiration of their extended unemployment benefits. Hourly earnings were also somewhat upbeat, rising by 0.3%.

While this report was not great, it was a lot better than what we've seen…and has to be viewed as encouraging. This report contradicts the arguments for deflation and a double dip recession…and should keep any additional Fed intervention on hold.

So what does this all mean for mortgage interest rates? Stocks and bond compete for investment dollars so as investment capital moves from Fannie Mae bonds (on which long-term interest rates are based) to stocks, bond yields and subsequently mortgage interest rates rise to attract investment capital. Yesterday the origination costs were .125% higher on all mortgage programs and again this morning we posted an increase of .125% to origination costs. That's a relatively small increase but here's what I see from experience:

Often clients who are floating will reason "I'll just wait to lock until rates are better again." How successful is that reasoning? It all depends on timing. If stocks continue to recover, bond prices will decline and rates will increase.

Lock or Float?

We've had a great run, but we don't want to be complacent. If you or anyone you know and care about is on the fence, it may be very advisable to Apply and lock now ahead of what "technically" could be the start of a bumpy ride for mortgage rates.