Mortgage rates remain at 9 month lows

Later tonight President Trump will deliver his State of the Union address to a joint session of Congress.  Generally the US president will use the address to communicate the state of the national budget, economy, and layout priorities for the coming year.

In other words, it’s a great night to binge watch “Friends from College” season 2.

Mortgage Rates

Interest rates remain at the best levels since April of last year.  Will they reverse course and move higher?  Or might they go even lower?

Technical Signals

The economic calendar is relatively light this week so I expect interest rates to react to technical trading patterns.

Currently, the yield on the US 10-year treasury note is trading up against its 3-month trailing trend line.  I will be watching to see if the yield can bounce lower off this level.  If so I expect home loan rates to improve.

If not, watch out as rates will likely increase by .125%-.25% in the coming week.

Home Prices

Core Logic released its monthly Home Price Index report earlier today.  It showed that on average home prices across the US increased by +4.6% from last year.  This confirms trends seen in similar housing data.

Home prices continue to increase but at a pace that is declining.  This is much like a car that is slowing.  Home prices continue to move ahead but at a slower speed than they have previously.  Home prices are not reversing and going backwards despite the media’s spin.


I expect mortgage rates to react based on the aforementioned technical trading patterns.  What may make it difficult for mortgage rates to improve this week is that the US Treasury is scheduled to auction ~$84 billion in fresh bond supply.  Last year at this time the US government only had to auction ~$66 billion to funds its budget.

Read THIS LINK to learn how this can adversely impact home loan rates.

Current Outlook: cautiously floating

Uncertainty keeps mortgage rates at low levels

Think “fake news” is a new phenomenon?

Back in 1935 an organization called the Clark Foundation based in Cooperstown, NY publicized a false story claiming that US Civil War hero Abner Doubleday invented the game of baseball in that town 100 years earlier.

Despite the story being inaccurate it helped the organization raise money to build the baseball hall of fame which inducted its first members on this day in 1936.

Every year around this time baseball fans eagerly await the election results to see which former players will be inducted in that year’s class.

Brexit uncertainty

The financial markets are eagerly awaiting a vote in the British Parliament today which will set the stage for Brexit which is currently scheduled to take place on March 29th.

Britain still does not have an approved trade agreement with the European Union and if Brexit takes place in the absence of one it is likely Britain will fall into recession.

Many analysts are predicting Brexit will get delayed so an agreement can be reached but there is still much uncertainty.

…more uncertainty

Political uncertainty is not contained to Britain.  Here in the US we recently reopened the Federal government after the longest shutdown in history.  The threat of another shutdown looms three weeks away and it is not a clear that a longer funding bill will get passed in time.

Furthermore, US and Chinese trade negotiators continue to meet periodically but by all accounts are still far from a comprehensive trade deal.

Political and economic uncertainty helps US mortgage rates remain low.  Should these issues get resolved I would expect mortgage rates to move higher by .25%-.50%.

Home prices still rising

The Case-Shiller Home Price index report was issued earlier today and showed that home prices nationwide increased by 5.2% from a year earlier.  Here in Portland home prices only increased by 4.4% from last year.  Many in the media are painting a doomsday scenario.

However, for a customer who puts 5% down on a $400,000 home ($20,000) and sees their home value increase by 4% in the first year (+$16,000) that is better than they could expect from the stock market.


Still to come this week is the Fed monetary policy decision (no rate hike expected) and the all-important jobs report due out on Friday.  For now we can continue to float but I am concerned rates may have hit a bottom at current levels.

 Current Outlook: floating

Mortgage Rates at multi-month lows but expected to rise during 2019

Happy New Year!  77% of US citizens set financial goals for their new year’s resolutions.  Did you?  Unfortunately only 1 in 5 are able to see their resolutions through February.

I hope 2019 brings you good health and prosperity!

Mortgage Rates

Interest rates start off the new year at the best levels since the spring of 2018.  Weakness in the stock market helped mortgage rates improve during the final two months of 2018.

Trend line

A look at the chart of the US 10-year treasury note, which mortgage rates tend to follow, shows that yields fell from 3.22% at the beginning of November to 2.55% on January 2nd.  During that time home loan rates improved by .50%.

Currently the US 10-year treasury note is at 2.70% which is right up against the two month trend line.

Near-term Outlook

Should yields bounce lower off this trend line then mortgage rates are likely to improve by another .125%-.25%.  However, if the yield closes above 2.70% then I expect rates to move higher.

Longer-term Outlook

Most Wall Street Analysts believe that yields will increase by .50%-1.00% during 2019.  Therefore, I think the best buying opportunities will exist in the initial three to four months of the New Year!

 Current Outlook: locking bias

Stock market weakness helps mortgage rates

Think Portland has grown?  According to Wikipedia there are currently 647,805 residents inside the city limits.  

Comparatively, there are 102 cities in China with a population of 1 million or more.  Shanghai is the largest with 22 million people. The US currently has 10 cities with a population of 1 million or more.  

US Stock Market

Concern over the health of the Chinese economy and stalled trade talks contributed to sharp losses in the US stock market last week.  In fact, last week’s slump marked the biggest one week decline since February.

