When looking back on the week that was, it seems like mortgage rates went on a wild ride. Lenders repriced for the better and lenders repriced for the worse, sometimes they did both on the same day. Yet, ahead of the most influential economic report released by the government, rates managed to find their way back to where they started the week: NEAR 2010 MORTGAGE RATE LOWS. At least until 8:30am this morning.

At 8:30 am eastern time, the Bureau of Labor Statistics released the monthly Employment Situation report.  As stated already, this is the single most important piece of monthly economic data released to the market.  Since consumer spending accounts for the vast majority of our economic growth, market participants track jobs as a way to gauge consumer demand and economic activity.   If the number of unemployed Americans is moving higher, more people are without a job and therefore without stable income. This drains consumer demand and forces companies to keep costs low to stay in line with falling revenues. High unemployment is bad for stocks. Generally what is bad for stocks is good for bonds and mortgage rates.

This report gives us four different readings:

1. Nonfarm Payrolls -  totals the number of jobs lost or created in the prior month. Consensus Forecast: 50,000 jobs lost
2. Unemployment Rate – the percentage of able Americans who are out of work. Consensus Forecast: 9.8%
3. Average Hourly Earnings – shows the monthly change in the hourly wages. Consensus Forecast: +0.2%
4. Average Work Week – shows the average amount of hours worked weekly. Consensus Forecast: 33.7 hours

Here are the results:

1. Nonfarm Payrolls: 36,000 jobs were lost. This was much better than expectations. January was revised worse from a first reported loss of 20,000 jobs to a loss of 26,000. December data was revised from -150,000 to -109,000
   
2. Unemployment Rate:  9.7%. Better than expected.
3. Average Hourly Earnings: 0.1%. worse than expected
4. Average Work Week : 33.8 hours, better than forecast.  This is important since the more hours worked leads to higher paychecks which gives workers more money to spend into the economy.

Prior to the data release, there was much discussion about east coast blizzards having huge negative effects on February jobs data. The Bureau of Labor Statistics said that they could not say how much the snow affected the report. However, the report was better than expected so there must not have been much of a distortion.

READ MORE ABOUT THE EMPLOYMENT SITUATION REPORT

Mortgage rates did not react well to this much better than expected jobs report. Following the economic data release, the 10 year Treasury yield rose and mortgage-backed security prices plummetted. Lenders who had already released rate sheet were forced to reprice for the worse while other lenders delayed rate sheets until the bond market found stable ground. As the day progressed mortgage-backed security prices continued to decline which forced many lenders to reprice for the worse again. However, after the lunch hour, MBS prices then began to improve and eventually rallied enough to recovery a good portion of early price losses. This allowed a few lenders to reprice for the better....but not a majority. I usually do not show MBS price charts on my blog, but I will today. Below is the Fannie Mae 4.50 mortgage-backed security coupon. Follow the arrows....

Talk about a roller coaster ride!

After all the commotion, reports from fellow mortgage professionals indicate lender rate sheets to be pretty much the same as they were yesterday morning (some lenders are slightly higher).  The par 30 year fixed rate mortgage remains in the 4.75% to 5.00% range for well qualified consumers.  To secure a par interest rate you must have a FICO credit score of 740 or higher, a loan to value at 80% or less and pay all closing costs including an estimated one point loan origination/discount/broker fee.  You may elect to pay less in closing costs, but you will have to accept a higher interest rate which is a great option for homeowners not planning on keeping present home for more than three years.

With many lenders still offering 4.75%, I will continue to advise locking.

Have a great weekend!