We’re almost at the midway point of 2025 and so far this year has not disappointed if you like to see headlines! We wanted to spend our time talking about a couple of things that are getting very little attention but could have a big impact on housing and mortgage rates the remainder of the year and even into next year.
The first thing we want to discuss is the BLS jobs data—and while we’ve been saying this for almost 2 years, it’s starting to come to light nationally. The Wall Street Journal published an article questioning the reliability of the BLS jobs data and effectively called out the BLS for not providing anything of relevance. The Fed has relied heavily on this data and has often cited it as a reason for not cutting rates.
If the Fed is relying on this data for major economic decisions but the data is wrong—what happens? I have a feeling we’re all going to find out soon enough.
In the Wall Street Journal article, it points out that the BLS is experiencing staffing issues—and these are impacting their ability to conduct the monthly survey. Isn’t it ironic that the entity responsible for reporting jobs data and inflation data isn’t able to keep a full staff?
Keeping it simple: the BLS utilizes hundreds of government workers called enumerators to go out across cities every month to check prices businesses are charging for goods and services. In cases where they aren’t able to track down a specific price, they guess based on substitutions. However, with fewer workers on hand, they’ve been forced to guess on more of their data.
In April, 29% of prices in the BLS report were made using guesses, not actual prices—almost twice as high as any other month in the past 5 years. Without going into details, a very similar thing is happening with the BLS jobs reports.
Everything else is pointing toward a slowdown—less hiring, higher unemployment, lower consumer confidence—however, the BLS continues to report strong job growth. Today was no different: markets were expecting 130,000 job creations, yet the BLS reported 139,000. This was bad for mortgage rates—the 10-year treasury note went up 10 basis points and it paints a picture of a strong economy.
Not surprising, since in 2024, if we looked at the BLS’s initial jobs reports month by month, they showed 2.5M jobs created. However, each of these reports was later revised—and when we look at the revised data, half of those jobs were removed, showing only 1.25M were actually created. Imagine what markets would look like if the BLS reported correct data initially?
From a mortgage rate perspective, one topic that is not getting enough coverage is the conversation surrounding Bank Deregulation.
While this is a scary term, it appears it’s not really “deregulation,” but rather a reset of the current regulations in place. After the crash of 2008, capital requirements were placed on banks. Banks make money by taking deposits, paying a small amount of interest, and lending out the rest at a higher rate—earning the spread.
However, the capital requirements imposed after 2008 made it difficult for banks to invest in U.S. Treasuries. Currently, if banks invest in Treasuries, it limits how much they can lend—so instead, they opt to lend at higher returns rather than invest in Treasuries.
However, Treasuries are a risk-free investment and should not be counted against their capital requirements.
Treasury Secretary Bessant and Vice Chair of Bank Supervision Bowman spoke about doing a deep review of bank regulation, because the leverage ratios that were put in place during a “different time” are now having unintended consequences.
The largest banks in the U.S. are now less inclined to buy Treasuries—even though for a long time, banks were major buyers due to the no-risk, small-return nature of Treasuries.
In July, the Fed will host a conference with bankers, academics, and capital experts to discuss this topic and potentially make tweaks to banking capital requirements.
This is important for housing and mortgage rates because if policies are put in place that encourage banks to invest in U.S. Treasuries, we’ll see more money that’s currently sitting on the sidelines flood into the bond market.
This is money banks already have—they’re not investing it in stocks, just letting it sit as dry powder. If they could put it into a Treasury making 3% to 4% with no risk, it would cause yields to go down because of increased demand. And as Treasury yields go down, so do mortgage rates.
We’ll continue to monitor this situation and will have an updated report after the July meeting.
Overall, housing remains strong—inventory is still below average, demand is high, and we still believe real estate is one of the greatest wealth creators in America.
We understand that everyone’s situation is unique, and we are more than happy to have a private consultation with you, your friends, or family.
Until then, have a great June—and we look forward to speaking with you again soon.
