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July 8, 1988
The bond market is having a bad morning due to the surprise announcement of a .3% fall in the Unemployment Rate to 5.3%, a 14year low. Nonfarm Payroll jumped 346,000, half again larger than the market expectation, and mortgage discounts are up about a point and a half since last week.
The Fed has been on the sidelines for nearly 60 days, having not overtly tightened, or even talked tough. This new employment data will probably not cause immediate action, but additional hard evidence of inflation may cause a hike in Fed funds and the Discount Rate. The unemployment rate is indirect evidence of an overheating economy: theory holds that wages will be under upward competitive pressure whenever unemployment is "too low." However, the raw data does not allow for those who are temporarily employed, or underemployed relative to skills or to last year's wages, or those who have given up looking for work altogether.
The next important data release will be Friday, July 15, when both trade and inflation numbers will come out. I have the ability to lock in your buyers before contract acceptance, and I recommend doing so rather than shooting craps with next Friday's data.
Good News: the rental market is clearly tighter. Several clients who have bought HUD 5% down rentals have had an easy time getting $550600 in less than a week for Powderhorn, Aspen Grove, and other units. Though I haven't seen aggregate statistics for the County, this rental response is particularly encouraging for this time of year.
Good Funds: when new contracts arrive from the commission, or sooner in some offices, you will have to specify your choice of good funds arrangement for closing. Universal's financial strength is such that closing funds will be wired to title companies by our Denver banks; no more complex arrangements are necessary.
Good Refunds: HUD will now permit $200 to be added to normal closing costs on FHA deals for a refund to any buyer who specifies an inspection of an existing property by a home inspection service. The buyer must produce the invoice and the report from the service in order to be reimbursed at closing. Please bear in mind that the report will become a part of the underwriting file, and has not been in the past.
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