Is it any wonder why we haven’t recovered?by Tim Manni
For a mortgage blog, the subject of jobs has come up quite a lot here recently. The reason being, as noted here quite often, jobs play an essential role in maintaining the housing market’s health, vibrancy and sustainability. Steady jobs produce consumer confidence; it’s as simple as that. Consumers who have a steady paycheck are far more likely to buy and refinance. Also, if you’re employed, you are better suited to handle costs increases in everything from your monthly payment to an unexpected home repair.
The minutes from the Federal Open Market Committee’s (FOMC) latest meeting were released last week, confirming the important connection between jobs and housing:
The Federal Reserve released the minutes of its August 10 meeting, and most clearly identified perhaps the chief reason the economy cannot seem to get out of its own way, economic “stimulus” and low rates or not. Whether you’re a consumer or run a business, it all comes down to confidence.
From the minutes: “A number of participants reported that business contacts again indicated that uncertainty about future taxes, regulations, and health-care costs made them reluctant to expand their workforces. Instead, businesses had continued to meet growth in demand for their products largely through productivity gains and by increasing existing employees’ hours.” (Emphasis added)
Faced with such concerns, is there any wonder why job growth has been nonexistent in this recovery?
Despite the lack of consumer confidence, mortgage rates remain at record lows:
HSH’s overall mortgage monitor — our weekly Fixed-Rate Mortgage Indicator (FRMI) — dipped back by another two basis points, closing our survey at an average 4.76%, a new low. The FRMI includes rates for conforming, jumbo, and most recently the GSE’s “high-limit” conforming products and so covers much of the mortgage-borrowing public. For borrowers who don’t need a long-term, fixed rate mortgages, a viable choice might be a Hybrid 5/1 ARM, which ended the week at an unchanged average rate of 3.73%.
Low mortgage rates are a welcomed benefit, but with so few people able to take advantage of them, their stimulative effect has been rather muted.
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