Three consecutive weeks have shown interest rates on slight nudges up, though still significantly low following the Brexit ripple; and today, has revealed its fastest pace yet. Experts attribute the hike to the strong jobs data for July that added 255,000 new jobs to the employment sector. What makes it impressive is its significant difference from the predicted 180,000 increase. Wages also rose by 0.3 percent, a point up from the 0.2 percent prediction and a 2.6 percent rise since 2009.
Seventy thousand new jobs have been added to the business and professional services sector. There are 38,000 positions currently being offered in the government sector. Jobs in finance increased by 18,000 and there are 43,000 new health care positions. Meanwhile, the hospitality and leisure sector owned 45,000 additions.
It’s a good month, statistically speaking. This July charts the lowest unemployment numbers since 2007. It also revealed the highest consumer confidence for the same month since that same year. Other than that, the nominal home prices are at its peak since any July in history, coupled with the lowest record in mortgage rates.
Positive as most goes, however, there are still job sectors that showed little to no movement in job additions. These include the retail and wholesale trade sectors, the information industry, manufacturing, and construction.
This dent in the construction industry puts a strain to available inventory of homes for sale, which also influences home prices by the bars.
Shortage in inventory means limited choices for potential buyers looking for a suitable home option. In fact, finding the right place is one of the impediments cited by repeat buyers in their home-buying intent.
The issue in tight supply will put a cap off mortgage access, especially now that many and many more millennials are eyeing the option of investing on a mortgage. Twenty-five to 34 year-olds who are now considering buying their first homes rose to 81 percent this month compared to 75 percent last year, thanks to low mortgage rates. However, because of the surge in applications, it is also getting more difficult to get an approval. Nine percent of first-time buyers said qualifying for a mortgage is among the hurdles that stop them from getting the home they want. This is a 4-point increase from last year’s 5 percent who said the same thing.
How will the government and private sectors respond to this increasingly straining problem in inventory?
Though mortgage rates have been on a three-week streak, it still remains in low range. The 30-year fixed mortgage finished on an average of 3.43 percent for the week ending August 4 compared to last year’s 3.91 percent. The 15-year fixed-rate mortgage ended with a 2.74 percent average as against 3.13 percent a year ago. Meanwhile, the 5-year hybrid ARM averaged 2.73 percent – still significant from last year’s 2.94 percent. Will this conclude with a rate hike within the year?
There’s talk of a possible Fed rate hike by December. Traders said there is a 40% probability that that may happen. Even though mortgage rates are not dependent on changes in Fed Funds, there’s a directly proportional correlation between the two.
The trend is highly likely to continue and while it’s on a steep climb, it’s may be wise to lock in on current rates – or not. Next week’s results could be your deciding factor.
Justin McHood is America's Mortgage Commentator and has been providing expert mortgage analysis for over 10 years.