The answer to the question as to whether the Federal Reserve will raise interest rates this week obviously depends upon whether you asked the question on the Thursday before the Jobs Report as opposed to afterwards. Before the jobs report was released, it was expected that there was close to a 50-50 chance of a rate increase. Now the chance of the Fed taking action has been lowered significantly. As a matter of fact, many are now predicting that rates may not go up after the July meeting as well.
The concern over the weak jobs report has not gone unnoticed by the Federal Reserve Governors. Federal Reserve Governor Lael Brainard called for a reconsideration of any potential rate hikes, citing a slowing labor market and continued evidence of global economic instability as reasons for the Fed to keep its foot on the financial brake. Chairperson Yellen had this to say the following week: “This past Friday’s labor market report was disappointing.” Thus, there is good reason for the markets to believe that the Fed will hold off.
We would like to add two points. The markets seem to love any news that would cause the Fed to hold off from raising rates. The Wednesday after the jobs report, the Dow hit the 18,000 level, but then fell back late in the week. Secondly, keep in mind that the monthly job numbers are frequently volatile and subject to major revisions. Even if the Fed does not make a move, there will be another employment report released before the July meeting. While it is not likely the numbers could rebound enough to erase doubts, May’s job numbers might still prove to be an anomaly.
The Markets. Rates fell in the past week in response to the weak jobs report. Freddie Mac announced that, for the week ending June 9, 30-year fixed rates fell to 3.60% from 3.66% the week before. The average for 15-year loans decreased to 2.87% and the average for five-year adjustables also fell to 2.82%. A year ago, 30-year fixed rates were at 4.04%%, almost one-half of one percent higher than today’s levels. Attributed to Sean Becketti, chief economist, Freddie Mac –“Growing optimism about the state of the economy was quickly erased with May’s employment report. The disappointing release caused an immediate flight to quality resulting in the 10-year Treasury yield dropping 10 basis points on Friday. The rate on 30-year fixed home loans responded by falling 6 basis points to 3.60 percent. This week marks the 10th consecutive week the 30-year rate has averaged under 3.7 percent, allowing an extended window for homebuyers to take advantage of these historically-low borrowing costs.” Note: Rates indicated do not include fees and points and are provided for evidence of trends only. They should not be used for comparison purposes.
Updated June 10, 2016
|Daily Value||Monthly Value|
|6-month Treasury Security||0.43%||0.42%|
|1-year Treasury Security||0.59%||0.59%|
|3-year Treasury Security||0.91%||0.97%|
|5-year Treasury Security||1.22%||1.30%|
|10-year Treasury Security||1.68%||1.81%|
|12-month LIBOR||1.337% (May)|
|12-month MTA||0.467% (May)|
|11th District Cost of Funds||0.690% (Apr)|
|Prime Rate||3.50% (Dec)|
Active-service military buyers between the ages of 18 and 35 are purchasing homes at a “far greater rate” than non-military buyers – 51 percent versus 34 percent, according to the National Association of Realtors®’ newly released Veterans & Active Military Home Buyers and Sellers Profile. This is the first time NAR has released such an in-depth look at the military with the aim of evaluating the differences between active-service/veteran real estate clients and those who’ve never served. Despite their lower median income ($76,800), active-service military members tend to have more job security, says Lawrence Yun, NAR’s chief economist. “No-down payment financing options…are giving aspiring home owners in the military a deserving advantage over their civilian peers,” he adds. “Furthermore, their tendencies to marry and raise a family at an earlier age and carry less student debt make buying a home a more desirable and achievable option.” Because of the tendency to marry and have children at younger ages, active-service members often purchase larger homes that cost more than those purchased by non-military buyers and veterans alike, according to the study. The loans available to the military prove to be a big perk. Veterans Affairs loans offer 100 percent financing for veteran and active-service home buyers. Source: National Association of Realtors®
Women buying homes may need more reassurance and confidence in a real estate transaction than men, according to ValueInsured’s Modern Homebuyer Survey, which uncovered a housing confidence gap between genders. Women show more desire to buy a home than men, but they may still be more hesitant to sign on the dotted line. Seventy-seven percent of the women surveyed who don’t own a home say they want to buy, compared with 70 percent of men, according to the survey. The survey found that men are more confident than women that they can sell their home for the same amount or more than what they paid for it. Also, more men than women would like to sell their current home and upgrade to a new one (83 percent of men versus 74 percent of women). Researchers attribute the confidence gap in housing between the genders as women’s tendency to be more debt-averse. Women were more likely than men to cite being “debt-free” when asked about their personal definition of the American dream. Men tended to more often cite “owning my own home.” Source: ValueInsured.com
Big cities across the U.S. are seeing their post-recession population surge slow as Americans uproot for new jobs and suburbs regain some of their appeal. Census Bureau figures show the top 50 cities accounted for 20% of the nation’s population growth for the 12 months ending July 1, 2015. That figure is down from 21% the prior fiscal year, and has slid each of the years since 2011, when cities accounted for 26.7% of U.S. population growth. U.S. cities have experienced a population surge since the recession ended in 2009, as revitalized downtown cores drew millennials, empty nesters and immigrants with lower crime, pedestrian-friendly environments and job growth. That growth is slowing as a bulge of late-20s Americans reaches prime homebuying age and high urban real-estate costs are making suburbs and exurbs more attractive, according to economists and demographers.Source: The Wall Street Journal