Mortgage rates fall after remarks by Fed President Waller
I
am
in
the
camp
that
the
labor
market
is
more
important
than
inflation
for
the
Fed,
so
Let’s
focus
on
this
statement:
“The
labor
market
is
solid.
It’s
not
booming.
It’s
not
falling.”
I
feel
like
the
character
from
the
movie
“The
Notebook”
when
he
asks
his
love
interest,
“What
do
you
want?”
Residential
construction
workers
are
at
risk
of
facing
job
losses
for
the
first
time
in
this
recovery
yet
the
Fed
often
takes
a
hawkish
stance
in
its
statements
at
key
points,
which
tends
to
drive
mortgage
rates
higher.
Now,
it
seems
like
the
Fed
is
suggesting
that
we
might
need
more
rate
cuts.
Last
year,
when
mortgage
rates
approached
7.5%,
we
saw
our
first
negative
jobs
report
for
the
residential
real
estate
sector
since
the
recovery
began.
As
you
can
see
below,
this
is
a
front-line
sector
at
risk
of
a
labor
recession.
Mortgage
rates
then
went
back
to
6%
which
took
this
concern
away,
but
rates
are
back
above
7%
again.
I
recently
wrote
that
2025
could
be
a
wildcard
for
the
Fed
and
the
economy
as
we
observe
the
completed
units
by
builders
are
piling
up,
and
housing
starts
and
permits
are
already
at
recession
levels.
On
Twitter
today,
the
Minneapolis
Fed
tweeted
out
a
quote
from
one
of
their
recent
articles:
“9th
District
apartment
construction
is
expected
to
slow
down
soon
as
number
of
construction
permits
sought
by
developers
fall.
Twin
Cities
has
seen
the
worst
decline
while
some
cities
in
Greater
MN,
MT,
and
SD
fare
better.”
As
we
can
see
from
everything
above,
some
Fed
members
are
getting
the
“Hello,
Mcfly!”
message.
As
I
write
this
article,
the
10-year
yield
stands
at
4.62%,
down
from
a
recent
high
of
4.81%
earlier
this
week
on
Tuesday.
My
forecast
for
this
year
is
the
10-year
yield
will
range
between
4.70%
and
3.80%,
with
mortgage
rates
expected
to
fall
between
7.25%
and
5.75%.
Therefore,
it’s
unsurprising
that
the
Federal
Reserve
is
attempting
to
calm
the
markets,
since
mortgage
rates
have
risen
rapidly.
However,
their
own
policies
and
phrasing
contribute
to
these
significant
swings
in
the
market.
Regarding
the
labor
market,
let’s
keep
it
straightforward:
private
payroll
growth
is
slowing,
and
manufacturing
employment
experienced
job
losses
in
2024.
If
residential
workers
also
lose
their
jobs,
it
will
be
necessary
for
government
jobs
to
grow
increasingly
faster
in
2025
to
offset
these
losses.
However,
we
know
that
this
is
unlikely
to
happen.
So,
expect
mortgage
rates
to
fall
if
we
see
weakness
in
residential
workers
to
add
to
the
softness
we
already
experienced
in
manufacturing
labor.
Already
today
mortgage
rates
fell
because
I
believe
the
Fed
is
signaling
their
concern
about
the
residential
labor
market