#November's Sharp Pullback in Mortgage Rates May Not Last
The recent decline in 30-year fixed mortgage rates may not be permanent if the labor market continues to perform well, according to Mark Palim, Deputy Chief Economist at Fannie Mae. The robust jobs report released on Friday revealed that the US added 199,000 jobs in November and saw an increase in wages. However, these figures were somewhat inflated due to the return of striking workers from the auto industry and from Hollywood.
Palim believes that homebuyers can take advantage of the strong labor market and the nearly 80 basis point decline in mortgage rates since the end of October. Nevertheless, if the labor markets continue to thrive, Palim states that the pace of mortgage rate declines may slow down or partially reverse.
As of Friday, the benchmark 30-year fixed mortgage rate was at 7.05%, down from a peak of almost 8% in October, according to Mortgage Daily News.
The positive outlook surrounding falling mortgage costs and its potential impact on home sales has led to a surge in shares of Toll Brothers Inc., TOL, +1.33%, as well as other homebuilders tracked by the SPDR S&P Homebuilders ETF, XH, which reached record highs earlier this week. However, some investors in homebuilder bonds have been selling their holdings in recent weeks.
Yields on 10-year BX:TMUBMUSD10Y and 30-year Treasury notes BX:TMUBMUSD30Y experienced significant increases on Friday, reaching approximately 4.23% and 4.32% respectively. Despite these increases, they are still below the highs recorded in October, which were around 5%. The surge in long-term borrowing costs was prompted by Federal Reserve officials' tough stance on the need to maintain higher rates for an extended period in order to bring inflation down to its targeted 2% rate.
Read: Solid Job Growth and Sharp Wage Gains Send Treasury Yields Soaring
US stocks rebounded on Friday afternoon, recovering from earlier weakness following the release of the jobs report. The Dow Jones Industrial Average DJIA rose by 0.2%, narrowing the gap between its last record close set two years ago. The S&P 500 index SPX and the Nasdaq Composite Index COMP also registered a 0.2% increase, according to FactSet data.