What a better-than-expected jobs report means for mortgage rates
The good news is that an interest rate cut is still on the table as other signs point to a cooling labor market. The Fed will decide later this month.
The latest jobs report came in stronger than expected, but there was some bumpiness to it that may convince the Federal Reserve to move forward with another rate cut later this month.
The numbers: The U.S. economy added 227,000 jobs in November, a big rebound from October and higher than analyst expectations. However, the unemployment rate bumped up to 4.2%, according to the U.S. Bureau of Labor Statistics.
What the jobs report means: The report has been difficult to interpret recently because of the devastating hurricanes and labor strikes. But the November report points to a broader trend of fewer people quitting and fewer openings, creating "The Great Stay," said Sam Williamson, senior economist at First American. That's a dynamic where employers are being slow to hire and fire, while workers are opting to stay put.
There are more unemployed individuals, however, which boosts the chances of a quarter-point interest rate cut when the Federal Reserve meets Dec. 17-18.
How this connects to mortgage rates: While interest rates are not directly tied to mortgage rates, one does tend to influence the other. This fall, mortgage rates defied expectations by trending higher despite two rate cuts.
Other economic factors — like inflation and treasury yields — could push rates higher. Williamson expects 30-year mortgage rates to hang around in the upper 6% range for the rest of 2024, drifting modestly lower in 2025.
Mortgage rates remain hard to predict, so next week's consumer price index report may shed some light on what's next, said Lisa Sturtevant, chief economist at Bright MLS.
"At this point, mortgage rates in the mid-6s are probably the best prospective homebuyers can expect," Sturtevant said.
What about a Trump bump? Even with elevated rates and rising home prices, new policies by the incoming Trump administration could influence what happens in the housing market for 2025.
"Whether housing gets a Trump bump or not will depend on the specific details and timing of policies adopted by the new administration and Congress," said Danielle Hale, chief economist at Realtor.com.