The Federal Reserve has been setting the stages for tapering their purchasing of mortgage backed securities using Quantitative Easing (QE). Their purchasing of gov’t notes and mortgages have kept interest rates at artificially lower levels to compensate for the economic effects of the pandemic shutdowns.
The Fed will be using employment and inflation levels as the criteria to deviate from their present stimulative policies. Inflation numbers have been high, but many of the elements are transitory. Hopefully, many of the supply chain issues will be eliminated over the few months. The reopening economic acceleration has been scaled back by the Delta variant rearing it’s ugly head.
Friday, we learned that the U.S. economy slowed job growth in August, with payroll employment rising just 235k compared to an average of more than one million over each of the prior two months. Leisure and hospitality added zero jobs in August, which marked the slowest month of growth since January 2021, largely due to concerns for the spread of the delta variant. While some say the move won’t affect the tapering discussion by the Fed, it pretty much removes any tapering announcement this month. The Fed’s projected path of inflation and interest rates was based on an assumption that economic growth would continue to accelerate.
The lower-than-expected jobs gain in August should not be taken as a sign that the job market is cooling. It’s not that jobs are in short supply, it’s that qualified/skilled workers willing to fill those jobs are hard to come by. The NFIB small business survey reported the number of businesses having difficulty filling open positions rose to a record high in August. While there are many factors at play from surging COVID cases, lack of childcare, and extended jobless benefits to name a few, several of these impediments could be abated with higher pay. Average hourly earnings rose 0.6 percent in August, more than twice expectations, and were up 4.3 percent over the last twelve months. Consumer spending continues to shift towards the service sector and the boom in goods spending appears to be fading. August’s consumer confidence report was the lowest since the winter and showed buying intentions for large durable goods such as cars and appliances declined.
As can be seen in the chart of the 10 year note, rates have bouncing around but have trickled up since the beginning of August. Rates are at a level of technical resistance. If the resistance holds, rates may stabilize for a while, otherwise, rates will continue to trickle higher.
If you are in the Los Angeles area, have any questions or real estate sales or financing needs, feel free in contacting me
Ron Henderson GRI, SRES, SFR, RECS, CIAS
President/Broker
Multi Real Estate Services, Inc.
Gov’t Affairs Chair – California Association of Mortgage Professionals (2017-2018)
Chairman – OutWest Marketing Meeting (Real Estate Education)
BRE #00905793 NMLS #310358
www.mres.com
ronh@mres.com
Specialist in the Art of Real Estate Sales and Finance
Real Estate market, mortgage rates, Los Angeles, San Fernando Valley, Conejo Valley, Simi Valley, Woodland Hills, West Hills, Calabasas, Chatsworth
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