Mind Blowing Labor Market

GM. This is Mortgage Nuggets. The email that tells you what's going on in the mortgage industry, in plain jane English. Every Mon, Wed, and Fri morning.

Welcome to the 147 new folks joining us since Friday. Let's dive in!

1. Unemployment lowest since 1969

The jobs report released on Friday was exceptional.

The US economy saw a record decrease in unemployment with the addition of 517,000 jobs in January and a drop in the unemployment rate to 3.4%, the lowest it has been in over 50 years.

The numbers, which were more than double the predicted 190,000, came as a surprise as employers are adding jobs faster than expected, despite the Federal Reserve's efforts to slow down the labor market.

The report also showed that in January, average hourly earnings increased by 0.3% or 4.4% compared to the previous year.

While strong employment has the potential to boost housing activity, factors such as weak wage growth and rising inflation may limit investment.

The Federal Reserve's monetary policy officials may be close to ending their tightening cycle, but the recent job numbers make it likely that the Fed will keep interest rates higher for a longer period.

2. Housing inventory rose 65.5% between Jan. 2022 and Jan. 2023

Why? Spiked mortgage rates created a historic demand pullback, which saw homes sit on the market longer.

This led to an increase in housing inventory in some areas, such as Nashville, Austin, and Phoenix, where there are now three times as many homes on the market compared to the previous year.

Despite this increase, the overall housing inventory in the US remains 43.5% lower than it was in January 2019.

Only 15 out of the 400 largest markets in the country have seen an increase in inventory levels above pre-pandemic levels.

The biggest gains have been seen in Midland, TX (+41.67%), Odessa, TX (+97.50%), Cheyenne, WY (+24.8%), Idaho Falls, ID (+73%), Pueblo, CO (+28.48%), and Tullahoma-Manchester, TN (+10.17%).

3. Majestic Home Loan shuts down

Majestic Home Loan, also known as RMK Financial Corp., has shut down its operations after operating for over two decades.

The wholesale lender based in California laid off most of its employees via Skype in mid-January and officially closed on January 31st. The sudden shutdown came as a surprise to employees who were actively being hired up until the end of last year.

Over the years, the lender faced several enforcement actions from state and federal regulators, including fines for false advertising and failure to provide a comprehensive list of mortgage originators.

Despite these issues, the exact reason behind the closure remains unclear.

4. Rate lock volume sores 109% in January

The volume of mortgage rate locks increased significantly in January compared to December. According to a report from Mortgage Capital Trading Inc (MCT).

The increase was led by rate/term refinance volume, which rose by 124%, followed by cash-out refinance volume, which increased by 93%. Purchase lock activity also saw an increase of 110% from December.

Despite the substantial increase in January, the total lock activity remains down by 54% compared to the same period last year, primarily due to a drop in refinance demand.

Purchase locks made up 88% of the total lock volume in January, cash-out refinances accounted for 8%, and rate/term refinances made up 4%.

It is expected that as the Federal Reserve reaches its final federal funds rate for this cycle, mortgage rates will decrease, increasing origination activity.

5.Meme of the day

☀️ See you on Wednesday!

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