Jordan Keck breaks down mortgage rate locks, the 43-day government shutdown's impact on IRS and FEMA backlogs, and ADP data showing job losses averaging 11,250 per week in late October. Small business optimism hit its lowest level since April, and delayed economic reports may leave the Fed without fresh data before its Dec 10 meeting, making a rate cut unlikely.
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Good morning and happy Friday. Jordan Kekir, your lender buddy, with your weekly market update. Kicking off, interest rates basically flat week over week, moving from 6.32% to 6.34%. Little up, little down, but again, with government opening up here, there's going to be a delay on some information that we get that could potentially move the markets. So until that time, rates are playing it pretty carefully and not wanting to jump too soon. Starting with our weekly mortgage tip though, wanting to talk about rate locks and extensions. Few people realize that when a lender locks in an interest rate, they're actually simultaneously buying an interest rate hedge against that lock. So if a loan doesn't close at all, or if the closing date moves and they need to extend again, they are not going to be getting the advantage of that rate lock hedge and end up having to do that again. They basically have to pay more money when that happens. So rather than continuing to give that for free, since the lender is incurring a cost, they pass that cost along to the consumer when there's an extension. Even though the initial lock does cost the lender money, they're not charging clients for that lock upfront. Now, that being said, there are different lock periods. Typically, you can— standard lock period is 30 days. You can also get 45 or 60 with most lenders for a slightly higher amount in closing costs. Those are going to be cheaper than doing an extension in most cases. So best to err on the side of having a little bit more than if you think you're right there on the edge, or you might need to extend. Now, some lenders will offer 75 to 90 day lock periods. Not everyone does. And again, it just gets a bit more expensive in those cases, because you're having to factor in more interest rate risk during that period. Now, is that a good idea to do? Should clients wait to lock in their rates so they can get a shorter lock period, maybe take advantage of rates moving in their favor? Potentially, but the amount that the closing costs can change at the exact same interest rate day to day can be a factor of thousands of dollars. So the way I look at it is it's almost always best to lock in an interest rate up front because when people are buying a home, rarely are they going to decide to go down to the casino and gamble $1,000, $2,000, $3,000 a day. That's exactly what they're doing if they don't lock in an interest rate. So 99% of the time, I'm locking in my clients upfront. Next up, government shutdown. You probably already heard it's finally over after 43 days. This beat the previous record from 2019 of 35 days, beating it by over a full week here. But while this is a good thing, there will still be some time before we get back to operations as usual, likely some backlogs. Uh, personally, I had a client who was actually able to go to the local IRS office, get an appointment very, very quickly. But are other people going to be doing the same so it takes longer? Tough to say. Among those who may have backlogs, you're going to be looking at the IRS, FEMA, and USDA. Next, ADP's employment report for October showed 11,250 job losses per week for the last 4 weeks on average. This is different than ADP's monthly report that comes out because we saw on their last report they showed 42,000 job gains for the month of October. but that report is only taking into account through the 12th of the month. That being said, since we are looking at the last 4 weeks, likely means the second half of October and in the early part of November have been very weak. And when we get the next monthly jobs report from ADP, that'll likely be reflected as well. The NFIB Small Business Optimism Index fell again for October, now at the lowest level since April, mainly due to weak labor market conditions. As we've been seeing with employment, the majority of job gains the last few months have been in large businesses, with small and medium businesses showing a net loss, which is echoing what we're seeing in this index. Employers' plan to hire within the report also fell to— over the next 3 months fell to just 15%. So only 15% of employers who were surveyed said that they do have plans to hire in the next 15 months— in the— excuse me, in the next 3 months. And lastly here, with the backlog of economic reports, we should be seeing some more of those roll in here. Here, but it's not going to be immediate. Might be anywhere from a couple of weeks to a month or so more. That means that, you know, those normal market-moving reports are going to be delayed, and so interest rates won't have a whole lot to go on in the meantime, as well as the Fed in deciding whether or not to do rate cuts. This includes the CPI and PCE inflation reports, as well as the BLS September jobs reports. Now, since the Fed's next meeting is December 10th, they're likely not going to see these reports by then or have time to digest them. Which based on our last time the Fed cut rates, they said if we do not have this information by the time our next meeting, we will most likely not be cutting rates. So because of that, the market's already factoring that into play. So if the Fed meets, they don't cut interest rates, then that's pretty much as expected. If they end up do cut, if they do end up cutting interest rates, that's going to be unexpected for the market right now. We could see an improvement in market rates because it's a difference in expectation. For the positive. That being said as well, also wanna watch for the commentary. Last time when the Fed met, they cut interest rates, which was as expected, but what wasn't expected is they're putting a caveat on potentially cutting in December when the market had already thought that would be a given. Because of that change in expectations, we saw mortgage rates move higher when the Fed cut the overnight funds rates this last month. So again, we'll be watching really closely to see if they cut, if they don't, what the commentary is, and when these reports come out, which might be able to fuel some higher chances of seeing a rate cut in December. As always, hopefully this is helpful. Have a fantastic weekend. We'll see you next time. Take care.
