September 7th, 2010

Is it any wonder why we haven’t recovered?



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.

CLICK HERE to continue reading the latest issue of our Market Trends Newsletter, “The Fed and the Economic Downshift.”

HSH.com’s free Market Trends Newsletter, an in-depth analysis of various financial markets from the week prior, is published every Monday. Email subscribers receive it in their inbox Friday night, so sign up today! Also, be sure to check in with our Market Trends blog for all news relating to any weekly shift in mortgage rates.

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About the HSH Blog

HSH.com's daily blog focuses on the latest developments in the mortgage and housing markets. Our mission is to relate how changes in mortgage rates and housing policy, as well as the latest financial news, impacts consumers, homebuyers and industry insiders alike. Our 30-plus years of experience in the mortgage industry gives us an edge as we break down the latest changes in an ever-changing market.

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Tim Manni

Tim Manni is the Managing Editor of HSH.com and the author of their daily blog, which concentrates on the latest developments in the mortgage and housing markets.

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