The Federal Reserve appears ready to cut rates for the second time this year during their November 7 Federal Open Market Committee (FOMC) meeting, opined a recent report from the California Association of Realtors.
After last week’s surge, mortgage rates stabilized while remaining above 7%, so mortgage applications trended downward. The October jobs report showed low job creation and significant data issues, said the California Association of Realtors report, while other positive economic indicators suggested that the market did not react strongly to the weak report.
The labor market also slowed more than expected in October, according to the United States Department of Labor Statistics, said California Association of Realtors, with the economy only adding 12,000 new jobs, after three months ending in September when the economy added an average of 148,000 jobs a month.
As the California Association of Realtors report also noted, the low figure is largely due to events like hurricane events, the now-resolved port strike, and the Boeing strike.
Publicly listed American companies reporting earnings also showed a strong year, with earnings up 8.4% from a year earlier, said the report. As a result, the market did not react strongly to the small jobs figure, with the bond market actually inching slightly higher, the opposite expected result after a weak jobs report.
Wage growth picked up, with average hourly earnings rising 0.4% month-over-month and 4% year-over-year, according to the United States Department of Labor.
Real gross domestic product (GDP) increased at an annual rate of 2.8 percent in the third quarter of 2024 (table 1), according to an “advance” estimate released by the United States Bureau of Economic Analysis. In the second quarter, real GDP increased 3.0 percent.
However, the United States Bureau of Economic Analysis report shows a strong U.S. economy helped along by consumer spending, a strong labor market, and solid business investment, even amid high borrowing costs.
Consumer spending rose by 3.7% in the third quarter.
According to Mortgage News Daily, mortgage rates spiked at their fastest pace in months last week, following the jobs report, making for a total increase of nearly 3/8ths of a percent (.375%) in the average lender’s top tier conventional 30yr fixed rate.
“Moves of this size are rare, but less so when the market gets a big piece of surprising information after recently hitting a longer term high/low,” Mortgage News Daily added. “Those ingredients were in place this time around with prevailing rates close to the lowest levels in well over a year over the past few weeks and a shockingly strong jobs report.”
The average 30-year fixed mortgage rate reached 7.05% as of November 4 after a peak of 7.09%. Higher rates hit mortgage applications, which fell for the fifth consecutive period.
Based on the Mortgage Bankers Association’s weekly survey results for the week ending October 25th, said the California Association of Realtors report, the purchased application index dropped 0.1% on a seasonally adjusted basis when compared to the previous week.
The Refinance Index, which covers all mortgage applications to refinance an existing mortgage, and is the best overall gauge of mortgage refinancing activity, fell by 6% from last week while, in some good news, there was a 5% increase in mortgage applications to purchase a new home.
