Friday's "Catastrophic Surge" in Mortgage Rates

If you're thinking about buying a home, then you're probably not going to like what I'm about to say. On Friday, while you were busy nursing yourself back to life following the previous night's celebrations, mortgage rates exploded.

The daily recap from a widely followed mortgage industry publication characterized it as a "catastrophic surge," saying: "today's rise in mortgage rates is among the largest ever, and certainly the largest in the past 10 years. Today alone, rates rose more than most entire weeks."

According to its estimates, the rate on a conventional 30-year fixed rate mortgage "moved forcefully into 4.75% territory, with some lenders at 4.875%."

But wait a second. Didn't Freddie Mac just announce on Wednesday that rates had fallen? What could have happened in the meantime to cause them to take flight?

The answer is this: Friday's better-than-expected jobs report for June. As my colleague Morgan Housel noted, "Bad news for the end-of-the-world crowd: June's jobs report was released Friday, and it was pretty good. 195,000 new jobs were created last month, according to the Bureau of Labor Statistics. That was the third-best June jobs report in the last 15 years."

The connection between mortgage rates and job creation is the Federal Reserve. That is, as the labor market picks up, the central bank will begin to reduce its support for the economy. And because its support for the economy consists, in large part, of bond purchases, its retreat will result in higher interest rates.

As Mortgage News Daily put it (emphasis added):

Today's catastrophic surge higher was a direct effect of a stronger-than-expected Employment Situation Report, which not only showed June job creation to be better than expected, but revised the last two months into stronger territory as well. The more profound indirect consideration is the report's role as the key barometer for Fed policy. This is the reason the rise in rates of the last two months has been as sharp as it is.

All things considered, in turn, if you're a prospective homeowner, it might behoove you to act on your inclination to buy a house sooner rather than later, as there's reason to believe that this trend could very well continue.

And if you're an investor, it'd behoove you to follow these rates as well. This is particularly true for the nation's largest mortgage originators, among them Wells Fargo (NYSE: WFC  ) , JPMorgan Chase (NYSE: JPM  ) , Bank of America (NYSE: BAC  ) , and US Bancorp (NYSE: USB  ) .

As I've discussed previously, all four of these banks benefit from noninterest income related to mortgage underwriting activity, which could be throttled because of the higher rates. But at the same time, these lenders will reap gains from the higher interest income on their securities portfolios. How these factors, as well as others, balance themselves out, in turn, will largely dictate both the price of bank stocks and the ability of lenders to increase their dividends over the foreseeable future.

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  • Report this Comment On July 06, 2013, at 7:30 PM, Martininsocal wrote:

    I don't understand why anyone pays attention to the June hiring numbers. These are all seasonal jobs that will be done and gone by the end of October. From National Parks, to seasonal firefighters to lifeguards to Summer Amusement park hires, it is all mostly low wage and most no benefits jobs that will be gone before Christmas. Why do we set ourselves up like this?

  • Report this Comment On July 06, 2013, at 7:56 PM, dstb wrote:

    We have gotten so conditioned to lousy employment numbers that when there is even a small beating of the already low expectations the markets think the economy has recovered. We will need hundreds of thousands of jobs added each month to significantly move the needle. Mortgage rates will settle when this becomes reality.

  • Report this Comment On July 06, 2013, at 8:05 PM, fujidan wrote:

    Oh Please, I paid my mortgage off that was at 12.75%. I don't consider 4.75% terrible. 1980 to 1997 I paid at 12.75%. People really have it good now for rates. Thanks for listening.

  • Report this Comment On July 06, 2013, at 8:18 PM, serioso777 wrote:

    Rise baby rise...rise like the market ...don't stop til you pop !

  • Report this Comment On July 06, 2013, at 8:30 PM, msf150 wrote:

    Well, well once again we have been trying for over 7 years to buy a home, get the credit straight then this crap when in the hell does the rates go up for mortgages when homes have been selling like hot cakes from April till now???

