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September 6, 2012

Rate market thoughts before jobs report (and before year-end)

September 6, 2012

Rate market thoughts before jobs report (and before year-end)

Jobs reports are incredibly hard to predict, but mortgage rate shoppers are subject to market reaction to jobs (and all other) short term market reports. Here is my commentary on MortgageNewsDaily today about whether to lock rates before tomorrow’s jobs report. A link to the full piece is below the excerpt, which includes further insight on other factors that may contribute to higher rates short term.

Rates are .125% to .25% higher today than the record low range in the three business days leading up to today. I maintained a rate lock bias during those days. I still maintain the rate lock bias going into tomorrow’s BLS jobs report. Consensus estimates call for +120k nonfarm payrolls created for August vs. +163k for July. Even exceeding this number slightly will reinforce the “mediorce is the new good” sentiment I discussed with July’s jobs report when the mediocre +163k beat estimates of +100k and broke a 4 month streak of much weaker results. Rates rose after that July report last month, and tomorrow is likely to be a similar scenario.

Rates rose today because of optimism about the latest vow by the ECB to contain the eurozone’s debt problems. We don’t know how that will play just yet, but the positive sentiment will likely carry into tomorrow, which poses additional upside rate risk.

That said, the 2012 theme of rates rising a bit on better short-term news/data then falling to record lows on weaker long-term fundamentals should continue into and through the U.S. election. This dictates a lock-on-the-dips approach between now and year end.

To do this, rate consumers need to set rate targets with their lenders that they can’t or won’t go above, and they need to give their lenders standing order to lock those rates when MBS markets allow—because MBS markets don’t wait. They fluctuate wildly each trading day, and the lows come in minutes, not days.
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Reference:
Mortgage Rates Rise At A Decent Pace Ahead of Jobs Report