Last week was a choppy week in terms of mortgage rates. This is the end of the first quarter of2021, and on Friday we have the “first Friday of the month” employment situation data from the prior month. Orion’s brokers are having to explain to their clients why rates have slid higher, especially when the news would not typically lead to higher rates, so let’s jump in!
Home sale data from February was disappointing, normally pushing rates down. Existing home sales fell 6.6 percent and new home sales dropped 18.2 percent. While some of the decline was expected due to macro reasons around supply and severe weather, the declines were more than forecast. But Orion’s brokers know that while rising mortgage rates and home prices are a concern heading into the spring, expectations around the full reopening of the economy and the accompanying job gains are expected to offset those anxieties.
Manufacturing data remained strong in February despite a small decline in orders for durable goods which was blamed on production and shipping bottlenecks. Over the last three months orders were up at a 12.7 percent annual rate. Initial claims for unemployment finally broke through the 700K level coming in at 684,000, the lowest level since spiking at the onset of the shutdown. While this number is still above the highest levels of the 2008 recession it is nonetheless a welcome milestone.
The pandemic, and everything impacting it, is still driving rates, plain and simple. Expectations remain high that increased vaccinations combined with the most recent fiscal stimulus will help those in high contact parts of the economy who have been displaced long term recover this spring and summer as those sectors reopen. And those hopes are what is driving mortgage and other fixed-income rates higher here at the end of March.