    This is damn BS from the banks and suckers out there that is controlling this maybe the President needs to get busy TAKING CARE OF THIS COUNTRY INSTEAD OF WORRY ABOUT OTHER CRAP THAT DOESN'T MEAN A THING TO THE PEOPLE OF THE UNDITED STATES!!!

    Trying spending 6billions dollars here repairing home loans getting the FEDS to cut back on the rates!!!!

  • Report this Comment On July 06, 2013, at 8:35 PM, M2HB wrote:

    I wonder if all the school kids who are out of school for the summer getting jobs are affecting these numbers much. I'd think so, and those will be over in a couple of months...

  • Report this Comment On July 06, 2013, at 8:54 PM, colin2862 wrote:

    The job numbers are bogus, there is no recovery and the world is still in a financial mess. The interest rate hike shows what will happen if the Fed tries to roll back QE,

  • Report this Comment On July 06, 2013, at 9:01 PM, wishlistgirl wrote:

    195,000 jobs OF WHAT KIND? Full time? Part time? Seasonal? Minimum wage? Benefits? If the answers aren't "Full time, well above minimum wage with full benefits" than they don't count. Paying on a mortgage for 30 years isn't going to happen with a part time, poverty level and/or seasonal job. Your foolish counterpart is indeed, foolish.

  • Report this Comment On July 06, 2013, at 9:32 PM, KPPM wrote:

    "Catastophic Surge" wonderful headline.

    Talking heads and their gloom and doom forecasts do as much to create situations as they do reporting.

    It is almost as if they are looking to help produce another economic downfall.

    Try looking from a glass half full approach-instead of finding the most negative aspect of any event.

  • Report this Comment On July 06, 2013, at 9:45 PM, AbuRas wrote:

    Someone calculated that it was time to raise the rate to continue squeezing the life out of us to feed their own greedy lifestyles.

  • Report this Comment On July 06, 2013, at 9:53 PM, forward4 wrote:

    seasonal jobs and a lot of companies are paring down full time workers and hiring part timers. Most are trying to keep a ratio of 70% part time and 30% full time. So more people are being hired at lower hours to keep up demand with turnover. You tend to lose these employees faster when they have to look for 2 jobs to pay the bills. Yet the big companies are going to maintain this posture at least for the next year in anticipation of the Obamacare tax penalty coming. Nobody wants to pay a $2000 penalty per full time employee, which Obamas plan says is 30 hours, currently. Then you have the extention just added to by pass the mid year elections, but this October will be very interesting when all these low information voters start to realize that what they thought was going to be free is now going to come out of there pocket book in the tune to the size of a small car note. They are not going to be happy, and somehow I think that everyone else but Obama will be blamed for that.

  • Report this Comment On July 06, 2013, at 10:10 PM, mernadecabeza wrote:

    Someone may have paid 12.75% in 1980 but what was your home value? Incomes are not going up, So the higher the rate the, the more home prices are going to drop. We also have the new Dodd-Frank qualified mortgage rules capping debt ratio qualification to max 43% debt to income are also going to cap home appreciation. The current Max dti is 50%.

  • Report this Comment On July 06, 2013, at 10:19 PM, ak12 wrote:

    Um,

    It was catastrophic because the housing "recovery" just died a catastrophic death.

    The only thing that was making this housing recovery possible was low rates.

    Now, a buyer in the market has lost 15% purchasing power. That's right, 15%. Maybe not a big problem in the boonies where a house goes for $150,000 and at 2.5 times annual income, but a huge deal in California where homes go for $750,000 and at 6 times average income.

    Sionora fake housing recovery. Now at least we can return to a normal housing bubble.

  • Report this Comment On July 06, 2013, at 10:45 PM, zenlensjunk wrote:

    ^^^exactly. this is all another cruel joke that we are heading anywhere positive. "they" are creating the exact same situation. my home just appraised for 480K! it's at best worth a little over 400 and the appraiser was allowed to come up with this ridiculous number without using ANY sold properties. that's right, they used only properties currently for sale. absurd. same thing happened before the market crashed when they pencil whipped an appraisal before the addition was even done and said it was worth 550K!

