Last Friday we received the latest job numbers from the U.S. Bureau of Labor Statistics which reported that total nonfarm payroll employment rose by 336,000 in September, and the unemployment rate was unchanged at 3.8 percent. The nonfarm payrolls’ number was twice what had been forecast. Despite the Federal Reserve continuing to increase the overnight Fed Funds rate, the employment picture in the Unites States, and the economy in general, continues to motor along. What does it mean for Orion’s broker’s valued clients?

Our brokers know that even before the strong jobs data Friday, mortgage rates climbed north of 7 percent and buyers face a real possibility that they may continue rising as long as economic indicators remain resilient. The average 30-year fixed-rate mortgage increased to 7.49% for the week ending Oct. 5, according to Freddie Mac's latest Primary Mortgage Market Survey. A year ago, the 30-year fixed-rate mortgage averaged 6.66 percent. The average rate for a 15-year mortgage was 6.78 percent, up from 5.9 percent last year.

The Fed hasraised interest rates 11 times since last year, primarily due to factors which have also triggered significant increases in mortgage rates, pushing them to their highest level in over two decades. As a nation we have high inflation, a strong job market, rising wages, uncertainty around the Federal Reserve's next move (always present), are contributing to the highest mortgage rates in a generation.

Orion, and the industry in general, has seen the higher rates pulling back homebuyer demand as they have eroded affordability for most buyers. A typical monthly mortgage payment for buyers reached $1,896 in August, or 18 percent higher thana year prior, a recent Zillow report said.

Brokers have seen their “move up” buyers being impacted. The higher rate environment means existing homeowners are less likely to put their homes on the market, even as home prices rise. They want to avoid borrowing at today's much higher rates, sometimes double their existing cost of funds. This has prevented housing supply from being built and is why home prices continue to rise in conjunction with mortgage rates.

Meanwhile,many of our brokers tell Orion’s AEs that homebuyers still in the market compete over the limited inventory, evidenced by increasing home listing prices and quick sales. Home prices remain high. In August, prices were 42% higher compared with March 2020, when the pandemic began, according to a recent CoreLogic report. U.S. home prices (including distressed sales) increased by 3.7% year over year in August 2023 compared with August 2022. Home prices rose by 0.3% on a month-over-month basis compared with July 2023. To put it into perspective, homebuyers in August paid a median sales price of $375,000.

Orion’s management realizes that continued mortgage rate increases challenge affordability across our markets. We also know that home price growth is in line with typical seasonal averages, reflecting strong demand bolstered by a healthy labor market, strong wage growth, and supporting demographic trends. As we move through October and into autumn and then winter, coupled with higher mortgage rates, additional monthly price gains may taper off. Talk to one of our AEs about the right program for your client!

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