"The time has come to adjust policy - J. Powell
 
Last week was a great week for the homebuyer. Every report seemed to say it's time to start cutting rates and FINALLY, FINALLY Powell confirmed last Friday at his speech in Jackson Hole, that the Fed has seen enough data to begin to adjust policy (which is Fed speak for cutting rates).


The average rate on a 30-year fixed rate conventional loan went to 6.39% (down from the 6.5% reported last week).  Sign up for our weekly Friday rate texts to see our rates (there are now several loan programs where homebuyers can get a rate in the 5s!).

Is the Labor Department pulling JOBS data out of thin air?

The U.S. economy created 818,000 FEWER jobs than originally reported in the 12-month period through March 2024, the Labor Department reported last Wednesday. The initial reporting showed that 2.9 million jobs had been created during the same period - which means that there were nearly THIRTY PERCENT fewer jobs created than we were led to believe. That's the largest downward revision in job creation since 2009.

Markets were STUNNED by this report given how much reporting technology has advanced since 2009. Also, keep in mind that much of the reason we did not see rate cuts in the first quarter of 2024 was because the labor reports allegedly showed that labor market was too hot with January jobs doubled economic forecasts and February jobs were 40% higher than expected.

Now, economist are left wondering just how reliable this jobs data has been and whether the labor market is in a much worse position than initially thought. Opinions of whether the labor market is in dire straits or just okay continues to shift, but one thing is certain - it's definitely not a good jobs market and that's good for mortgage rates.

Jobless Claims Steady

Weekly initial jobless claims flattened out last week to 232,000 for the week (slightly up from the 230,000 expected). Nancy Vanden Houten, lead U.S. economist at Oxford Economics, believes that the leveling off will lead to "a small decline in the unemployment rate in August" but with the other labor report showing just how far off the Labor Department can be on these numbers, I wouldn't read too much into it for the time being.

Home Sales INCREASE for the First time in 5 Months!

But that doesn't mean that the house market has thawed. Contract closings are up 1.3% nationwide from a month earlier to 3.95 million annualized units, but still well below the pre-pandemic sales ~5 million annualized units

There are 2 reasons for the increase - 1) mortgage rates have fallen A LOT and there's more certainty on where they are heading than there's been in the last 2 years (maybe it's finally appropriate to say "marry the house, date the rate" 😂 2) supply is increasing - more home are slowly coming on to the market and those homes are taking longer to sell!

More home affordability, more choices and more negotiating power = more sales!

However - TBD how long these homes will take to sell if we see rates continue to fall.

Powell Puts An End to The Rumors

To top off a great week, J Powell took the mic at the Jackson Hole conference on Friday. The highly anticipated speech was also EXACTLY what everyone hoped for.  Markets rejoiced as Powell's "marvelous" speech confirmed (as much as the Fed can definitely confirm anything) that rate cuts are coming on September 18th.

Here are some of my favorite quotes from the speech:

“My confidence has grown that inflation is on a sustainable path back to 2%,”

“We do not seek or welcome further cooling in labor market conditions,”

“The upside risks to inflation have diminished... And the downside risks to employment have increased.”

“We will do everything we can to support a strong labor market as we make further progress toward price stability.”

“The time has come for policy to adjust,” 


RATE CUT WATCH:

There's a 100% chance of seeing a rate cut on September 18th! 65.5% believe we'll see a 25bp cut and 34.5% believe we'll see a 50bp cut. 

A fairly quiet week this week for news. The only thing that can derail our hopes and dreams for lower mortgage rates would be a bad PCE report on Friday so let's hope we can start celebrating LDW early with a great report!