Friday’s bond market is in positive territory following some stock weakness and the news of a spike in the unemployment rate last month. The benchmark 10-year Treasury bond price was up about 17/32, with the yield falling 8 bps to about 2.36%; higher than this time last week. Our posted Conforming 30-year fixed interest has fallen to 5.250% with 0-points this morning.
December’s Employment report showed that the unemployment rate rose to 7.2% last month, which was higher than the 7.0% forecast, and at the highest level since January 1993. The Labor Department also reported that 524,000 jobs were lost during the month of December, and while that reading practically matched forecasts, today’s release also revised November’s job losses from 533,000 to 584,000. Overall, we saw 2.6 million jobs lost last year; the most in any year since 1945.
Earlier this week:
• On the same subject, initial jobless claims fell a steep 24,000 in the Jan. 3 week to 467,000; more than 50,000 below forecasts. Now the bad news... continuing claims continue to swell, up 101,000 to 4.611 million for the worst level since 1982. The 4-week average rose 45,000 to 4.470 million, also the highest level since 1982.
• The Commerce Department posted November’s Factory Orders data, reporting a drop of 4.6% in new orders. This data gives us a fairly important measurement of manufacturing sector strength and was expected to show a decline in orders of 2.6%. This means that the manufacturing sector was weaker than expected.
• The Pending Home Sales index fell 4.0 percent in November to a level of 82.3, pointing to deepening declines for the housing sector.
• The Fed minutes for the historic December 15-16, 2008 FOMC meeting show members engaged in sharp debate over how the Fed should communicate and implement its new policy of fed funds rates near zero. Additionally, the Fed staff sharply lowered its forecast for economic growth in 2009. The minutes confirm that the Fed is going to hold rates low for some time and that the Fed’s attention will now focus on other measures of policy instead of mainly interest rates.
• The release of the FOMC minutes had to compete with announcements by President-elect Obama that he believes trillion dollar federal deficits are likely to continue for years. Obama’s comments bumped up interest rates and lowered the day’s stock gains.
Next week brings us the release of several important reports including December’s Retail Sales data International Trade, Import and Export Prices, the Consumer Price index (CPI), Industrial Production, Consumer Sentiment and weekly Jobless Claims. There is no relevant data scheduled to be posted Monday or Tuesday, and Friday is poised to be the busiest with three reports due for release.
Currently, 43 states have an estimated combined budget deficit of about $100 billion. With many states required by law to balance their budgets, those governments are looking at everything from reduced garbage collection and shortened school years to new taxes on everything from soda to music downloads.
And do you remember “Hope for Homeowners?” We didn't think so. In July, Congress passed their only housing rescue plan to date: a guarantee of up to $300 billion worth of mortgages to help prevent more than 300,000 foreclosures. But to participate, banks had to take steep losses -- and doing so was voluntary. Only 321 applications have been filed since the program's Oct. 1st launch - and not one loan workout has been completed, according to the U.S. Department of Housing and Urban Development.
Just for Laughs:
“The United States has developed a new weapon that destroys people but it leaves buildings standing. It's called the stock market." —Jay Leno
Today’s unemployment numbers were not unexpected, but still are having some impact on all of our related markets. While there still may be room for rates to fall, I believe there comes a time when the “bird in the hand” should get more consideration. Therefore, I’m holding my LOCK recommendation for immediate and short-term closings.
If I were considering financing/refinancing a home, I would... LOCK if my closing was taking place within 7 days... LOCK if my closing was taking place between 15 - 30 days... FLOAT if my closing was taking place between 31 - 60 days... FLOAT if my closing was taking place over 60 days from now.
This is my opinion of what I would do if I were financing a home. It is only an opinion and cannot be guaranteed to be in the best interest of any/all other borrowers. Feel free to discuss this information with me or your mortgage professional.