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The Story Continues: The Weekly Market Update

Jobs and Disaster Recovery
Jobs and Disaster Recovery

Jobs and Disaster Recovery

With the release of last month’s job numbers, we were able to get a glimpse of the major effects of three major hurricanes hitting within a few weeks. We have seen many pictures of devastation from Texas to Puerto Rico. The jobs report was one more picture which has made the national numbers look bad, even considering the drop in the national unemployment rate, but the national numbers still dwarf the drastic effects upon the local economies and millions of lives.

This story will not be a short story. It will be a novel with many chapters. It starts with mass devastation and the delivery of food and water, as well as other supplies of survival. It will end differently for many. Some will relocate and many others will be part of the rebuilding process. That rebuilding process will create thousands upon thousands of jobs. This is likely to result in construction job shortages in other parts of the country.

How long will it take to recover? No one knows the answer to that question. Many economic reports will be skewed as these regions go through the process. Even the federal budget deficits will be affected by a slowing economy and increased funds spent on recovery efforts. Along with the budget deficits, there will be a spike in mortgage defaults. But again, the housing stock will be rebuilt. For market analysts, this will be a very interesting story, but not nearly as meaningful as those affected locally.

The Weekly Market Update

Rates edged up in the past week, with rates on home loans rising less than Treasuries. For the week ending October 5, Freddie Mac announced that 30-year fixed rates rose to 3.85% from 3.83% the week before. The average for 15-year loans rose 2 ticks as well, to 3.15%. The average for five-year adjustables moved down to 3.18%. A year ago, 30-year fixed rates averaged 3.42%.

Attributed to Sean Becketti, chief economist, Freddie Mac -- "After holding steady last week, rates ticked up this week. The 10-year Treasury yield rose 8 basis points, while 30-year fixed rates increased 2 basis points to 3.85 percent."

Note: Rates indicated do not include fees and points and are provided for evidence of trends only. They should not be used for comparison purposes.

The Brexit Adjustment: The Weekly Market Update

The Brexit Adjustment

Europe Awakens

Sometimes it is hard to explain why certain things happen in the markets. Much of the time the markets seem to have a mind of their own, and market analysts are reaching for explanations as to what happened after the markets moved in one direction or another. Of course, usually there are several factors affecting the markets at once and it is typically impossible to determine which is the dominant factor.

For example, let’s discuss the recent movement in interest rates. The Federal Reserve Board has raised rates three times in the past six months or so. To the public, this would indicate higher rates to borrow money to purchase homes or cars. But as we have indicated previously, the Fed controls short-term rates and they have an indirect influence on long-term rates. Indeed, the Fed has raised short-term rates by 1.0% overall, but as of a few weeks ago, long-term rates for home loans had barely moved half of that amount.

One reason long-term rates have not moved is the fact that the economy is not overheating and there is no sign of inflation. Job growth continues to be solid, but the economy grew by less than 2.0% in the first quarter. Then why did long-term rates start rising more recently? Remember Brexit and how the markets were worried that slow growth in Europe would affect our economy? Well, apparently Europe has shaken off the Brexit worries and growth is stronger than expected overseas. Like here, there are no signs of the European economies overheating. Thus, while rates remain low, the fact that Europe appears to be awakening from their slumber has put some pressure on the bond markets, and thus our long-term rates.

The Weekly Market Update

Rates moved up for the second week in a row. For the week ending July 13, Freddie Mac announced that 30-year fixed rates rose to 4.03% from 3.96% the week before. The average for 15-year loans increased to 3.29%, and the average for five-year adjustables moved up to 3.28%. A year ago, 30-year fixed rates averaged 3.42%. Attributed to Sean Becketti, chief economist, Freddie Mac -- "After fully absorbing the sharp increases in Treasury yields over the past couple of weeks, the rate on 30-year fixed loans has cleared the psychologically important 4 percent mark for the first time since May. Today's survey rate stands at 4.03 percent, up 7 basis points from last week."

Note: Rates indicated do not include fees and points and are provided for evidence of trends only. They should not be used for comparison purposes.