Portland Mortgage Market Update — August 2, 2024

That's right, we are in the middle of a good old fashioned "rally" FINALLY! Mortgage rates got some juice last week from the PCE report, then the Fed met this week, and finally the BLS jobs report dropped today which all combined to help interest rates improve. Now we are brushing up against some very strong resistance levels so we may see a bounce back higher before the end of the day, but for the time being we will take what we can get and enjoy the fact that we are likely going to see better days in the coming weeks.

But didn't the Fed hold their funds rate? Why did that help mortgage rates? It wasn't so much what the Fed did as it was what they said. In the post meeting press conference Jerome Powell straight up said "a rate cut could be on the table for the September meeting". He was much more dovish in his remarks, and the market is pricing in a near 100% chance for a Fed rate cut at their mid-September meeting and another possibly in November or December. He also acknowledged that the labor market has cooled off but is still still strong, but with their dual mandate (keeping inflation in check while not killing the labor market), they have to monitor both and act accordingly.

And today's BLS report (finally) showed a weaker job market than expected. The BLS report has notoriously been, well, full of BS. They have been propping up employment numbers by using an estimated "birth/death" model then adjusting them downwards to more realistic numbers in later reports. In this months report, they estimated small business accounted for 246K new jobs in this Birth/Death model (ADP's report from this week estimated a loss of 7K by comparison), and even with this astronomical number we still only showed 114K total new jobs created vs the 175K estimate. In future months, once they adjust the B/D model back to reality, it will likely show that we lost jobs this month. Also of note is the unemployment rate in the household survey portion, which showed a 4.3% unemployment. This is huge because 16 of 19 Fed members stated that 4.1% would be the max unemployment rate we would hit this year, and we just blew by that. This will force their hands to take action and cut rates in September.

But progress is never in straight line. There will be ups with these downs but all signs are pointing to better days ahead.