  • Report this Comment On July 06, 2013, at 10:55 PM, plange01 wrote:

    thats it for the housing recovery and price increases! it lasted about 5 weeks?jobs remain a disaster and oil speculators taking advantage of the country being without a president pushed oil prices to a yearly high to take advantage of fourth of july travel! WELCOME TO A LEADERLESS AND FAILING AMERICA!!

  • Report this Comment On July 06, 2013, at 11:33 PM, SD13SHO wrote:

    According to the news this morning, Congress is considering removing the interest rate deduction on our taxes. You want to see the housing market tank big time, watch it, if they pass this one.

  • Report this Comment On July 06, 2013, at 11:36 PM, marjo312001 wrote:

    So the unemployement for the last couple of months was revised upward? How convenient, like I trust this administration!

  • Report this Comment On July 06, 2013, at 11:46 PM, smokesheets wrote:

    Here is another example of the banking system of America robbing the American people. As other members noted, most of the jobs are seasonal and most will go away be the end of the year. Home loans are the biggest legalized crime in history. But as Americans we are dumb enough to continue to allow it to repeat itself. Im first in line, I own two homes.

  • Report this Comment On July 06, 2013, at 11:58 PM, polythemis wrote:

    Mortgage rates up. Stocks up.Banks make more,and they want you to buy a SUV.If you feel like no one cares you can get a Ford Exploder and get noticed

  • Report this Comment On July 07, 2013, at 12:20 AM, redfox435cat wrote:

    The real unemployment numbers went up so how the hell does it skyroket on job numbers alone, that's horse!@#$

  • Report this Comment On July 07, 2013, at 12:37 AM, CrazyDocAl wrote:

    The jobs data is BS. They are reporting that the jobs are low paying ones and the conclusion is that people are just taking anything they can now. If that's the Obama recovery history will not be too kind to him.

    Mortgage rates are nuts. I just did a 15 year refi at 2.529%, having even closed yet. The credit union I use is now 3.661%. In less than a month it's gone up over a point. What We are going to see is a rash of buying as buyers panic and then the market will die.

    It's just like the cash for clunkers. They sold a bunch of cars and then the car dealers couldn't move squat. Now it's several years later and sales are picking back up the government is trying to make it sound like the economy is booming.

  • Report this Comment On July 07, 2013, at 12:55 AM, bill4848 wrote:

    We're headed for another crash. Ovarall wages going down, average housing prices going through the roof for no reason. Obamacare fixing to kick in. Federal workers starting their furlough days without pay.

  • Report this Comment On July 07, 2013, at 1:39 AM, williamsiam wrote:

    We purchased a home and closed on June 7 @ 3.25%. It looks like we were finally "in the right place at the right time". But the truth is a rate under 5% or 6% is a long ways from "catastrophic".

  • Report this Comment On July 07, 2013, at 2:11 AM, CitizenPatriot wrote:

    The June jobs report is Obama propaganda. Yes, the rate stands at 7.5%, but it's stayed there or higher for the past 54 months. Further, said rate is not reflective of the "actual" unemployment rate which now stands at 15.3%.

    This article also failed to mention that of the 195,000 jobs created by American companies, 160,000 were part-time jobs reflective only of the usual summer increase. Further, another BLS report stated that 46% of all jobs in the U.S. are now part time and will increase dramatically as Obamacare takes effect.

  • Report this Comment On July 07, 2013, at 2:12 AM, jamesp79 wrote:

    I just refinanced my home and a property in Hawaii....the latter was appraised at the value of another that was being sold in the same building...sad part they had dropped their price by 25% to move it and guess what my property was appraised at same value even though it should have commanded a 20 to 30% premium for being ocean side...and with many upgrades the other didn't have like a window wall worth 10,000....

    As to the jobs report...it is virtually all part time at 25 hours a week...and like many said these people will be renters not buyers...it will discourage many investors as this will depress the market...especially in California.

