12-months of Jobs Lost  A few important news items from last week: First, the results are in on the Federal Reserve's first run at purchasing mortgage-backed securities under its new $500-billion buying program. Over the last week, the Fed bought $10.2 billion of mortgage-backed securities. Any time there is increased buying demand - for anything - prices will move higher. When bond prices move higher, home loan rates improve -- and last week, they did. Second on last week’s news front: Stocks faced selling pressure due to a rash of earnings warnings from the nation's retailers, including Macy's, who announced they are closing eleven stores. Because money coming out of stocks is often reinvested in the bond market, bonds and home loan rates responded last week by reaching never-before-seen levels. Finally, the job market reached a level not seen since 1945. The Labor Department reported on Friday that there were 524,000 jobs lost during the month of December, which you can see in the accompanying Jobs Report chart. All told, there were 2,600,000 jobs lost in 2008, which represents the biggest job loss in any calendar year since 1945, when 2,750,000 jobs were lost as the country demobilized from World War II. But we must consider that there are a lot more people in the U.S. today, so the absolute number represents a smaller percentage of the overall working population. It still is a huge hit. The Unemployment Rate shot up higher than expectations to 7.2%, the highest reading in 16 years. Bonds and home loan rates typically improve on negative economic news since money will flow out of stocks and into bonds when bad news hits the wires. But keep in mind, these are volatile times, so it's hard to know how long the downward trend will last for home loan rates. The Fed's purchasing program will continue to be something to watch in the weeks and months ahead. The Fed’s original December 31 announcement indicated the program would continue for six months. During this coming week, there will be several reports that may impact whether bonds and interest rates continue to explore new territory . On Wednesday, we will see the Retail Sales Report for December, and since many retailers have already said this holiday season was the worst in a long time, it wouldn't be a surprise if this is a horrible report. The silver-lining would be further downward pressure on home loan rates. If you are one of those people for whom now is the right time to buy, contact me, or start your Flagstaff home search here: BestFlagstaffHomes.com. |
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