The Three Bears Jobs Report

May 12, 2015
ECONOMIC COMMENTARY
After a disappointing March jobs report, we will go back to the old nursery library to describe April’s numbers. Everyone knows the story about the three bears and Goldilocks. One chair was too big and one chair was too small. But the last chair was “just right.” We think that an increase of approximately a quarter of a million jobs for April is just about right as well. Why is that?

With regard to the Federal Reserve Board raising interest rates, the last quarter of 2014 had the economy adding an average of over 300,000 jobs per month, or just about a million for the quarter. If that level had continued, the Fed probably would have raised rates by now. The first quarter of this year, we added just under 200,000 jobs per month. While not shabby, it is just not enough jobs to keep the economy improving fast enough. Thus, 223,000 jobs is just right. Not too fast to scare the Fed and strong enough to move the economy forward.

This is especially true considering the fact that hourly wage growth was lower than expected. However, the good signs included an increase in the labor force participation rate and a decrease in the unemployment rate to 5.4%, the lowest since May of 2008. Leading up to the report, rates and oil prices increased pretty steeply. While this report may give us some breathing room, it reminds us that these ridiculously low rates will not be with us forever. For those who are thinking of making a purchase, you may be well advised to move quickly before Goldilocks grows out of that chair.

WEEKLY INTEREST RATE OVERVIEW

The Markets. Last week rates on home loans rose to their highest levels in almost two months. Freddie Mac announced that for the week ending May 7, 30-year fixed rates increased to 3.80% from 3.68% the week before. The average for 15-year loans also increased to 3.02%. Adjustables were mixed, with the average for one-year adjustables decreasing to 2.46% and five-year adjustables rising to 2.90%. A year ago, 30-year fixed rates were at 4.21%, which is 0.41% higher than today’s levels. Attributed to Len Kiefer, deputy chief economist, Freddie Mac — “Rates rose on home loans this week to the highest level since the week of March 12 as a selloff in German bunds helped drive U.S. Treasury yields above 2.2 percent. The U.S. trade deficit reached $51.4 billion in March, the highest level since 2008. Also, the Institute for Supply Management’s manufacturing index was unchanged in April, but manufacturing employment contracted as the index fell below 50 for the first time since May 2013.”  Rates indicated do not include fees and points and are provided for evidence of trends only. They should not be used for comparison purposes.  
Current Indices For Adjustable Rate Mortgages
Updated May 8, 2015
Daily Value Monthly Value
May 7 April
6-month Treasury Security  0.08%  0.09%
1-year Treasury Security  0.24%  0.23%
3-year Treasury Security  1.02%  0.87%
5-year Treasury Security  1.55%  1.35%
10-year Treasury Security  2.18%  1.94%
12-month LIBOR  0.697% (Apr)
12-month MTA  0.166% (Apr)
11th District Cost of Funds  0.687% (Mar)
Prime Rate  3.25%
REAL ESTATE NEWS
 Vacation home sales jumped to a record high in 2014, according to the National Association of Realtors®’ 2015 Investment and Vacation Home Buyers Survey. Vacation home sales climbed to an estimated 1.13 million last year, the highest since NAR began its survey in 2003. Sales of vacation homes rose 57 percent compared to the 717,000 tally in 2013. Vacation sales in 2014 nearly doubled the combined total of the previous two years. “Affluent households have greatly benefited from strong growth in the stock market in recent years, and the steady rise in home prices has likely given them reassurance that real estate remains an attractive long-term investment,” says Lawrence Yun, NAR’s chief economist. “Furthermore, last year’s impressive increase also reflects long-term growth in the numbers of baby boomers moving closer to retirement and buying second homes to convert into their primary home in a few years.” Vacation home sales comprised 21 percent of all transactions in 2014 – the highest market share since the NAR began conducting its survey. As vacation home sales soared, investment purchases dropped for the fourth consecutive year, the report showed. Investment home sales in 2014 fell 7.4 percent to an estimated 10.2 million in 2014 compared to 1.10 million in 2013. The market share of investment sales dropped to 19 percent in 2014 from 20 percent in 2013. Source: NARSeventy-five percent of single home owners ages 25 to 50 say home ownership is important to them, according to a Century 21 survey. These are the top three reasons single home owners say they decided to buy: They viewed home ownership as an investment in their financial future; they were tired of paying rent; and they thought it was the right time to purchase a home. “We are in the midst of a shift in the home-buying population,” says Rick Davidson, president and chief executive officer of Century 21 Real Estate LLC. “This survey shows that home ownership is a major life decision for singles and that it is just as important a part of the American Dream for them as it is for married couples.” Nearly one-third of all real estate purchases in 2013 were made by single home buyers, according to data from the National Association of Realtors. But single home buyers say it wasn’t easy to achieve home ownership because many were intimidated by the home-buying process, and they had to make several sacrifices in order to buy a home: 60 percent say they had to dine out less to purchase a home, and half say they had to cut back on entertainment. Fifty-one percent say they had to spend less on vacations. What were their most important considerations in buying a home? Single home owners rated space and square footage (59%); the yard (57%); and proximity to work or school (47%) as the most important criteria in their house hunt, according to the Century 21 survey. Good cell service and proximity to public transportation tended to be more important to single home owners 25 to 35 years old than those 36 to 50 years old. Source: C-21

Most Americans underestimate the importance of their credit score, with four in 10 saying they don’t know what their credit scores are, according to a new Chase Slate Credit Survey of about 1,000 Americans. What’s more, 52 percent of those surveyed say they were unaware that paying bills on time is the factor that has the largest impact on their credit score. The survey also found that confusion exists on what is a good versus bad one. Respondents who say they have previously checked their credit score consider a “good” one to be around 719. That’s 51 points higher than the 668 that those who never checked their score considered to be good. However, researchers note, even a score of 719 does not guarantee access to credit at the best rates. Only 37 percent of Americans say they feel confident that their current credit score can help them accomplish personal goals in their life. Credit-score knowledge and confidence can vary widely among the generations. The survey found that Generation Xers tend to be bolder about facing their credit health than other age segments. Case in point: Just 4 percent of Gen Xers say they have never checked their score compared to 19 percent of Millennials and 13 percent of baby boomers. Sixty-seven percent of Gen Xers say they know their current credit score, higher than baby boomers (60%) and Millennials (55%). Source: Chase Slate Credit Survey

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