    I was going to buy a few properties for investment...cash flowing them will be difficult at best now and coupled with the fear that the market might turndown come the fall...I think like many I will take a wait and see attitude...

  • Report this Comment On July 07, 2013, at 2:23 AM, fairfaxaa wrote:

    "CATASTROPHIC SURGE"!!!!!!

  • Report this Comment On July 07, 2013, at 2:27 AM, fairfaxaa wrote:

    "CATASTROPHIC SURGE"?!!!!!!!!!

    Whoever wrote this is either about 18 years old or has a short memory. You have gotten spoiled by the unrealistically rock bottom rates of the last few years.

    I bought car last year and paid 0%. When I bought my house in 1980, the rate was 13 7/8%. I refinanced when rates went all the way down to

    10 1/4%. Today's rates are still really low by historic standards, not just compared to 1980. Stop whining and that you didn't catch it at the bottom. It's still a bargain.

  • Report this Comment On July 07, 2013, at 3:08 AM, MBSLive wrote:

    Greetings fools. Author of cited article here. I happened to catch this on a weekend and had time to bask in the warm glow of the fire up to which some of my premises were being held. Thanks for the thoughts and the chance for reflection. I'm not sure if I'll be able to stay tuned in to follow-up comments, but I'll do my best. Cheers!

    Regarding the several comments that directly or tangentially raised the seasonality flag on June’s numbers:

    The detrimental effects on rates markets of this most recent jobs report have less to do with this particular instance of the report and more to do with how it fits into the longer term trend, and finally, the implications of that longer term trend on Fed policy.

    For instance, this is the 9th consecutive month where private payrolls have been above 150k. markets haven’t done that (or even 8 months for that matter), since 1999. It’s all in this chart (made especially for you fools):

    http://screencast.com/t/UmTcgdBePC

    The chart additionally makes the case for tracking private payrolls vs the more traditional nonfarm payrolls (NFP). It’s also a convenient way to strip out the distortional effects from periodic census hiring.

    Further to these same points and many others lamenting the “fakeness” of the recovery, I’m fairly sure Bernanke himself would agree with you. After all, he said in March that QE is about ‘near term momentum,’ and even way back then, mentioned labor market improvements and simply needing to verify that they were more than temporary before considering a reduction in asset purchases. March NFP (in early April) was so awful that it binned the notion of tapering rather decisively. The only thing that could ‘un-decide’ the binning would have been the April report (out on May 3rd) coming in way above expectations AND with massive positive revisions to the previous two reports. If conspiracy theorists want to be taken seriously, they should focus on that shooting of the moon.

    Conspiracy or not, the moon was shot and that was the beginning of the end for bond markets. Everything since then has been in line with the same trend, and of course volatility has increased along the way. June’s report (this past Friday) is a rather meaningless thread in the tattered tapestry of labor markets, but it serves the important role of “not unraveling” when the Fed has plainly conveyed they’re ok with ‘tattered’ as long as markets can manage it with a token reduction in QE. That’s all that’s really going on here. The catheter is coming out and the patient will now try to use the restroom under his own power. The parents aren’t kicking the 25 year old out of the house, but they are taking away his allowance. In this sense, June was just another month where the patient had another successful trip to the restroom or where the son’s life went on. Like labor markets, neither of these two metaphorical protagonists have progressed much toward the end goals that others have for them, but neither have they regressed. “Others” will therefor keep raising the bar (or lowering their QE—so far, we’re just talking about it) as long as the protagonists continue surviving. Weaning.

    Regarding KPPM’s comment: “Talking heads and their gloom and doom forecasts do as much to create situations as they do reporting. It is almost as if they are looking to help produce another economic downfall. Try looking from a glass half full approach-instead of finding the most negative aspect of any event.”

