New data gives mortgage markets an early Christmas gift

A nice pre-Christmas market rally for mortgage rates

Happy Friday from Local Mortgage!

It was a good week for mortgage rates as markets improved 4 out of 5 days this week. We will end the week back at 5.875% for our very best 30-year fixed conventional scenario.

Tuesday’s jobs report showed the unemployment rate moved up to 4.6%, the highest level in several years. With a forecast of 4.4%, this unexpected jump validates the Fed’s labor market concerns. The rally was tempered only by a rise in the employment participation rate and slight increase in average hourly earnings.

The positive market movement continued Thursday with the CPI report. November Core CPI came in at 2.6% vs a 3.0% consensus forecast, which was a pretty big miss. While markets moved in a positive direction for rates, we would have normally expected a bigger move, but reaction may have been muted by the size of the miss.

Economic data quality continues to cloud the picture for many investors. Analysts pointed out post-government-shutdown measurement issues, including unusually low survey response rates, are making readings on inflation, jobs, and retail sales harder to trust. This has contributed to a “wait and see” vibe in both bond and mortgage markets.

On the housing front, the existing home market showed modest improvement: sales edged up slightly in November, and reports highlighted that lower mortgage rates compared with a year ago are helping at least a bit with buyer activity — though affordability remains a headwind and inventory is still tight.

Looking ahead to next week, investors will continue to look for Fed commentary and will be tuned to the GDP and Consumer Confidence reports on Tuesday.  Next week will be a short week as markets will close early on Wednesday and will be closed on Thursday for Christmas.

Hope everyone has a great weekend and thank you for reading!