The appetite for mortgages, as evidenced by the pricing on Wall Street, is at a three year low this morning. Mortgages are sought after by investors as a safe place to put money when the economic future is uncertain. When more traders, including the federal government, throw excessive amounts of money at the mortgage market, the price goes up and the rate of return goes down. Now that it appears that our economy has turned the corner (after like eight years), boring ol’ mortgages are getting the back seat to the high-flying thrill of the high-flying stock market.
The Jobs Report this morning is yet another evidence that the great recession–and super low interest rates–are no longer the talk of the town. The Unemployment Rate dropped to 4.7%, the Labor Participation Rate rose to 63%, Average Hourly Earnings rose 2.8%, and 227,000 new jobs were created. Should optimism continue across other sectors, I see mortgage rates breaking through the three-year high and hustling up another 1/2%. The excitement of a great running machine doesn’t come cheap, and neither does a vibrant economy.