Mortgage Rates

When stocks do poorly it encourages investors to sell equity holdings and reinvest the proceeds into the bond market.  That additional demand for bonds is what drives yields lower. As a result, home loan rates tend to benefit when stocks sell off.  

Although mortgage note rates have not declined they have at least stalled which is a win compared to the sharp increases we saw during the first week of October.

What’s next?

Should stocks continue to sell off I would expect home loan rates to improve modestly.  However, if stocks gain footing and recover last week’s losses then it will put further pressure on mortgage rates to move higher.

According to the Case-Shiller price-to-earnings ratio the US stock market us currently trading at 31 times annual earnings.  

Dating back over 100 years there have only been two times when this metric has been above 30, 1929 and 1999.  In my view US stocks are still expensive which leads me to believe that values will correct at some point in the future which should help US interest rates.

The tricky part is forecasting when.

Current Outlook: floating bias

What goes up……might come down?

If you are a believer in the proverb “what goes up must come down” then last week doesn’t hurt so bad.

Home Loan Rates

Mortgage rates suffered the biggest increase in one week since the presidential election in November 2016.  Interest rates rose by +.25% last week.


It seems obvious that as the cost of borrowing increases affordability of homes worsens.  But how much? For every 1% increase to interest rates purchasing power decreases by 12% for homebuyers.  

Therefore, homes got 3% more expensive in five short days.


The good news and bad news is that average hourly wages are increasing in the US.  Over the past year American workers have seen their pay increase by 2.9%.  That is good news because it allows households to afford higher mortgage payments but bad news because it helps contribute to higher interest rates via wage-based inflation.

Why are rates rising?

One of the primary reasons why we’re seeing mortgage rates rise is because the Fed is no longer supporting them.  I explained this concept back in February (HERE).  For years the Fed had been purchasing mortgage-backed securities via quantitative easing.  Instead of stopping the support immediately they gradually tapered their activity.

As recently as September they had been reinvesting some of their capital into the mortgage-backed securities market.  Starting on October 1st that activity has ceased and as a result interest rates have risen in order to attract capital from other places.

The week ahead

The economic calendar is relatively light this week.  There are three Fed officials speaking today.  Tomorrow we’ll see the producer price index and on Thursday we’ll get the consumer price index.  Since mortgage rates increased so sharply last week I am going to recommend floating this week in the hopes that what goes up must come down.  

Current Outlook: floating bias

Mortgage rates hold steady, might the Fed help home loan rates improve?

Jenny Don’t Change Your Number!”- Today is National One-Hit-Wonder Day.  What is your favorite hit?

 Mortgage Rates

After consecutive weeks of moving higher the good news is that mortgage rates did not change last week.  Home loan rates continue to hover around the highest levels of the past seven years.

The Fed

As I noted in last week’s update the Fed is meeting today and tomorrow and is expected to announce a +.25% hike to the Federal Funds rate.  Although many media outlets will use the announcement to forecast higher mortgage rates readers of this blog know that the Fed does not directly influence home loan rates (don’t believe me?  See HERE).  

In fact, I can see a scenario where tomorrow’s announcement could be a catalyst for mortgage rates to reverse lower.

Inflation Medicine

We know that inflationary pressure is the primary nemesis of mortgage rates.  This is because when lenders believe the purchasing power of money lent will decline, via inflation, they will charge higher rates of interest to compensate.  

The reason the Fed hikes rates is to curb inflationary pressure.  Therefore, I will be listening to the comments which accompany the rate hike announcement on Wednesday to hear if they feel like inflationary pressure is building or expected to ease (hopefully the latter).

The Week Ahead

On Thursday we’ll see fresh reports on pending home sales and durable goods orders.  On Friday the Fed’s favorite gauge of inflation will be released (personal consumption expenditure price index).

I am shifting to a floating bias.

Current Outlook: floating bias

Mortgage rates continue to trend higher

Today marks the 17th anniversary of the horrible 9/11 attacks.  Virtually every US citizen’s life were altered that day. If you’ve never heard the incredible and inspiring story of Welles Crowther (AKA “the man in the red bandana”) I encourage you to take a moment to watch THIS today.

 Mortgage Rates

Last week I recommended locking and that proved to be the right call.  

Since the end of April conventional 30-year fixed rates have traded within a range of 4.625%-4.875%.  As recently as August 24th mortgage rates were available at the lower end of that range but as of today we are at the top end.  

The last few times mortgage rates have hit these levels they have reversed lower.  I am not confident that pattern will repeat itself this time.

The Fed

The Fed is scheduled to meet in two weeks and according to CME Group there is currently a 98% chance they hike rates by +.25%.  It is basically a certainty.

Yield Curve

As of today there is a .22% difference between the yield on the US 10-year treasury note and the 2-year treasury note.  After the Fed hikes rates in two weeks we could see the yields on par which means we’d have a flat yield curve.

If this happens I would either expect an economic recession in the next 12-24 months or  longer-term interest rates to increase (including for mortgages).

On a side note the flattening of the yield curve is also reducing the difference between 30-year and 15-year fixed rate mortgages.  There is currently only a .25% advantage for 15-year amortizing loans.

