Financing Homes in Lake Tahoe and Truckee since 1992.

Lake Tahoe Mortgage Rate Trends- January 7, 2016

Thursday’s bond market has opened flat as investors prepare for tomorrow’s major economic news. The stock markets are in selling mode yet again with the Dow down 236 points and the Nasdaq down 99 points. The bond market is currently up only 1/32 (2.16%), but due to strength late yesterday we should see an improvement in this morning’s mortgage rates of approximately .125 of a discount point.

Yesterday’s afternoon release of the FOMC minutes did give us some interesting insight into the Fed’s thought process about raising short-term rates. While there wasn’t much dissent among voting members about raising rates last month for the first time since 2006, there appears to be some concern about future increases. Besides global economic conditions, there also was much discussion about the inflation rate that remains stubbornly low. The minutes indicate that unless inflation gains momentum, more rate moves by the Fed may not be agreed upon nearly as much as December’s increase was. That certainly threatens the 2-3 more increases this year that many analysts had been predicting.

Today’s only economic data was last week’s unemployment numbers at 8:30 AM ET. They revealed that 277,000 new claims for unemployment benefits were filed last week, down from the previous week’s 287,000 initial claims. However, this was still higher than the 270,000 that was forecasted. Therefore, we can consider the news neutral for bonds and mortgage rates.

Tomorrow morning brings us the release of the almighty monthly Employment report. The Labor Department will post December’s employment figures at 8:30 AM ET tomorrow. This report is arguably the single most important monthly release we see. It gives us the national unemployment rate, the number of jobs added or lost during the month and average hourly earnings, which is a key measure of wage inflation. Rising unemployment, a decline in payrolls and flat earnings would be ideal news for the bond market. Current forecasts call for no change in the unemployment rate of 5.0% while 200,000 new jobs added to the economy and an increase in earnings of 0.2%. If we see weaker than expected results, the bond market should rally and stocks should fall, improving mortgage rates noticeably tomorrow. However, stronger than expected readings will likely raise optimism about the economy, pushing stocks and mortgage rates sharply higher.