A rollercoaster week for anyone rooting for lower mortgage rates.  We saw interest rates lower every single day last week - dropping significantly after Chairman Powell's widely anticipated press conference on Wednesday. BUT - the "stunning
 jobs report we saw on Friday threw a wrench into the works.

 

The average 30-year fixed rate conventional loan still fell slightly on the week to 6.6%! Sign up for our weekly Friday rate texts to see all the great options LendFriend provides to homebuyers! 

However, what does last week's data mean for rate cuts? Find out here.

Home Prices Are Still Resilient

The Case-Schiller report for November home prices was released last week. Home prices in November fell 0.2% from October, according to the S&P CoreLogic Case-Shiller national home price index. This is actually quite impressive given that recorded home prices from November - went under contract in October, a period when interest rates peaked to their highest level in the last 20 years.

If home prices BARELY dropped when interest rates were at 20 year highs, its safe to say that everyone is expecting home prices to start increasing again in future reports now that interest rates are almost 2% lower than they were in October!

For the second straight month, Detroit reported the highest year-over-year gain among the 20 cities - where prices rose 8.2% in November. Looks like that city is making an amazing comeback!

Chairman Powell Downplays March Cuts but Still Gives the Market Hope

The Federal Reserve committee met on Wednesday, January 31st and, as expected, decided to hold the Fed Funds Rate where it was (5.25-5.5%). The more important part of the meeting was Chairman Powell's press conference. There, he said a few key points.

 Don't expect any additional rate hikes. We're likely to start cutting rates "at some point this year"

While the six months of declines in inflation have been “a good story,” “we need to see more evidence that confirms what we think we’re seeing, and gives us confidence that we’re on a sustainable path [to] 2% inflation,” he continued. 

“We want to see more good data,” Powell said in his post-meeting press conference. “It’s not that we’re looking for better data, we’re looking for a continuation of the good data we’ve been seeing.” - meaning they've liked the inflation data that we've seen over the last several months

If labor market gets tighter, that would could contribute to inflation and the Fed would need to take action.

The Federal Reserve is not likely to have seen enough good data by March to start cutting rates by then.

So - March rate cuts are likely off the table, but we're also not going to see another hike!  Powell confirming that the inflation data has been good and just needs to continue along this path was a big win for the market. Unfortunately, he also confirmed that they are walking a fine line on the labor market and the Friday labor market report made everyone nervous!

The BIG Jobs Report

U.S. employers added 353,000 jobs in January, according to a report from the Labor Department Friday. It blew expectations out of the water. It's been dubbed extraordinary, stunning, exceptional - not exactly the words you want to here if you are Jerome Powell. 

The unemployment rate held at an ultra-low 3.7%. That means the jobless rate has now been below 4% for two years — a historic stretch you would have to go back to the late 1960s to beat.

This extraordinary Jobs Report dealt another blow to rate cut predictions. While inflation is seemingly finally getting under control, a labor market this strong will deter us from hitting the Fed's 2% target for inflation. The report was SO good, that analysts that it even cast doubt on a rate cut in May!

What to watch for this week...

Many Federal Reserve Committee Members will be speaking this week and each has the potential to move interest rates higher or lower. 

Right now the most important thing to understand is that - interest rates are likely to hover around this level until we start seeing a cooler labor market.

Regardless,  buyers are starting to accept their fate of a 6-7% range interest rate and are opting to buy today and refinance down the road rather than continue sitting on the sideline, which means demand is heating up and home prices will start to rise given the low inventory. 

Remember - buyers can still utilize TEMPORARY INTEREST RATE BUYDOWNS - paid for by the seller, to get rates in the 4-5% range in year 1.