The Week Ahead

There are a number of Fed officials speaking this week and their comments can always influence the markets.  On Thursday we’ll get the latest Consumer Price Index report and on Friday we get the latest reading for Retail Sales.

Momentum is not on our side.  I think mortgage rates will worsen by another .125% before stabilizing.  I will maintain a locking bias.

Current Outlook: locking

Rates modestly worse, home prices projected to increase at a decreasing rate

On this day in 1998 two graduate students from Stanford University incorporated their business which was named after the mathematical term for 10 to the 100th power (“1” followed by 100 zeros).

Had you invested $100 in their internet search engine business on that day your initial investment would be worth over $41 million today (91% annualized return).  Don’t believe me? Google it.


Although investing in a home is not as profitable as being an early investor in a business like Google it can still be fruitful.  

Corelogic released it’s monthly Home Price Insights report earlier today.  The report showed that nationwide home prices increased by 6.2% on average in the past year.  It went on to forecast that home prices will increase by 5.1% in the next year.

It’s important that consumers understand that although the pace of price appreciation is projected to decline home prices are still increasing.  If a consumer put 5% down and purchased a home today and the home appreciated by 5% in the next year their cash on cash return (on paper) would be 100%.  

Mortgage Rates

Last week I recommended a locking bias.  Pricing on mortgage rates indeed worsened modestly.  Interest rates are currently in the middle of the range they have established dating back to the beginning of the summer (30yr fixed: 4.625%-4.875%).  

Technical Trading Patterns

Momentum appears to be working against us but mortgage-backed bond prices and the yield on the US 10-year treasury are trading up against technical barriers.  If yields can bounce lower we may see rates improve by .125%.  However, if yields blow through these levels then expect +.125% higher rates by the end of the week.

The Week Ahead

There are a number of significant economic reports due out this week but none more important than the all important jobs report on Friday.  US-Canada trade talks are scheduled to resume on Wednesday.  If talks indicate a free trade agreement on the horizon I expect US stocks to rise which will hurt mortgage rates.

Current Outlook: locking

Yield on US 10-year treasury note holds key to direction of mortgage rates

Housekeeping: This weekly ‘rate update’ email will now be delivered each Tuesday instead of Monday.  

You may be here today but will you be gone to Maui?  On this day in 1959 Hawaii became the 50th state of the union.  I plan to celebrate when I am on Kauai in January.   

Mortgage Rates

Home loan rates improved modestly last week.  That said, during the month of August mortgage rates have barely budged.  


Those of in the real estate industry are acknowledging a modest slowdown in activity.  My personal view is that 2018 is the first year since 2014 for where we experience seasonality with demand.

Last week the Commerce Department reported that permits for single family homes decreased by 10% in the western region.  It appears that builders are having a harder time finding affordable and sufficient skilled labor.

This week the National Association of Realtors will release date on existing home sales on Wednesday and new home sales on Thursday.

Aside from that the only significant economic event on the calendar is durable goods which is also due out on Thursday.

Technical Trading Patterns

In the absence of a lot of economic data I expect mortgage rates to react to the stock market (when stocks do well mortgage rates tend to suffer and vice versa) and technical trading patterns.

The yield on the US 10-year treasury note, which home loan rates tend to track, is currently trading at 2.85%.  This is as good as interest rates have been all summer.  

If yields can find a way to break below 2.82% then we could see home loan rates improve by another .125%-.25%.  However, the past couple times that yields have hit this point they have reversed higher and home loan rates have worsened by .125%.

Current Outlook: cautiously floating

Fed stays put as do mortgage interest rates

Seventy one years ago a wood raft carrying five people arrived at an island near Tahiti after a 101 day journey from Peru.  The raft was captained by Norwegian Thor Heyerdahl and supported his thesis that Polynesia’s earliest inhabitants may have migrated from South America.  

The story was later made popular in the best-selling book Kon-Tiki.  

The Fed

It looks like it will be about 101 days from the Fed’s last rate hike to the next one.  

As expected the Fed did not hike short-term interest rates last week.  According to CME Group there is a 93% probability that the Fed will hike by .25% when they meet in mid-September.  The Fed last hiked short-term interest rates back in mid-June.

As a reminder the Fed does not directly control mortgage rates but their comments and actions can influence them.  

Jobs Report

This past Friday the Labor Department released its monthly employment report.  It showed that the US economy created 157,000 jobs during July and wages grew modestly.

With the unemployment rate at 3.9% the labor market is deemed to be tight which we would expect to pressure wages higher.  If wages grow too quickly then it could lead to inflation which is not friendly for mortgage rates.

The Week Ahead

Speaking of inflation it is about the only significant event scheduled for release this week.  On Thursday we’ll get a look at the Producer Price Index and on Friday we’ll get the latest reading of the Consumer Price Index.

In the absence of a heavier economic calendar I would expect interest rates to react to technical trading patterns.  The technical signals suggest it will be much harder for rates to improve this week than for them to worsen.  I would recommend carrying a locking bias into the latter half of this week.

Current Outlook: locking