The Week Ahead: Low unemployment numbers and low mortgage rates

As consumers start the week ahead they hope to slow down the roller-coaster ride experienced last week

Higher prices at the gas pump continued to threaten their confidence and dampened what was a pretty good week. Historically, unemployment numbers came in at the lowest levels in nearly four years. Settling in at 7.800%, the numbers point to an economy that may finally provide a larger pool of desperately needed consumers to fuel the type of economy some have been predicting for months.

Just as impressive as more people getting some type of paycheck to participate in our economic recovery, is starting the week with lower mortgage rates. The week starts with the traditional 30 year Fixed Rate Mortgage at 3.360%

Housing and employment are two critical metrics in evaluating the economy. Obviously the more people employed, the more they can position themselves to qualify for a mortgage loan. Low mortgage rates provide consumer confidence in making a commitment to invest in what may be the largest purchase in their lifetime.

To further illustrate the relation between historic low rates and the unemployment data, the last time unemployment was below 8.00% or 7.800, mortgage rates were 5.050%. Another way to analyze the data would be to compare a typical mortgage payment:

Average mortgage $175,000

October 8, 2012 3.360% = $772

January 2009 5.050% = $945

DIFFERENCE = $173 per month

Even though employment data has struggled for nearly four years to boast confidence, lenders are on the supply side and are projecting an increase in mortgage applications.

In the week ahead, consumers will continue to see rates around the 3.400% range. On the other hand, most consumers understand that rates are cyclical and don’t always go down or up, week after week. For those on the sidelines, who meet underwriting qualifications and have yet to make a move, their challenge is does 3.360% represent the low point or will it be lower on Thursday, or will it start to inch back up because more consumers are in the marketplace?