Jobs data from the federal government showing slower than expected growth helped push rates down for home purchase loans.
According to the report from the Labor Department, the U.S. picked up 148,000 jobs for the month of September. Keep in mind that this report came just after the federal government was shutdown for over two weeks. This was the first time since 1995 that the government was shutdown.
“The labor market lost, rather than gained, momentum over the summer, leaving us with less than a desirable cushion just as the government was shuttered in response to political shenanigans,” said Diane Swonk, chief economist at Mesirow Financial.
Taking Advantage of Falling Rates
Though the national economy has been adding jobs every consecutive month for the past several years, there has yet to be any major changes to job growth. This is both good and bad news depending on what perspective you take.
Loan originators couldn’t be happier with the numbers as it signals to them a potential increase in business. People are more incentivized to take out a new home loans when rates are lower.
Ted Rood,a Senior Originator at Wintrust Mortgage, is one of the people celebrating over the recent jobs data. “Christmas came early this year as another tepid jobs report sparked a broad rally in MBS markets. All lenders improved their rates, and analysts predicted Fed tapering would not occur until for at least several more months. Time for refi procrastinators to get on the phone with a loan officer, rates well down from just a month ago. Folks shopping for homes may now be able to afford more house. Happy NFP Tuesday!”
Prospective homeowners stand equally in a good position to celebrate. As the rate for 30-year home loans fall, the less expensive it is in the long run to purchase the home. This is especially important to consider for investors who are looking to buy properties and then flip them for a profit. Homeowners can also look forward to the possibility of refinancing in order to save money on the mortgage that they’ve already taken out.
Federal Reserve May Delay Tapering
The Fed has hardly been quite about its desire to pull back some of the support that it has given to the economy with its bond buying program. In fact, as early as this past September, it had come to be conventional wisdom that the Fed would start to taper some of the support that it was giving. That didn’t end up happening.
Many economists believe that this recent jobs report from the labor department will only further push the Fed to delay its decision to taper support. While no economist’s opinion should be taken as gospel, it can hardly be said that the conclusions being reached are a stretch. Under the direction of Ben Bernanke, the Fed has indicated that it’s looking to base it decision to taper on the health of the United States labor market. Given how meek the jobs growth has been for such an extended period of time, it’s only reasonable to assume that the Fed would more than likely wait until at least 2014 to make a decision.
