(Be sure to click on View Slideshow & click thru all 10 photos to read about each new project.)
LABOR MARKET IMPROVING
The data released earlier in the week hinted at healthy improvement in the labor market, and Friday’s Employment report confirmed the gains. Against a consensus forecast of 180K, the economy added 203K jobs in November. The Unemployment Rate declined from 7.3% to 7.0%, the lowest level since November 2008. The economy has added an average of 193K jobs over the past three months. Several Fed officials have suggested that they would like to see sustainable job gains around 200K per month to confirm that the labor market is back on more stable ground before scaling back on monetary stimulus. This data brings the Fed closer to tapering its bond purchase program.
This week’s economic data revealed that the strength in the labor market is consistent with improvement in the overall economy as well. Third quarter GDP was revised substantially higher to 3.6% from 2.8%, well above the consensus of 3.0%. This was the fastest pace of growth since the first quarter of 2012. The ISM national manufacturing index rose to the highest level since April 2011. October New Home Sales increased 25%, but this was from a somewhat depressed level in September. Finally, Consumer Sentiment jumped to the highest level since July.
BUYING TRENDS: AMERICANS PREFER MIXED-USE, WALKABLE COMMUNITIES
“Growth patterns, economic development and quality-of-life issues are inextricably linked to the success of communities and residents,” said NAR President Gary Thomas. “Realtors® build communities and care about improving those communities through smart growth initiatives. Although there is no one-size-fits-all approach, smart growth is typically characterized by mixed-use development, higher densities, and pedestrian-friendly streets that accommodate a wide diversity of transportation modes.”
The most popular choice among respondents? A suburban neighborhood with a mix of houses, shops and businesses. Least popular was a suburban neighborhood with just houses.
Mortgage Market News for the week of Oct. 11, 2013
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PROGRESS IN CONGRESS
With government produced economic reports postponed by the shutdown, the budget and debt ceiling discussions in Congress dominated the economic news again this week. The gridlock in Washington and the signs of progress have caused large movements in the stock market, but the impact on mortgage rates has been much more limited, and mortgage rates ended the week just a little higher.
Of the two, the debt ceiling has much more serious potential consequences for the economy and financial markets than the government shutdown. With the debt limit rapidly approaching, on Thursday the two parties raised investors’ hopes for a deal. It was reported that both sides might agree to a short-term deal which would extend US borrowing authority until November 22. Such a deal would remove the threat of a disruptive default in the short-term, and it would give Congress more time to reach a longer-term compromise. It is not known at this time whether the deal would end the government shutdown. On Thursday, stocks recovered all their losses from earlier in the week and turned positive for the week.
Investors almost universally misread the Fed’s signals leading up to the September 18 Fed meeting, when the Fed decided not to taper its bond purchase program. As a result, investors were very eager to see the detailed Minutes from that meeting, which were released on Wednesday. The vote at the meeting was 9 to 1 in favor of maintaining the current level of bond purchases, but the Minutes revealed that Fed officials had very mixed feelings about whether to taper and that it was a “relatively close call”. Overall, Fed officials wanted to wait for greater improvement in the labor market before reducing monetary stimulus. In addition, they expressed concern that the rise in interest rates that had been seen and the unresolved questions about fiscal policy could slow economic growth.
• Consumer Sentiment declined to the lowest reading since January
• Jobless Claims jumped partly due to computer glitches in California
• Results were mixed for the 3-yr, 10-yr, and 30-yr Treasury auctions
• Gold prices dropped below the $1,300 per ounce level
Investors will continue to follow the budget and debt ceiling discussions next week. If the shutdown is not resolved, most of the economic reports scheduled for next week will be postponed, including the Consumer Price Index, Industrial Production, and Housing Starts. Unaffected by the shutdown, the Fed’s Beige Book will be released on Wednesday and the Philly Fed index will come out on Thursday.