Morning Report: Job openings tick up

Posted on May 31, 2023 by Brent Nyitray

Vital Statistics:

Stocks are lower this morning on no real news. Bonds and MBS are up.

Job openings ticked up in April, according to the JOLTs jobs report. Job openings were the highest in retail, health care and warehouse / transportation. The quits rate, which tends to precede wage growth slipped to 2.4%.

Mortgage Applications fell 3.7% last week as purchases fell 3% and refis fell 5%. Rates increased last week on hawkish Fed-speak. “Inflation is still running too high, and recent economic data is beginning to convince investors that the Federal Reserve will not be cutting rates anytime soon. Mortgage rates for conforming, balance 30-year loans were being quoted above 7 percent by some lenders last week, and the weekly average at 6.9 percent reached the highest level since last November,” said Mike Fratantoni, MBA’s SVP and Chief Economist. “Application volumes for both purchase and refinance loans decreased last week due to these higher rates. While refinance demand is almost entirely driven by the level of rates, purchase volume continues to be constrained by the lack of homes on the market.”

MBS spreads continue to remain at historically wide levels, which isn’t helping mortgage rates.

About a third of the mortgages originated pre-pandemic were refinanced during 2020 and 2021, according to a research report by the New York Fed. About 14 million mortgages were refinanced during the 7-quarter boom, of which about 2/3 were rate / term refis and the rest were cash-outs. The home equity extraction during the pandemic rivaled the bubble years on a gross dollar basis, but were much lower as a percentage of disposable income. All told, borrowers extracted about $430 billion in equity during the boom. The big question is whether that disposable income number is artificially inflated due to pandemic-related government spending which won’t be recurring.

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