Last week the 30-year mortgage rate fell to, on average, 7.17%, its lowest level since August. Refinancing applications rose 14 percent week-over-week, something that Orion’s AEs are seeing as well. Orion’s management thinks that our broker clients should know what is going on out there that is driving interest rates, as well as the stock market, so that you can explain it to your clients

Stocks closed higher Friday following a strong monthly jobs report to clinch a sixth straight week of gains, with the S&P 500 and Nasdaq Composite hitting their highest closing levels since early 2022. Analysts said the Labor Department's report that November added 199,000 jobs on a seasonally adjusted basis likely keeps the Federal Reserve on pace to hold rates steady at this week's meeting.

The drop in the unemployment rate to 3.7 percent, combined with rising payrolls and earnings, portrays an economy that is easing toward a soft landing and is noton the brink of a recession.

Our focus now turns to the Federal Reserve's last monetary policy committee meeting ofthe year this week. Markets are widely anticipating the U.S. central bank to hold steady on rates, as do Orion’s management. While the Federal Open Market Committee is expected to hold rates steady, the tone from Jerome Powell and the presidents of the various Federal Reserve districts will still be of high interest to market watchers. As it stands now, the Fed's favored inflation gauge, core PCE inflation (Personal Consumption Expenditure), looks on track to end the year comfortably below the central bank's forecast and not too far off the Fed's 2 percent target. Outside of the Fed meeting, the economic calendar also includes the consumer price index and producer price index reports, as well as updates on retail sales and industrial production.

Despite some movement higher in interest rates Friday in response to the jobs report, Orion’s wholesale rates have come down. Job market strength may be enough to keep the Fed cautious with respect to any comments regarding the path for rates at its December meeting. Inflation is declining, but further declines are likely dependent upon some slowing in the job market.

Many believe that the Fed will begin to cut rates in the spring of 2024, as job market trends are likely to weaken from here. This report, however, provides further evidence that the labor market remains healthy, and our AEs echo that sentiment in the areas they cover. The recent rapid decline in rates, in particular the mortgage rate is down nearly 80 basis points since the end of October, along with continued job growth, are beneficial for homebuyers. But if labor markets remain this strong, the pace of mortgage rate declines will likely not continue in the near term or may partially reverse.

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