What? That’s right, more jobs in the US economy may be bad news for home buyers for two reasons: higher interest rates and higher home prices.
More Jobs and Higher Mortgage Interest Rates
When Americans are working they have money to spend. This also means that they are making their mortgage payments and credit card payments. All of these are good signs for the economy as the economy is based nearly 70 on the the buying and spending that Americans do on a daily basis. Said in another way, jobs matter to the economy because it means people have money to spend.
However, with a strong job market, especially after a long slump as we’re currently experiencing here in 2010, comes higher mortgage interest rates. We’ll try to explain it like this.
Job growth improves the economy which draws money into the stock market. Unfortunately this is bad news for mortgage interest rate shoppers. As money poors into the stock market, money is taken out of the mortgage bond market (the US Treasury Bonds). When money is taken out of the mortgage bond market, mortgage interest rates go up.
More Jobs and Higher Home Prices
Job growth can quite possibly lead to increaseing home prices. The reason for this is that with more jobs there will be more home owners able to make their mortgage payments. With more homeowners making their mortgage payments there will be less foreclosures. With less foreclosures, there will be less homes and less cheaper homes on the market. With lower supply and supply with higher values home prices should easily stablilize where they have previously been falling and in areas where prices are stable they should see possibly see an increase in home values.
While both higher rates and higher home prices might be bad news for home buyers in general, the better overall effect in the economy and public morale may just be that people are getting back to work so we’ll have to live with higher interest rates and home values going up for a change.
With more jobs on the horizon, you may want to start your home search and mortgage application process sooner than later if you are one of the fortunate ones now to have a job in early 2010.