A
combination of factors helped push average 30-year mortgage rates back
below 7% this week.
First, the jobs data (JOLTs, ADP) held few surprises. Second, Powell’s
testimony to Congress was a non-event. Of course, this could all reverse
today (3/8/2024) if the February BLS jobs report delivers more than
200K job additions.
On the other hand, if the February BLS report shows fewer than 200K job additions and the
improbably strong +353,000 jobs figure for January gets revised down, I
think we’d get 10-year treasury yields moving towards 4% and 30-yr
mortgage rates approaching 6.8%. Wouldn’t that be nice!?
“It
would be appropriate to start reducing the Fed funds rate at some point
this year,
but only when there is greater confidence that inflation is sustainably
moving towards the 2% target. Reducing policy restraint too soon or too
much could result in a reversal of progress we have seen in inflation
and ultimately require even tighter policy
to get back to 2%.”
Fed Chairman Jerome Powell in his semiannual Monetary Policy Report to Congress.
“Despite
affordability issues, many younger Americans are finding a path to
homeownership,
with millennials accounting for more than half of home purchase
applications between 2020 and 2023. Meanwhile, baby boomers who already
have significant financial reserves can pay for homes entirely in cash,
which further increases challenges for other buyers.”?
CoreLogic
February Home Price Insights report
“Job gains remain solid. Pay gains are trending lower but are still above inflation. In
short, the labor market is dynamic, but doesn’t tip the scales in terms of a Fed rate decision this year.”?
Nela Richardson, ADP’s Chief Economist