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What affect does the Unemployment Rate have on the housing market and mortgage rates?

The national unemployment rate was released this past week and the results were positive.  We learned that the rate dropped to 7.5% which is a 4 year low.  The last time unemployment was lower than it is now was in December 2008, when it was 7.3%.  The economy seems to be benefiting from a resurgent housing market, rising consumer confidence and the Federal Reserve’s stimulus actions, which have helped lower borrowing costs and lift the stock market.  There are some skeptics however that are not pleased with these results.  This is due to the fact that most of the job gains were in lower paying fields and more part time jobs were added over full time jobs.  The average hourly pay rose but because employees in the private sector worked fewer hours, average weekly paychecks declined. 

So what does all this mean for the housing market? Well, I think we would all agree that the more jobs that are created the quicker our economy will improve which is good news for everyone.  As more people enter back into the work place then the demand for housing will increase as Americans set their sights on homeownership.  We are already experiencing this housing demand now in South Florida.  I have seen numerous buyers become frustrated with the lack of inventory and some are being outbid by stronger buyers as soon as a home comes onto the market.   The improved job market has brought more potential buyers into the real estate market but now we need more sellers to accommodate the demand.  One way to satisfy this demand is to speed up the foreclosure process in the state of Florida.  Currently the average foreclosure process in Florida takes 853 days which is more than twice the national average.  Many realtors believe that this is a major contributor to our inventory shortage.  We did have some good news this week with House Bill 87 recently passing in the Florida Legislature which will hopefully decrease the timeframe on the foreclosure process and bring more homes onto the market.  We are also hopeful that the improved job market will boost consumer confidence and motivate more potential sellers to list their home and upgrade to a larger home.

And what about interest rates? Any improvement in the job report will have a positive impact on the stock market which will typically send stocks and bonds higher.  Interest rates will typically react the same and will also increase which means they will worsen for mortgages.  Even though interest rates will rise with an improved economy the Federal Reserve has already stated that they plan on doing everything in their power to keep rates low through 2015.  Even if we do experience a slight uptick in rates, I believe we would all much rather see an improvement in the job market and our overall economy than have interest rates stay at record lows. Any small increase in rates would be minimal and we would still remain at a historic low.  This would be a win win for everyone. 

To learn more about our company and mortgage products, please feel free to call Dan Longman, President of Priority Lending Corp, at 954-438-3776 ext.11 or email prioritydan@bellsouth.net. Please visit www.prioritylendingcorp.com

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