Over the previous three months, home mortgage rate motion has actually been driven mostly by developments in the Iran war. It’s not that war, itself, is a consideration, however rather the ramifications for fuel prices and inflation. Bonds care deeply about inflation and interest rates are based straight on bonds.
When inflation isn’t raging (or at the risk of raging), rates/bonds spend most of their time thinking of the economy. Lately, the information has been even-keeled enough that it hasn’t had adequate of an impact to bypass the war’s inflation-related volatility, however today was an exception.
The jobs report not just crushed expectations, however it modified the previous 2 reports dramatically higher too. The net effect is that the labor market looks more like it’s discovering its footing (possibly even accelerating) and less like it is still in the sag that defined the post-covid normalization.
If all that was complicated, here’s the simple version. More people got jobs than anticipated and the marketplace didn’t like it because it eliminates any argument in favor of the Fed cutting rates. Fed rates don’t equal home mortgage rates, however Fed rate expectations for the future cause mortgage rate motion in today (and Treasury movement, and stock market motion, etc).
On a brilliant note, even after today’s rout, the typical lender remains under the highs seen on May 19th. The Iran war is still the most crucial input for rates, and a confirmed peace deal would still supply relief.
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