Last Week in Review: The Jobs Report for March was released, along with important housing news.
Forecast for the Week: Look for the minutes from March's Federal Open Market Committee meeting, plus news on wholesale inflation and consumer sentiment.
View: This simple tip can make a big difference in client meetings.
Last Week in Review
Not too hot. Not too cold. Just right. While Goldilocks from the famous children's story may have been referring to porridge, the sentiment also applies to the Jobs Report for March. Read on for the details.
The Labor Department reported that 192,000 jobs were created in March, as much of the country thaws out from the extreme harsh winter weather. This was in line with expectations, and it's a strong number given the amount of job creations reported in recent months. In addition, the figures for January and February were revised higher by 37,000 jobs.
The Unemployment Rate ticked up to 6.7 percent from 6.6 percent, while the more important Labor Force Participation Rate (LFPR) rose to 63.2 percent from 63 percent. Though it's good that the LFPR increased, it is still near 35-year lows. The LFPR measures the proportion of working-age Americans who have a job or are looking for one, and it should be moving higher in a recovery.
In housing news, CoreLogic reported that home prices (including distressed sales) rose by 12.2 percent from February 2013 to February 2014. This represents 24 months of consecutive year-over-year increases. In addition, from January to February, prices were up 0.8 percent. However, despite the rosy gains, prices are still nearly 17 percent below their peak set in April 2006. The big gains from 2013 are starting to cool and return to more normal historical levels.
What does this mean for home loan rates? The Fed is now purchasing $30 billion in Treasuries and $25 billion in Mortgage Bonds (the type of Bonds on which home loan rates are based) to help stimulate the economy and housing market. This is down from the original $85 billion per month that the Fed had been purchasing. The Fed will be closely watching upcoming reports, especially in the labor and housing markets, as it evaluates the timing of further tapering. These decisions will continue to impact our economy and home loan rates as we move ahead this year.
The bottom line is that now remains a great time to consider a home purchase or refinance, as home loan rates remain attractive compared to historical levels. Let me know if I can answer any questions at all for you or your clients.
Forecast for the Week
After last week's busy economic calendar, economic reports don't begin until Thursday this week.
As usual, weekly Initial Jobless Claims will be released on Thursday. Last week's claims jumped unexpectedly by 16,000, reaching a one-month high.
On Friday, look for news on inflation at the wholesale level with the Producer Price Index. The Consumer Sentiment Index will also be released.
In addition, the minutes from the March FOMC meeting will be released on Wednesday, and they could provide more insight regarding tapering and the Fed's Bond buying program.
Remember: Weak economic news normally causes money to flow out of Stocks and into Bonds, helping Bonds and home loan rates improve, while strong economic news normally has the opposite result. The chart below shows Mortgage Backed Securities (MBS), which are the type of Bond on which home loan rates are based.
When you see these Bond prices moving higher, it means home loan rates are improving and when they are moving lower, home loan rates are getting worse.
To go one step further a red "candle" means that MBS worsened during the day, while a green "candle" means MBS improved during the day. Depending on how dramatic the changes were on any given day, this can cause rate changes throughout the day, as well as on the rate sheets we start with each morning.
As you can see in the chart below, the markets have been volatile this year but home loan rates remain near historic best levels. I'll continue to monitor them closely.
Chart: Fannie Mae 4.0% Mortgage Bond (Friday April 4, 2014)
The Mortgage Market Guide View...
The Power of "Listening Slowly"
As a sales professional or service provider, you often meet with new clients and referral partners. But even if your questions are thorough, people may occasionally give vague or incomplete answers that, when left unexplored, could significantly impact both the advice and service you give them.
In the book, Change-Friendly Leadership, management coach Rodger Dean Duncan suggests you try a technique called listening slowly, which Duncan learned directly from PBS NewsHour anchor Jim Lehrer.
"He urged me to ask a good question," says Duncan, "listen attentively to the answer, and then count silently to five before asking another question. At first that suggestion seemed silly. I argued that five seconds would seem like an eternity to wait after someone responds to a question. Then it occurred to me: Of course it would seem like an eternity, because our natural tendency is to fill a void with sound, usually that of our own voice."
So, how can this technique help you in meetings? When people are left with a few moments of silence, you'll be amazed at how often and how quickly they will offer more information that can help you better serve them.
Of course, you don't want to pause for five seconds after every single question – strictly factual and yes-or-no questions are fine as they are. But when you're looking for a deeper-level answer, an opinion, or an expanded view into a person's thoughts or needs, then try incorporating the magic of listening slowly into your client meetings.
Please feel free to pass this tip along to your team, clients, and colleagues.
Economic Calendar for the Week of April 7 - April 11
Wed. April 9
Thu. April 10
Jobless Claims (Initial)
Fri. April 11
Core Producer Price Index (PPI)
Fri. April 11
Producer Price Index (PPI)
Fri. April 11
Consumer Sentiment Index (UoM)
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As your mortgage professional, I am sending you the MMG WEEKLY because I am committed to keeping you updated on the economic events that impact interest rates and how they may affect you.
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