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Are rates going higher?? Mortgage rates jumped to over 6.5% today due to a strong BLS (Bureau of Labor Statistics) jobs report, which came in much higher than expected at 254,000 new jobs. The household survey, which is also part of the report, showed even higher numbers.
In general, more jobs signal a stronger economy. A better economy can lead to inflation, and mortgage rates tend to rise when there's inflation and job growth.
The BLS has been unreliable in recent months, often revising job numbers downward. However, this report showed upward revisions for the last two months. The unemployment rate also dropped from 4.2% to 4.1%, another positive sign for the economy.
How real is this? It's unclear, but digging a little deeper into the report reveals some interesting details:
The BLS household survey reported more job creation than the headline number, but nearly 55% of these jobs were for 16- to 19-year-olds, likely not the highest-paying positions. It could be that seasonal jobs are already starting to play a role.
Additionally, the average workweek—the number of hours worked per week—declined again, as employers try to hold onto employees in hopes that things will improve in 2025. They don't want to let workers go after investing in training to get them up to speed.
But the economy may still be on the edge. Inflation has eaten away at everyone’s paychecks and purchasing power. Consumers are increasingly relying on credit cards to make ends meet.
How long can this last? Will there come a point when they simply can’t access any more credit?
But don’t panic. Mortgage rates won’t drop in a straight line. They will still go down into 2025.
On a "bad" day like today, Wall Street likes to take advantage of volatility in the markets. Some of the trading is technical, aimed at finding profits. Rates had been dropping steadily for the past four months, so a day like today was inevitable. Plus, Wall Street wants to cover all their positions before the weekend to avoid being caught on the wrong side.
One more interesting note: Fed Chairman Jerome Powell made strong comments about the economy earlier in the week, prior to the release of the BLS report. This was a shift from his previous remarks. The question is, was he aware of the BLS jobs report before its release? Maybe more attention should be paid to what Powell says—he probably knows more than most.
On the real estate side, inventory keeps rising, offering more options for buyers. Good properties are still selling quickly, while those that have been sitting for a while are offering seller-paid closing costs to move them. It’s definitely a win for buyers.
This is still a great time to buy a home—more options and possibly some seller incentives. Buyer demand remains strong, and many are waiting to get through the election and the Thanksgiving and Christmas holidays.
Then, come January 1st, watch out! 2025 will likely be an incredible year for real estate.
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