How To Get Home

After barely moving for four days, mortgage rates jumped Friday morning after the release of the Employment report. The economy added 180K new jobs in March, far above the forecasts, and the figures for prior months were revised higher as well. The Unemployment Rate fell to 4.4%, below the consensus of 4.6%. Hourly Earnings, a proxy for wages, rose at the expected 4.0% annual pace. In short, wage inflation in March came in at the expected level, but economists are concerned that increased competition for workers due to tight labor markets will lead to higher future wages and inflation.

Fed Chief Bernanke recently emphasized that inflation is running higher than the Fed’s comfort level and that the Fed’s primary policy concern is that inflation will not move lower. This Employment report will further fuel these concerns, and it will make this month’s other economic and inflationary indicators even more important to the mortgage markets.

In the housing sector, the Pending Home Sales index increased slightly in February. The index is based on contracts which were signed but were not yet closed, so it is a leading indicator of future home sales. Following the release, the Chief Economist of the National Association of Realtors (NAR) suggested that an “underlying stabilization” is taking place in the housing market, but he added that troubles in the subprime sector will slow the pace of future activity to some degree. Given the bad weather in February and the issues in the subprime market, this data was encouraging.

Good news on the economy and the strong labor market may cause a slight uptick in mortgage rates, but are welcome signs of life for those trying to make their mortgage payments.