    Flattered as I am to be considered a talking head, I actually don’t much care for many of them myself. I’m certain I made no forecasts and instead simply seek to make an accurate daily report on the status of the mortgage rate market. It’s excessively accurate. It might seem that by impugning my message that you’re striking a blow against the ills that talking heads do, but in fact that’s sorta my thing to. I’m just a guy. All my many previous daily articles stand as evidence that I have no agenda, but I grant you that words like “catastrophic”—when viewed without the cumulative perspective that regular readers will have—would certainly seem a bit silly. Those regular readers won’t find it silly, nor will most anyone in the mortgage industry or seeking to obtain a mortgage at the moment. Anyway, I’m on your side, etc… It was the worst day for mortgages in most anyone’s frame of reference. To my audience, that’s catastrophic. Everything’s relative. Hope this helps.

    Regarding redfox435cat ‘s comment:“The real unemployment numbers went up so how the hell does it skyroket on job numbers alone, that's horse!@#$”

    No one cares about the silly household survey compared to the establishment survey. OK, a bit of hyperbole there considering the Fed has U/E in the text of the statement, but it’s not like they can put NFP in the statement and retain any tangibility for Main Street. Hyperbole aside, the “real unemployment numbers” have always been in the establishment survey, not the household survey. All that having been said, I think the crux of my response is at the top of the comment.

    Regarding the 2 comments referring to 4.75% not being a ‘catastrophic’ rate, I actually preemptively addressed this in the cited article:

    “Is it awful in and of itself--as a frozen moment in time? Not at all. Rates in the mid-to-high 4's are some of the best ever before mid-2011. But since then, not only are those rates on the highest end of the spectrum, but we were fairly close to all-time lows at the end of April. That makes the past two months incredibly abrupt, and it's that rate of change that's most painful for mortgage rate shoppers who may have seen a rate quote a few days/weeks/months ago only to shake their heads in disbelief over today's rates.”

  • Report this Comment On July 07, 2013, at 3:14 AM, MBSLive wrote:

    Well-met Fairaxaa! Just notice your comment on my way out. Anyway, I remember my folks talking about their 13% mortgage in the early 80's actually! Different times to be sure.

  • Report this Comment On July 07, 2013, at 4:47 AM, SJDsgirl wrote:

    195K is not even a good job increase, the media and the banks just want you to believe that. Yeah they control the interest rate unfortunately with zero regulation or oversight by the government on how much the American middle class gets screwed. Ironic really, since we pay for everything. This government does not govern.

  • Report this Comment On July 07, 2013, at 5:25 AM, reel01 wrote:

    "Catastrophic Surge", foolishness.

    I would have loved to have gotten that rate when I bought 21 years ago. Instead I refinances 3 times to get better rates and this is still better than what I have.

    If you can't afford a house at this interest rate, DONT BUY IT! Look for something less expensive or wait till the fall when the rates may go down.

    People blame the banks for the bad loans made. They offered me a bigger loan than I could afford to repay when I bought too. So I said no to the excess money and bought within by budget. It's called taking personal responsibility for yourself.

    As for the people who watch Fox News (which contains almost no news), I would take the word of the Bureau of Labor Statistics over your "real" numbers any day. Why? Because they use actual numbers and not political distortion.

    To the many of you who took issue whith this article pointing out the 195, 000 new jobs in June being the "...third best June in 15 years.", I would say you are being foolish. Yes, these jobs are mostly seasonal. Yes, most of these jobs will go away at the end of the summer. Yes most of these jobs are minimum wage, no benifit jobs but, what do you think they were in the previous Junes? All this means is that going back through all of Obama's presidency, all of G. W. Bushes presidency and 1 1/2 years into the Clinton preidency (the last time our government posted a surplus), this was the third best JUNE jobs increase. This goes back before the bank, auto and housing crashes. Back before two unfunded wars. Back before 9 - 11.

    So, since unempolyemnt drove the rates up, what do you think will happen to them when the summer season ends? Well, unemployment will go up and the Republicans will blame Oboma for it. (I guess they think he controles the seasons.)

