What Friday’s Employment Report Tells Us

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For months we have wondered whether this winter’s economic slowdown was a temporary factor of weather, or an indication of something more significant that could spread throughout the entire year. Indeed, with the economy contracting 0.7% in the first quarter of the year, one more negative quarter and we would be using a very bad word as a precaution– recession. Well, we are here to tell you that the Federal Reserve Board was right when they indicated that the economy was not as sluggish as it appeared.

The latest evidence is overwhelming in the form of Friday’s jobs report which showed the economy adding 280,000 jobs in April. And the rise in the unemployment rate from 5.4% to 5.5% is also seen as a positive because it means that more Americans are returning to the workforce. Though the number of jobs added is subject to revision in future months, April’s gain of over 220,000 jobs was not revised significantly and now we are talking about an average of 250,000 jobs added per month thus far this quarter.

The other good news for workers is that hourly wages are finally increasing. While this is good news for workers, it is a number closely watched by the Fed as evidence that inflation is coming back. The markets have already reacted with long-term rates increasing significantly in the past few weeks. The Fed’s Open Market Committee meets next week and all eyes will be on that meeting to see if they will be raising short-term rates now or waiting for the second half of the year.

Weekly Interest Rates OverviewThe Markets. Rates on home loans were stable in the past week; however, these numbers do not fully reflect the volatility which occurred before the release of the jobs report on Friday. Freddie Mac announced that for the week ending June 4, 30-year fixed rates remained at 3.87%. The average for 15-year loans decreased to 3.08%. Adjustables were higher, with the average for one-year adjustables increasing to 2.59% and five-year adjustables rising to 2.96%. A year ago, 30-year fixed rates were at 4.14%, which is more than 0.25% higher than today’s levels. Attributed to Len Kiefer, deputy chief economist, Freddie Mac — “Rates on home loans were little changed for the week following mixed economic data before bond yields began moving higher Wednesday afternoon. Although real GDP growth was revised down to a negative 0.7 percent annualized rate, the Institute for Supply Management reported a modest growth in the manufacturing sector in May. If the Wednesday surge of treasury yields persists, the impact on rates is likely to result in a bout of affordability shock to many housing markets across the country.”  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 June 5, 2015

  Daily Value Monthly Value
  June 4 May
6-month Treasury Security  0.08%  0.08%
1-year Treasury Security  0.27%  0.24%
3-year Treasury Security  1.04%  0.98%
5-year Treasury Security  1.65%  1.54%
10-year Treasury Security  2.31%  2.20%
12-month LIBOR    0.734% (May)
12-month MTA    0.168% (May)
11th District Cost of Funds    0.680% (Apr)
Prime Rate    3.25%

Real Estate News You may have heard that it is extremely difficult to get approved for a home loan to buy or refinance a condominium. That was the case for several years after the housing market crashed, but lenders finally have loosened the rules on condo financing. Borrowers seeking to get a condo loan these days will find more lenders to choose from and more condominiums that are eligible for financing. Mortgage giants Fannie Mae and Freddie Mac have eased some of the requirements on loans for condos, and a growing number of lenders offer loans that go outside the box of the condo rules in conventional financing, says industry experts. You’ll still need good credit and stable income to qualify for a condo loan — just as you would with a loan to buy a house. But you are less likely to face restrictions relating to the property itself. When approving a condo loan, the lender wants to make sure the building is financially stable. Because the financial stability of a condo project depends on the owners paying their bills, lenders tend to view condo loans as a riskier investment than a house. Lenders are more flexible when analyzing condominiums’ financial stability. Late in 2014, Fannie issued new guidelines to lenders allowing them to issue loans in developments where up to 15 percent of the owners were 60 days past due on monthly payments. The threshold had been 30 days. Another change made it easier to finance condos in new developments. Still, many condo buildings don’t meet Fannie and Freddie’s requirements; however, there are several options that have now become available for portfolio lending, as well. Source: BankRate.com  Thinking of purchasing a condo and have questions? Contact us for advice before you sign a contract. 

Home ownership can lead to higher levels of well-being, according to data from the OECD Better Life Index, which gauges the quality of life worldwide by factoring in such things like housing, jobs, civic engagement, health and safety. The heightened sense of happiness that comes from home ownership may be more than just getting a new home, but more closely tied to the basic need for shelter, says Aida Caldera Sanchez and Caroline Tassot, authors of an analysis about the index. Also, home ownership can lead to status and independence – qualities that often are linked to happiness, their analysis shows. Source: RIS Media

New-home sales climbed 6.8 percent in April reaching a seasonally adjusted annual rate of 517,000, as home prices also saw a big jump, the Commerce Department reported. “Sales are moving forward and our builder members are telling us they are starting to see more activity as more buyers get off the fence and enter the marketplace,” says Tom Woods, chairman of the National Association of Home Builders. Inventories of new homes for sale also saw a slight increase in April to 205,000 units. This now represents a 4.8-month supply at the current sales pace – still, most economists consider a 6 month supply healthy for the sector. With tight supplies, the median price for a new home soared 8.3 percent in April compared to a year ago, now at $297,300. While higher home prices could reduce affordability, they boost household equity, which could boost consumer spending. Source: Reuters

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