Minnesota Homes Today Local & National News

Friday’s Jobs Report Represents A Big Risk To Low Mortgage Rates

by Leave a Comment

Net new jobs created (2000 - 2011)

Have you been floating a mortgage rate? It may be time to lock.

At 8:30 AM ET Friday, the government’s Bureau of Labor Statistics will release its November Non-Farm Payrolls report. Better known as “the jobs report”, the monthly Non-Farm Payrolls figures provide sector-by-sector employment data, and tally the size of the current U.S. workforce size.

From these two elements, the national Unemployment Rate is derived.

Since topping out at 10.2% in October 2009, the Unemployment Rate has dropped to 9.0%. More than 2.3 million net new jobs have been made in the last 24 months.

Wall Street expect to see 125,000 more jobs added in November.

Depending on how closely the actual Non-Farm Payrolls data meets Wall Street expectations, Minneapolis rate shoppers could find that the mortgage market landscape has shifted beneath them. The jobs report is a mortgage-market catalyst and when its reported value differs from Wall Street expectations, the impact on mortgage rates can be palpable — especially in a recovering economy.

The connection between the jobs market and the mortgage market is straight-forward — as the jobs market goes, so goes the economy.

  1. When more people work, consumer spending increases
  2. When consumer spending rises, businesses expand and invest
  3. When businesses expand and invest, more people are put to work

Furthermore, employees and employers both pay taxes to governments. With more tax revenue, governments embark upon new projects which (1) require the hiring of additional workers, and (2) require the purchase and/or repair of additional equipment and supplies. 

Employment can be a self-reinforcing cycle for the economy and that’s why Friday’s jobs report will be so closely watched. If the number of jobs created exceeds the 125,000 expected, mortgage rates will rise on the expectation for a stronger U.S. economy in 2012.

Conversely, if the jobs figures fall short, mortgage rates may fall. 

Mortgage rates continue to hover near all-time lows according to Freddie Mac’s weekly Primary Mortgage Market Survey. The average 30-year fixed rate mortgage is sub-4.000 percent nationwide, with an accompanying fee of 0.7 discount points. 1 discount point is equal to 1 percent of your loan size.

If you’re under contract for a home or looking to refinance, minimize your interest rate risk. Lock ahead of Friday’s Non-Farm Payrolls release.

Get your rate lock in today.

Case-Shiller Index: 17 Of 20 U.S. Housing Markets Slipped In September

by Leave a Comment

Case-Shiller Index September 2011

Standard & Poor’s released its September 2011 Case-Shiller Index this week. The index tracks home price changes in select cities between months, quarters, and years.

The Case-Shiller Index for September showed drastic devaluations nationwide.

As compared to August, home values fell throughout 17 of the index’s 20 tracked markets, led by Atlanta’s 5.9% drop. On an annual basis, home values have now returned to early-2003 levels.

That said, home buyers and sellers should be cautious when referencing the Case-Shiller Index. The index is a flawed metric and, as such, can lead to improper conclusions about the housing market overall.

The Case-Shiller Index’s first flaw is its most obvious — its limited sample set. 

According to Wikipedia, there are more than 3,100 municipalities nationwide. Yet, the Case-Shiller Index includes data from just 20 of them in its findings. These 20 cities account for fewer than 1% of all U.S. cities, and just a small percentage of the overall U.S. population. 

The “national figures” aren’t really national, in other words.

Even on a city-by-city basis, the Case-Shiller Index gets it wrong.

By lumping disparate neighborhoods into a single, city-wide result, the index ignores the relative strength of one area at the expense of another. In the aforementioned Atlanta, there are areas that fared much better than September’s -5.9% as cited by Case-Shiller. Some areas fared much worse.

A second flaw in the Case-Shiller Index is it’s methodology for measuring changes in home value. The index only considers “repeat sales” of the same home in its findings, and those homes must be single-family, detached property. Condominiums, multi-family homes, and new construction are not included.

In some cities — Chicago, for example — “excluded” property types can account for a large percentage of total monthly sales.

And, third, the Case-Shiller Index is flawed by “age”.

Because Standard & Poor’s publishes on a 60-day delay, the Case-Shiller Index is reporting on a housing that no longer exists. Sales that closed in September are based on contracts written from June-August –a time-frame that’s 6 months aged.

The best use of the Case-Shiller Index is as an analysis tool for economists and policy-makers interested in the long-term trends of U.S. housing. The index does very little good for every day buyers and sellers, unfortunately.

For up-to-date, accurate market data, talk to a real estate professional instead. Bob Elliot 612 578 6162 or click Minnesota Real Estate Today.

New Home Supplies Fall To An 18-Month Low

by Leave a Comment

New Home Supply 2009-2011

If you plan to buy of new construction in Minnesota sometime in 2012, don’t expect today’s low prices. Like everything in housing of late, the market for newly-built homes appears to be stabilizing and, in some markets, improving.

As foreshadowed by this month’s strong Homebuilder Confidence survey, the Census Bureau reports that the number of new homes sold rose to a 6-month high in October, climbing to 307,000 units on a seasonally-adjusted, annualized basis.

A “new home” is a home that is considered new construction. It’s the opposite of an “existing home”.

Home buyers are comparing new construction to home resales and liking what they see. At the current sales pace, the nation’s complete new home inventory would now be depleted in just 6.3 months. This marks the lowest home supply since April 2010 — the last month of the last year’s federal homebuyer tax credit.

By building only to meet new demand, builders are keeping home supplies in check, and home prices stable. They’ve also found a niche market — 80% of homes sold last month sold for less than $300,000.

Split by region, the Census Bureau reports October’s New Home Sales as follows :

  • Northeast Region : +0.0% from September 2011 
  • Midwest Region : +22.2% from September 2011 
  • South Region : -9.5% from September 2011 
  • West Region : -14.9% from September 2011 

Unfortunately, the data may be incorrect.

Although the October New Home Sales report says that sales climbed 1.3 percent last month, the government’s data was published with a ±19.7% margin of error. This means that the actual New Home Sales reading may have been as high as +21.0 percent, or as low as -18.4 percent. Because the range of values includes both positive and negative values, the Census Bureau assigned its October data “zero confidence”.

As home buyers, then, we can’t take our market cues from the published data. Instead, we should look to other metrics including Housing Starts data and the aforementioned homebuilder confidence survey. Each points to strength in the new home market, and foretells higher home prices in 2012.

If you’re in the market for new construction, consider writing an offer soon. Home prices remain low and mortgage rates do, too — a combination that keeps home payments low. Next year, that may not be the case.

Categories