    With more unemployment factored into the Bureau of Labor Statistics formula, it would stand to reason that the rates may also fall. (The falling rates will also be attributed to Oboma as a stunt to gain support for himself and his party. He will also be blamed for the increase in unemployment due to the loss of those seasonal jobs. At least that has historicly been how it works.) Still, the rates MAY go lower.

    This is a sign of consumer confidence and that more people have disposable income to be able to take a vacation, go to an amusement park, National park or whatever. Thus the need for more, low wage jobs to handel the increased volume

    . Am I saying that this means we have recovered? Heck NO! It is a sign that things may be getting better, even if only if a little bit. I will still take getting better over getting worse.

    To the person saying Obama is a weak president and that is why oil/ gas prices are so out of controle, here's a dose of reality. When Republican George W. Bush became president, gas at my local station, just outside of Washington D.C., was exactly $0.999 a gallon. By the end of his presidency, the cost of gas had risen as high as $3. 68 a gallon at that same sation, but had been hanging around $3. 50 for years. Just prior to Obama being elected, gas prices started to drop in anticipation of a crack down on their huge proffits at the expence of the country. That was a wise move becaue it took them out of the spot light as a major issue. The Repubicans claimed that if Obama was elected, gas prices would rise to $5.00 by the first summer and continue to rise to $10.00 a gallon by the end of his first term. Republican accuracy at it's best. In Bush's presidency, gas prices rose to 368% of what they were when he took office. (Now you want to talk about raising taxes with no benifit?) I bought gas at that same gas station last week and the price per gallon was LESS than what it was when Obama was elected. Enough said about the gas conspiricy angle.

    Now to the "Obamacare is going to destroy our country" floks. Before all the crashes (housing, banks, auto) I remember reading an article that said 50% of all home forclosures were due to people who did have medical insurance but were still driven under financially by mdical costs beyound what their insurance covered. That's half of ALL forclosures and they DID HAVE MEDICAL INSURANCE! That should tell you that medical coverage in this country was a major problem. When Bill Clinton was elected and took office on January 20, 1993, the first lady (Hillery) took on this massive issue. The Republicans were in an uproar because that was their job and not the place of the first lady! Health care as attempted by the first lady and her husband, the president, was defeated by these indignent Republicans. So they did nothin on ths very important issue in Clintons first term, or in his second. Nor did they make any attempt to address the issue durring the eight years that W. Bush was president. Then came Obama. The Republicans declaired from day one that they would oppose ANYTHING that the president was for in an ffort to stagnate our country and government in hopes that there would be a backlash against the president for the lack of progress. In my humble opinion, when the country is at war and the economy and federal finances are in shambles, choosing to work against the president and the best interests of the country in order to gain a political office (the presidency) is nothing short of being a trator to our nation! While Obama care may have many flaws, it is a start. The Republicans had 16 years from when they said it was their responsibility to address this issue and Obama's election and they did nothing! Since Obama,they have done nothing but obstruct those who are working hard to make America a better place by trying to make health care affordable for everyone. Instead of trying to find and fix the flaws that do exist with the program, they are refusing to allow them to be fixed so as to creat maximum hardship on the poorer Americans. The Republicans said that if the Democrats would trash their efforts on health care completely, they would write the new health care law. Instead of working on their own version or colaborating on the existing one, they have spent all their efforts working against it and the Amreican people and in turn, our economy. Again, I don't support traitors to our country.

    All the rest:

    I believe that oil should not be "traded" on the market at all. It allows the rich to artificially inflate the cost we pay for gas for no other reason than can and they make money by doing it.

    I would like to see a federal law that only allows banks to charge interest on what you still owe each month. Put another way, lets say I maxed out my crdit card to the tune of $20,000 and am paying it back at the minimum repayment rate. so in 30 years I will have it paid off. The credit card company can't calculate the interest on the full amount for 30 years and then make me pay that off first before I pay off the actual debt that I have incurred, so why should banks be able to do it.

    The interest of a mortgage should be what is owed for borrowing that money for another month and not on the next 30 years (for which you may not even own that home.)

