As job growth slows mortgage rates improve

As you read this take a quick look around.  Do you see a few things that were ‘Made in China’?  On this day in 2001 China joined the World Trade Organization.  Currently President Trump is working to resolve trade tensions which are helping to contribute to lower mortgage rates.

Mortgage Rates

Home loan rates have benefited from recent weakness in the stock market.  One of the major factors contributing to stock market weakness has been the lack of progress on trade talks with China.

There are reports that progress is being made but for now key differences remain.  If and when the US and China reach a trade deal we may see the stock market rally which presumably would cause mortgage rates to rise.

Job growth declining

Last Friday’s all-important jobs report showed that 155,000 new jobs were created in the previous month.  This was less than the 190,000 that were expected.  The trailing three-month average has decreased to 170,000 which is the lowest of 2018.  Some economists are predicting an economic slowdown for 2019-2020.

Inflation Sensation

Ultimately inflation is the key driver of interest rates because if a lender forecasts that the purchasing power of money repaid in the future will be diminished they will charge a higher interest rate.

The Labor Department reported earlier today that prices at the wholesale level of the economy (Producer Price Index) increased by 2.7% last month when you strip away volatile food & energy.  This is a modest increase from last month.

Tomorrow the Consumer Price Index will be released.

Technical Signals

Mortgage rates are .375% better than they were a month ago.  It appears to me that the rally lower has lost steam.  I think the risks of mortgage rates reversing higher outweighs them improving so recommend locking.

 Current Outlook: locking

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

Home loan rates at two month lows

What do you call a cow with a twitch?….beef jerky……Happy National Craft Beef Jerky Day!  

US Stocks & Interest Rates

Economic uncertainty is taking a toll on the stock market and helping mortgage rates improve.

In an interview with the Wall Street Journal President Trump said it was “highly unlikely” that the US would accept a request from China to hold off on additional trade tariffs as the two countries head into a trade summit.

Furthermore, investors are less certain about the Fed’s future monetary policy as US interest rates head closer to a “neutral” level.  

Economic uncertainty tends to discourage investment in the stock market and encourage capital to flow into safe-havens which helps US mortgage rates.

US interest rates are currently at two-month lows.

Housing Prices

As interest rates decline so do appreciation rates for homes.  Home prices are still increasing year-over-year but not as rapidly as they have over the past few years.  

The Case-Shiller Home Price index for Portland released earlier today shows that homes are 5.1% more expensive than they were 12 months ago.  For a homebuyer who puts 10% down that is still a great cash-on-cash return.  

Josh Lehner of the Oregon Bureau of Economic Analysis recently wrote THIS PIECE which explains how the housing market is re-balancing after years of under supply and strong demand.

The Week Ahead

This week’s economic calendar is busy.  On Wednesday we’ll see new home sales and Fed Chairman Jerome Powell is scheduled to speak.   On Thursday we’ll get minutes from the last Fed meeting and their favorite gauge of inflation (PCE price index).  

Given that mortgage rates are at recent lows I recommend locking in.

Current Outlook: locking

As stocks slide mortgage rates benefit

The irony of Thanksgiving and Black Friday on back-to-back days has always seemed funny to me.  How is it that we spend one day acting grateful for everything we already have then spending the next day trampling over each other to buy new things?

I wish you a warm and blessed Thanksgiving Holiday!

Mortgage Rates

Home loan rates are on a nice run lower thanks to weakness in the stock market.  When stocks do poorly investors typically park their money in perceived safe places which includes the US debt markets.  The additional demand for these securities drives yields lower.

US Stocks

The US stock market was trading at all-time highs only seven weeks ago.  Since then the S&P 500 has fallen approximately 10%.  Since July Facebook, Amazon, Netflix, and Google have lost nearly $1 trillion in combined market capitalization.

Is the loss of stock market wealth contributing to the slowdown in demand for home sales?  Afterall, in order for a person to make a large financial commitment like purchasing a home they have to feel confident about their future prospects.  Lower wealth could cause some people to hold off on buying a home.

Consumer Confidence

According to the Conference Board the Consumer Confidence Index (CCI) is currently at 137.9.  This is the highest level since September of 2000 when it stood at 142.5 so according to this measure households are still feeling pretty good.

However, the CCI has a pretty good track record of being a contrarian indicator as the graph below shows.

Source: Advisor Perspectives

The Week Ahead

It is a holiday shortened week and the economic calendar is relatively light.  I expect US mortgage rates to react to the stock market.  If stocks can rebound and move higher then home loan rates will likely worsen and vice versa.

Current Outlook: floating

Home loan rates improve modestly along with home values

As a father of two I wish Halloween fell on the weekend.  Ever wonder why it is celebrated on October 31st? You can find out HERE.

Interest rates

After hitting recent highs back on October 9th mortgage rates have improved very modestly.  Weakness in the stock market is likely the cause for the improvement in interest rates.

US stock markets have declined 10% from recent highs.  When stocks weaken it often encourages investors to re-position capital in the bond market which drives yields lower.


The Case-Shiller home price index was released today.  The report showed that Portland home prices increased by 5.4% from last year.  However, compared to the month before home prices were off by .1%.  

Although home prices here in Portland continue to increase (as measured year-over-year) they are doing so at a slower rate.  The +5.4% increase is the slowest rate of appreciation since 2012 and the Portland market now lags the national 20-city composite index which increased by +5.8%.

Seller Buydown strategy

Please take a moment to watch the video below which is a creative strategy to help bridge the gap between sellers’ willingness to make concessions in the current market and buyers who feel pinched by affordability pressures.

The Week Ahead

The Bureau of Labor Statistics will release its all-important monthly jobs report this Friday.  The markets are currently expecting +202,000 new jobs.  I won’t be surprised if the actual numbers miss expectations given the volatile weather in the southeast.  


Current Outlook: floating 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

Home prices increase at a decreasing rate, mortgage rates modestly better

In the book of life, the answers aren’t in the back.”-Charlie Brown  

On this day in 1950 the Peanuts comic-strip made its debut in newspapers.  


Lawmakers in Italy are looking for answers to their financial problems.  Earlier today a prominent Italian politician publicly remarked that Italy could solve many of its issues if it abandoned the euro and reverted to its own currency.  

His remarks have created some financial uncertainty which is helping US mortgage rates improve modestly.

Home Prices

What’s happening in the housing market?  

In the past week we’ve gotten the latest readings on nationwide home prices from the FHFA Home Price Index, Case-Shiller Home Price Index, and (this morning) the Corelogic Home Price Insights report.

Although each of these reports have different methodologies for calculating changes in home prices they all share similar results.  They each showed that home prices increased by 5.5%-6.4% over the past 12 months. Home prices continue to increase but at a decelerating rate (not to be confused with decreasing home prices).    

Corelogic projects that home price appreciation will continue to soften.  They predict home prices will increase by 4.7% in the next 12 months. By coincidence, 12 months ago they also predicted home prices would increase by 4.7% which turned out to be an underestimation.

Oil Prices

The media loves to focus on the Federal Reserve and the Federal Funds rate when trying to predict the future of home loan rates.  However, we know the Fed does not directly control mortgage rates.

I think they should play closer attention to oil prices.  Oil prices have increased by ~30% in 2018 and we know home loan rates have increased as well.  Energy prices are highly inflationary because they impact virtually every sector of the economy and inflation is the primary driver of mortgage rates.

The Week Ahead

The main economic event on the calendar for this week is the all-important jobs report due out Friday. I will remain in a floating bias but feel less confident than I did last week.

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