Mortgage Rates Report and Outlook, July 1, 2024 — Jobs Report Week

Today’s market

One-Liner

This week’s big event is Friday’s jobs report. It rivals the consumer price index (CPI) for the title of most consequential economic news for mortgage rates. So, metaphorical fireworks are possible then, following the literal ones on Thursday.

What’s Driving Mortgage Rates?

Mortgage rates ended June just modestly higher than they started it. However, there were some volatile days that month.

According to Mortgage News Daily’s archives, they climbed by 0.12% following the May jobs report and plunged 0.18% following that month’s CPI. Most other June days they moved only 0.01-0.02% with the biggest other single-day change measuring just 0.06%.

So, stand by for the June jobs report this Thursday (Jul. 5) and the same month’s CPI the following Thursday (Jul. 11). There’s a good chance they’ll be as influential this month as last.

What To Watch This Week

Once again, Friday is the crucial day for mortgage rates. That morning is when the jobs report (aka the employment situation report) is due.

For lower mortgage rates, we want to see mostly lower figures than markets are expecting, with the exception of the unemployment rate, where higher is better. A weaker job market gives the Fed a more solid case to cut rates.

Here’s what markets are currently expecting, according to MarketWatch:

• Nonfarm payrolls (number of new jobs created during reporting month) — 195,000, down from May’s 272,000

• Unemployment rate — Unchanged at 4.0%

• Hourly wages — 0.3%, down from May’s 0.4%

Market expectations are important because investors often trade ahead of reports based on them. So, what markets are expecting is baked into mortgage rates in advance.

When expectations are met, there’s little need for mortgage rates to move. But Wall Street must scramble to align its portfolios with reality when there’s a gap between expected and actual figures. And, the bigger the gap is, the greater the volatility.

The trouble is that the analysts who make the forecasts on which expectations are based are awful at predicting jobs reports. They’re right rarely and seriously wrong often. So, you really do have to buckle up for the jobs reports.

Before Friday

There are several reports due earlier in the week. But these tend to affect mortgage rates in only limited and temporary ways.

Watch out for:

• Monday — Two purchasing managers’ indexes (PMIs) for the manufacturing sector

• Tuesday — Reaction to a speech from Federal Reserve Chair Jerome Powell (but only if he says something surprising). Also, the May job openings and labor turnover survey (JOLTS)

• Wednesday — The ADP private-sector employment report. Plus, two PMIs for the services sector. Also, the minutes of the June meeting of the Fed’s rate-setting committee

• Thursday — Markets closed for Independence Day. Mortgage rates shouldn’t budge

Any of those could change mortgage rates a bit. And it’s possible (though unlikely) that the Fed Chair’s speech could move them significantly and for a long time. But, chances are, Friday will make the big difference — if there is one.

Forecasts

Fannie Mae had recently predicted that 30-year, fixed-rate mortgages would average over 7% during the last quarter of this year.

Friday brought good news. Fannie updated its forecasts. And it now expects that average to be 6.7%.

Better yet, it thinks that rate will fall very gradually during each subsequent quarter, reaching 6.3% during the last three months of 2025.

The Mortgage Bankers Association is even more optimistic. It forecasts those rates will be down to 6.6% during the last quarter of 2024 and will average 6.0% one year later.

So, there are good grounds for hoping that mortgage rates will decrease over the long term.

But, absent some unexpected economic bombshell, they’re unlikely to do so soon or quickly. Indeed, we may be in for a glacial slide.