Is a recession on the horizon? Fear drives mortgage rates to multi-month lows

I hope you took time to celebrate National Roof Over Your Head Day on December 3rd!  I showed up to work and helped people get a new roof over their heads so I’m feeling good about my contribution.  

Mortgage Rates

Mortgage rates continued to improve last week.  They are currently at multi-month lows.

Yield curve

As long-term rates improve the short-end of the yield curve is basically unchanged.  The difference in yield between the US 2-year & 10-year treasury notes is only .015%!  It appears that the yield curve may invert in the coming months.

Going back many decades every time the US yield curve has inverted the economy has gone into recession shortly thereafter.

Housing Prices

Corelogic released its monthly Home Price Index today.  It showed that homes appreciated by +5.4% nationwide in the past year.  Oregon homes appreciated by +6.0% according to the report.  

Home prices are still increasing but at a slower pace.   

The Week Ahead

The financial markets will be closed on Wednesday this week in honor of President George Bush who passed away over the weekend.  On Friday we get the all-important jobs report which can definitely influence the markets.

Current Outlook: floating

Mortgage rates steady despite strong economic growth

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Mortgage Rates Steady

On Friday the Commerce Department reported the US economy grew by 4.1% during the second quarter.  This was the strongest growth since the third quarter of 2014.  

Normally good news for the economy is bad news for mortgage rates.  However, analysts had been expecting an even stronger number so home loan rates remained steady.  

Pending Home Sales

The National Association of Realtors released its monthly pending home sales report today.  It showed that the the number of homes currently in contract increased month-over-month (+.9%) but is still down year-over-year (-2.5%).  

If you’ll remember last week the existing home sales report showed a slight increase to the supply of homes which may explain why we see more pending sales.  The trends in the housing market continue to suggest a more balanced market ahead.  

The Fed

Fed officials will meet this week and make a decision about short-term interest rates.  The markets currently expect the Fed to hold steady at this meeting but hike short-term rates by .25% at the September meeting.

Even if the Fed does not hike rates their comments can still impact mortgage rates.  

The Week Ahead

This week’s economic calendar is busy.  

On Tuesday we’ll get the latest Case-Shiller Home Price Index report and the Fed’s favorite gauge of inflation (Personal Consumption Expenditure price index).  On Wednesday we get the aforementioned Fed announcement and on Friday the all-important jobs report.

Current Outlook: locking