Mortgage rates moved lower this week after a dismal jobs report, sparking buyers to rush to the market and take out a mortgage loan.
Bad news was strewn throughout last week's jobs report. The labor force participation rate fell by 20 basis points down to 62.6 percent and has fallen by 40 basis points over April and May to offset first-quarter gains, after hitting its lowest level since the 1970s in 2015. In addition, not only did job gains total only 38,000 for May, but March and April totals were downwardly revised by a combined 59,000 jobs down to 186,000 and 123,000, respectively, making the average monthly job gain over the three-month period from March to May a less-than-stellar 116,000.
Freddie Mac's Primary Mortgage Market Survey (PMMS) showed that for the week ending June 9, 2016, the 30-year fixed-rate mortgage (FRM) averaged 3.60 percent with an average 0.5 point. Last week it averaged 3.66 percent, and a year ago at this time, the 30-year FRM averaged 4.04 percent.
According to Freddie Mac, the 15-year FRM averaged 2.87 percent this week with an average 0.5 point, down from last week when it averaged 2.92 percent. Last year, the 15-year FRM averaged 3.25 percent.
The 5-year Treasury-indexed hybrid adjustable-rate mortgage (ARM) averaged 2.82 percent this week with an average 0.5 point, down from last week when it averaged 2.88 percent and a year ago when it averaged 3.01 percent.
"Growing optimism about the state of the economy was quickly erased with May's employment report. The disappointing release caused an immediate flight to quality resulting in the 10-year Treasury yield dropping 10 basis points on Friday," said Sean Becketti, Chief Economist, Freddie Mac. "This week marks the 10th consecutive week the 30-year rate has averaged under 3.7 percent, allowing an extended window for homebuyers to take advantage of these historically-low borrowing costs."
While rates moved lower, buyer hurried to the market to apply for a home loan. According to data from the Mortgage Bankers Association's (MBA) Weekly Mortgage Applications Survey, mortgage applications increased 9.3 percent from one week earlier, for the week ending June 3, 2016 (including an adjustment for Memorial Day).
On an unadjusted basis, the Index decreased 13 percent compared with the previous week, MBA said. The Refinance Index increased 7 percent from the previous week. The seasonally adjusted Purchase Index increased 12 percent from one week earlier, while the unadjusted Purchase Index decreased 12 percent compared with the previous week and was 6 percent lower than the same week one year ago.
Refinance applications deceased to 53.8 percent of total applications from 54.3 percent the previous week, according to the MBA. Meanwhile, the adjustable-rate mortgage (ARM) share of activity remained unchanged at 5.0 percent of total applications. The FHA share of total applications increased to 13.0 percent from 12.5 percent the week prior, VA applications decreased to 11.5 percent from 12.0 percent, and USDA applications remained unchanged from 0.7 percent the week prior.