Market Snapshot

Friday's bond market opened in the positive territory following this morning's release of December's employment data. Surveys had initially estimated a net gain in jobs, but then yesterday that estimate was revised to a loss of 35K jobs. Today's report reflected a loss of 85K jobs. Stocks reacted less than favorably but closed slightly up.  Bonds took their lead from stocks and are currently -3. Rates were initially posted flat from Thursday's close, but when the Fannie Mae bond reached +15 around 3:00 PM, we improved rates and origination fees fell by .125%.

Buy, Lock or Float?

Take a look at the Fannie Mae Bond Chart below. Remember, when Fannie Mae (FNMA) bond prices go down, rates go up. A shift of 12 basis points (12/100 of a point) will cause discount points to go up .125%.  You'll see very clearly that a definitive trend range has been established. Even in the face of higher than anticipated job losses today, normally a stimulant to drive the bond higher, the bond ran up against the downward trend line and then retreated.

I cannot overemphasize the point: Housing prices are at a discount, the Federal Reserve is subsidizing interest rates and giving a tax credit to boot and mortgage interest rates are headed up. If you or anyone you know is in the market for a home or refinance and is in the financial position to act, NOW is the time.

Market News

Today's big news came from the Labor Department, who reported that the U.S. unemployment rate held at 10.0% and that 85,000 jobs were lost last month. The unemployment was expected to be unchanged, but the lost payrolls were worse than many had thought. The report also revealed a relative minor upward change in November's payrolls, revising from a loss of 11,000 to a gain of 4,000 jobs. But even with that revision, December's loss indicates that the employment sector was weaker than many had thought.

The third important reading of the report- average hourly earnings, matched forecasts with a 0.2% increase. Overall, this report can be considered favorable for the bond market, especially since recent Fed comments have hinted at concern about the labor market. It is one of the factors why the Fed has been so hesitant to even consider raising short-term interest rates at recent meetings. This should bode well for bonds and lead to improvements in mortgage rates in the immediate future, unless we get contradictory economic data.

Next week is fairly active in terms of relevant economic reports and events, but the most important data comes the latter part of the week. There is nothing relevant scheduled to be posted Monday, so look for the stock markets and any weekend news to be the biggest influence on changes to mortgage rates. We will get important readings on consumer spending and inflation at the consumer level of the economy late in the week in addition to a couple of important Treasury auctions. Look for more details on next week's events in Sunday's weekly preview.

If I were considering financing/refinancing a home, I would.... Lock if my closing was taking place within 7 days... Lock if my closing was taking place between 8 and 20 days... Lock if my closing was taking place between 21 and 60 days... Float if my closing was taking place over 60 days from now... This is only my opinion of what I would do if I were financing a home. It is only an opinion and cannot be guaranteed to be in the best interest of all/any other borrowers.