September 8, 2020
Last week we discussed the Federal Reserve’s impact on mortgage rates. As a reminder, the Fed doesn’t set mortgage rates, but it does influence the demand for mortgages through purchasing Agency MBS. And the same factors that move the markets also influence the Fed’s moves.
But Orion’s brokers are carefully tuned in to the daily news that moves markets, and last week was a fine example of reports on economic conditions that matter. Jobs and housing move markets, and last week we received updates on both. As we approach the end to a summer that will be talked about for years to come, economic data remains stronger than expected and suggests that there will be a partial rebound in GDP for the third quarter. Economists are cautiously optimistic in their outlook for the remainder of the year depending on whether Covid-19 resurges during the fall as well as the effects of future policies in response to the pandemic.
Drilling down, we learned that August payrolls increased 1.37 million and the unemployment rate fell from 10.2 percent to 8.4 percent as retail, leisure, education, and health services all saw people returning to work. Orion’s brokers should keep in mind that, through August, the economy has gained back roughly 48 percent of the jobs lost due to the “COVID Recession.” Initial jobless claims fell to 881,000 due to a change in the seasonality adjuster the Department of Labor uses to smooth out the data over the course of the year. Regardless, initial claims remain high and are only gradually improving.
Residential construction continues to be a bright spot with spending up 2.1 percent in July. Although mortgage applications fell for the third consecutive week, they remain 40 percent above their level this time last year. Our brokers continue to see existing borrowers who are able to refinance given Orion’s products and pricing. Be sure to talk to your AE about how we can help you help your clients.