Life is Full of Surpises.

People say that “life is full of surprises.” And indeed, last week’s Jobs Report contained several surprises. Read on to find out if they were good or bad...and what they meant for home loan rates.
Overall, the Jobs Report wasn’t great, but it did surprise by being better than anticipated. One thing that wasn’t a surprise was the unemployment rate which held steady at 9.1%. But the headline number came in at 103,000 jobs created, which was better than expectations of 60,000 and even higher than some of the more frothy expectations. In addition, 137,000 jobs were created in the private sector, which offset more government job losses and which was a lot better than the 83,000 private job gains expected.
Another surprise in the report was the significant upward revisions, which added 99,000 jobs to what was previously reported in prior months, and this added to the positive tone of the report. These upward revisions really change a very pessimistic jobs picture to something a bit more optimistic. For instance, last month the Jobs Report showed zero job creations and now that figure has been revised to show 57,000 jobs created. Once again, these aren't great numbers—but they are better than bad, and they tell us that the economy is not in a recession…at least for now.
So, what did all of this mean for home loan rates? It’s important to remember that when our economy is struggling, our Bond Market usually benefits as investors seek a safe haven for their money. And since home loan rates are tied to Mortgage Bonds, our home loan rates are sometimes at their best when our economy is struggling. In a way it makes sense...in times of economic struggle, good home loan rates can help kick start our economy in other areas.
Yet, when good or better than expected economic news hits the wires, like it did with Friday’s Jobs Report, investors often move their money out of Bonds and into Stocks in an attempt to take advantage of these gains. And that’s a big reason why we saw Bonds and home loan rates worsen late last week.
The most important thing to remember is that now is still a great time to purchase or refinance a home, as home loan rates remain near historic lows. Let me know if I can answer any questions at all for you or your clients.

Forecast for the Week



There aren’t a lot of economic reports in this holiday-shortened week, with the Bond Market closed Monday for Columbus Day (Stocks are open for a regular session). Be sure to look for:
On Tuesday, the Meeting Minutes from the September Federal Open Market Committee (FOMC) meeting will be released and it could garner some attention.
The usual weekly Initial Jobless Claims report will be released on Thursday. Last week’s initial jobless claims crept back up to just above 400,000 so it will be important to see which way this week’s numbers move.
Investors will also be focusing in on the Retail Sales report for September, which is due out on Friday. Last Thursday it was reported that September sales for retailers, which is a separate report, were solid—showing a 5.1% year-over-year gain from the 23 largest retailers due to back-to-school sales.
Also on Friday is the Consumer Sentiment Index, so we’ll get an idea about how consumers are feeling about the economy.
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.
As you can see in the chart below, Bonds and home loan rates worsened last week due to several factors. I’ll be keeping a close eye on which way they move this week.
Chart: Fannie Mae 3.5% Mortgage Bond (Friday Oct 07, 2011)

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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.

Bob Veldkamp
698 Tank Farm Rd Ste
Suite 230B
San Luis Obispo, CA 93401
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