Market Update: Rates, ADP and BLS jobs reports, GDP, PCE inflation, and pending home sales

Good morning and happy Friday. Jordan Keck here, your lender buddy, with your weekly market update. So hopefully you all had a great Halloween. We do have a little bit of spooky news today here with rates continuing their climb higher, going up from 6.9% last week to 7.09% this week. So getting into some of the data, it seems a little counterintuitive on some of this, but bond market pretty determined to continue their rise higher in light of recent news and expectations for future economic data. Also want to make sure that you remember this month— and now it is November 1st already— you have a couple of dates to be aware of. First is going to be Veterans Day. That is going to be November Monday, November 11th. And of course Thanksgiving on the 28th. So as you're looking at closing dates, be sure to keep those in mind. As far as our weekly mortgage tip here, looking at interest rates and locks and extensions, especially with the market rates moving up as high as they are. I've been saying this a lot here lately, but you got to make sure that your clients are locked in as soon as possible, especially if they're shopping around for rates right now before choosing which mortgage they're going with, which lender they're going with, knowing that the rates that they are quoted are dependent on the day. They're going to change just like the stock prices. So you've got to have the same rate and then compare what those total origination fees are. If you are under contract, get that rate locked as quickly as possible because we've seen some clients have changes as much as $1,000 for the same rate to as much as $3,000 a day difference for every single day that they waited and the market continued to rise higher. So be safe and get it locked in. If the market goes down, that's a good problem to have, but you gotta make sure that you get that locked in early. And then as far as extensions go, typically you can lock in for either 30 days, 45 days, 60, and sometimes longer than that. So make sure that they're giving themselves enough time, your clients here, because if you've got a closing in 32 days, don't necessarily want to go for a 30-day lock unless you can get a few free days on that one. Maybe go with a 45, slightly higher cost, but especially if you think there might be some repair negotiations, maybe there's going to be some delays in the appraisal or repairs that need to be talked through. Give yourself some extra time or make sure to early discuss with your lender what the cost would be for those extensions and what the game plan will be. One client in particular, we are comparing where they locked 30 days ago compared to where the market is now. And if they hadn't locked at the same interest rate, it would be $13,000 higher in closing costs for that same rate. That's over the course of about a month. So Don't play around with this. Get those clients locked in as soon as possible to avoid some difficult conversations. First up here, we got quite a bit of jobs data this week. So October's ADP jobs report came out first showing 233,000 jobs created, which blew the estimates out of the water, over twice the amount expected at only 115,000. And in addition to that, September was revised higher by another 16,000. So all in, this This report beat the expectations by 134,000 jobs when the original estimate wasn't even that there would be 134,000 jobs. ADP didn't get affected by the hurricanes though. So a lot of the data could be misconstrued there because this just counts how many people are on payroll, but not necessarily how many people are receiving paychecks. So that's where the BLS jobs report comes into play. And interesting to see when that came out, how much it would be different from the ADP. And sure enough, this week we also did get that BLS report and this came in extremely low. Expectations were already low of about 113,000, which a lot of people thought was going to be low compared because in August we saw a $254,000 headline number. The actual jobs number that came in for October was only 12,000. So huge, huge decrease there. And we also saw 112,000 of negative revisions to the August and September jobs numbers. We saw an 81,000 negative revision for August and 31,000 for September. If you've been watching this for any period of time, you know that the BLS numbers are full of errors and huge amount of adjustments. So even with this 12,000 count for October, there's still potential for this to get revised again in the next couple of months to maybe even a negative number. I mean, we're seeing an 81,000 negative revision for August alone. Easy to consider that August might have actually been negative. And a lot of this originally the markets took for the first maybe hour or so as a good sign. They saw weakness in the jobs market and economy, but very quickly ended up getting worse. So already with interest rates here higher as of yesterday, looking at today, there's likely going to be some more negative revisions. On lender rate sheets, going to see some reprices there because they just misconstrue the data, maybe seeing it just as seasonal, maybe seeing it just due to the weather. But even though with a huge weak jobs report, the market's still trucking forward on their rise towards higher rates. Within the BLS jobs report, there was the household survey component, which is where the unemployment rate comes from. That showed 368,000 job losses for the month. We had 220,000 people left the labor force, so the unemployment rate rose only about 0.1%, but when they rounded it, ended up looking unchanged between the previous and the current numbers. So headline unemployment not changing, even though realistically it did rise about 0.1%. Next up, the first reading of the Q3 GDP. This will be the first of a couple or 2 or 3 readings of this came in showing 2.8% growth for the US economy. Below estimates of a 3% number. Still pretty good. It's not really a bad number, but about almost a full percent, 0.85% of that came from government spending, helping make up almost a third of that total economic growth. Within the GDP estimate was the PCE, or the Personal Consumption Expenditures Inflation Price Index, and that component showed that it came in at 2.2% versus the 2.1% forecasted. This led to some expectations that maybe the actual PCE data that came in would be a little bit higher than estimated as well. Well, that data came in. PCE showed a rise for the month of only 0.175, rounded to 0.2. Year over year ended up declining from 2.3 to 2.1, pretty much exactly as expected. So the GDP numbers reflected a little bit hotter in it, but the PCE actually came in pretty much right where we wanted it to be. The core rate rose 0.254%, slightly above estimates, got rounded to 0.3%, and year-over-year remained at 2.7% versus the expectations of dropping to 2.6%. Within that report, the biggest components of increase were in shelter and healthcare costs, easily accounting for at least half the total amount of inflation. So all of these reports, I mean, we're seeing more and more this willingness in the bond market to continue to push higher towards rates. Part of that might be the looking at the election coming up here. So big hope of mine is that once that happens, things may get to flatten out a little bit. But I mean, there's not a huge amount of explanation for this continued drive forward, other than maybe they're just pricing in a win for the election right now. And then after that happens, we might see a little bit of stabilization, but your guess is as good as mine at this point. And lastly, here, pending home sales for the month of September rose 7.4%. Well above expectations of only a 1.1% increase. This is really reflecting the drop in interest rates that we saw during that time in anticipation of the Fed rate cut. This, and then year over year, we went from a -3.3% pending home sales year over year in August to September being up 2.6% over last September. This means we'll likely see strong existing home sales number as well coming out to reflect that increased amount of buyer traffic and lower interest rates for that month. But the flip side of that is because we've seen a higher move in interest rates for the month of October, when we end up getting the pending home sales and existing home sales numbers, likely going to see a drop in activity there as well. Wish I had some better news. Seems like a lot of downers this week on it, but just continue to do what we do, adjust, adapt, make sure that we're on top of our data for our clients. Get those interest rates locked in sooner than later. Talk about payments, not interest rates, and make sure your clients can afford the payments they're looking at. Hopefully you have a wonderful weekend. We'll see you next time. Take care.