  • Report this Comment On July 07, 2013, at 10:57 AM, TMFHousel wrote:

    <<I don't understand why anyone pays attention to the June hiring numbers. These are all seasonal jobs that will be done and gone by the end of October>>

    The numbers are seasonally adjusted.

  • Report this Comment On July 07, 2013, at 12:11 PM, gskinner75006 wrote:

    Call me when savings rates start to rise.

  • Report this Comment On July 07, 2013, at 12:52 PM, OceanJackson wrote:

    On the Macro side jobs, interest rates, and QE / tapering get all the press...

    But what about the National Debt? Should we be discussing this regarding the market today?

    Also, it seems like just a few weeks ago, all I was hearing from most Fool employees is..."stocks are expensive" or, "it's getting harder to find value"...but the way the Market is going, it's treating stocks as if they're cheap.

    I'm guessing earnings season will turn the discussion from the Macro back to individual company fundamentals, and we'll see if this thing can keep going higher.

  • Report this Comment On July 07, 2013, at 2:10 PM, pjfec wrote:

    And once again the Bond Ghouls (thank you Louis) have it wrong. Since most of the job gains were in temporary or part time jobs, see other article on the list, the number of people qualifying for a mortgage and buying a home will not improve at all. Look for rates to drop, more slowly maybe, but when no one applies for a loan at this rate, the price will drop again.

  • Report this Comment On July 07, 2013, at 2:44 PM, Hjin wrote:

    @MBSLive, valiant attempt at addressing user comments. However, of all the drivel you stated, you failed to respond to the simple fact that the current growth in payroll is driven by part time employment and temps.

    In addendum: the housing market "recovery" is also driven in part by foreign investors. For example, the housing "recovery" major metropolitan areas such as Los Angeles and New York is helped by cash-rich foreigners (e.g., Chinese, Russian, Saudi) who wish to own American properties. Alternatively, other companies snapping up used homes on the market include American Homes 4 Rent, which is a property management company backed by the Alaskan oil dollars. These homes are turned into rental properties. Lastly, numerous states (e.g., California, Nevada) introduced laws that significantly impeded the foreclosure process. Altogether, increased demand and decreased supply results in our observed housing "recovery". With that said, as long as there are foreign buyers, our housing "recovery" will do just fine.

  • Report this Comment On July 07, 2013, at 6:13 PM, MBSLive wrote:

    @hjin,

    Drivel? Maybe, but I'd have to draw the line at 'valiant.' The latter would connote some degree of passion concerning the underlying points whereas I'm merely trying to objectively assign cause and effect.

    When it comes to assigning causality to the existing movement in mortgage rates, I don't care if payroll growth is driven by PT. I only care about the response the data elicits from the Fed and markets.

    I'd note that even though such opinions are beyond the scope of my daily rate coverage, I am personally cognizant of the labor market composition issues and a bit concerned by them

    Some of the other issues you mention (and several you didn't) are also cause for concern. I've lamented most of these on a regular basis in other articles and in the live discussion on our other site. They seem to compound the bipolarization of wealth and the unsustainability of the supposed economic recovery.

  • Report this Comment On July 08, 2013, at 6:03 AM, devoish wrote:

    When a bank lends me $200,000 to buy a house from a downsizing couple, that couple spends the $200k into the economy over the course of their lives so I can work hard and earn it back from the economy in order to pay off the loan principle.

    But the bank charges interest, such that over thirty years I have to pay back $400,000 - $200k principle and $200k interest.

    Where does the economy get the additional $200k it needs to pay for my hard work, in order for me to pay off the interest?

    Do I just claim that my college education deserves higher pay than someone else's hard labor in order to justify my taking it from them through lowering their wages?

    Do I continue to believe this as those without college educations fall into unsustainable poverty, and those with college educations but without friends in high places follow them down?

    Is it possible for investors to notice that they are taking too much from the people who work for them?

    http://thinkprogress.org/economy/2013/04/01/1801511/why-coll...

    Best wishes,

    Steven

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