One of the hottest topics of any given election season is the unemployment rate and which candidate is going to do more to improve it. The logic typically flows that voters will opt for the politician who has more promise for lowering that rate. Of course, if those voters are in the market for a new home, it might actually behoove them to vote for the candidate who is more likely to worsen joblessness.
Okay, that’s a really cynical way of looking at the world. But the truth is that there is almost always an inverse reaction to every piece of good news in this string-theory-driven economy of ours.
For example, we got access to two new reports: the ADP Employment Report and the ISM Manufacturing Report. Both reported employment numbers that were much stronger than expected, which is great for the United States economy as a whole. But it’s not so great for mortgage rates.
Basically, whenever anything good happens for the economy—whether that’s high employment or healthy growth—rates are bound to increase. Why? Because the American people are more likely to be able to afford it.
Want a more dramatic example? Consider what mortgage rates were at during 2008. Upwards of 6.5 percent. Then, of course, the subprime mortgage crisis occurred. Last Summer, we were looking at rates down around 3.5 percent. Believe it or not, those low rates were still feeling the impact of the economic downturn that the U.S. experienced post-2008.
But now we’re up to 4.25 percent again, and it doesn’t look like we’re going to be descending anytime soon. That’s because economists see good things in the future, and it’s tough not to. The Federal Reserve raised rates during December—the first time in quite a while—and employment remains steady.
Granted, rates could have climbed even higher by the end of the day Wednesday. Most prognosticators can put two-and-two together, and gauge that The Fed’s own Employment Situation Report (which is scheduled for Friday). That report will be the best indicator as to how soon we can expect another rate hike (we’re expecting to see several during 2017)…however the statement released by The Fed on Wednesday implied that it was staying the course.
For the time being.
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