Author: Evan

My blog is a tool for me to provide updates on what is happening in the financial markets that will impact mortgage rates, update professional partners on what is happening in the mortgage industry, and write about general financially related topics.

Mortgage Rate Update April 18, 2016

Posted on by Evan in Rate Update, Swanson Home Loans Blog - Mortgage Rate Updates and More

Essentially mortgage rates are unchanged from last week.  They have oscillated within a .125% range since the beginning of April with only minor volatility.

Anytime we see prolonged periods of sideways trading I get nervous that a “breakout” is near.  A “breakout” is when rates move sharply one way or the other and given that rates are already near historic lows we have to assume they have a higher probability to breakout higher.

This weeks economic calendar has plenty of housing related indicators.
This weeks economic calendar has plenty of housing related indicators.

This week’s economic calendar is fairly light.  However the limited number of releases are housing focused.  Today we got the National Association of Homebuilders market index which was in line with expectations (no surprises here).  Tomorrow we’ll get building permits/ housing starts and on Wednesday the National Association of Realtors will report existing home sales.  On Friday we’ll get the Federal Housing Finance Agency’s housing price index.

The technical signals are also fairly quiet right now.  I will maintain a floating bias.  I don’t expect rates to improve much but at least we can buy some more time on our locks.

Current Outlook: floating bias

Mortgage Rate Update April 14, 2016

Posted on by Evan in Rate Update, Swanson Home Loans Blog - Mortgage Rate Updates and More

We had switched to a locking bias on Monday and that has proven to be the right call.  Mortgage rates have worsened very mildly since Monday.  This statement will contradict what you’ll hear from the media over the next couple days.

The Freddie Mac Primary Market Survey, which is what major media outlets tune into, was released today and showed that rates dipped slightly from last week.  Freddie Mac’s survey lags the market.

Lenders voluntarily submit interest rate information Monday-Wednesday of every week and then Freddie Mac releases the results on Thursday.  The results today simply show that mortgage rates were lower this Monday-Wednesday as compared to last Monday-Wednesday.  Unless rates move lower Monday-Wednesday next week next Thursday’s report will confirm that rates have worsened slightly.

Looking at the markets, the Consumer Price Index (CPI) was released today by the Labor Department and it continues a trend of tepid inflationary pressure.  This is friendly news for mortgage rates as inflation is the nemesis of long-term interest rates.

In a separate report weekly jobless claims matched the lowest level in over 40 years.  This is a positive sign for the economy which tends to be bad news for mortgage rates but at this point rates have not reacted.

From a technical perspective the US 10yr treasury yield and mortgage-backed bonds are trading at important levels after worsening over the last 3 days.  I am cautiously optimistic that they will catch technical support and rates will return to the levels we had at the beginning of this week.  But we need to be cautious given that rates are very near all-time lows.

Current Outlook: floating bias

Mortgage Rate Update April 11, 2016

Posted on by Evan in Rate Update, Swanson Home Loans Blog - Mortgage Rate Updates and More

Mortgage rates remain very attractive.  The 30yr fixed rates available today are only +.25% off the all-time lows created in November 2012.

The big story in the financial markets this morning is the sudden increase to oil prices.  The price of a barrell is now trading above $40 and has increased by ~14% in the past week.   How may this impact mortgage rates?

Higher oil prices over the past week threaten to pressure mortgage rates higher.
Higher oil prices over the past week threaten to pressure mortgage rates higher.

Recently higher oil prices have also translated to higher stock prices and that is the case today.  The US markets are up ~.5%.  When stocks do well mortgage rates tend to suffer.  Furthermore, higher energy prices can eventually lead to inflationary pressure which we know is the nemesis of mortgage rates.

Looking ahead for the week the economic calendar is a little more active compared to last week.  There are two important inflation reports scheduled for release Wednesday and Thursday.  We’ll also see the latest retail sales report and consumer sentiment later in the week.

From a technical perspective mortgage rates appear to have stalled out after improving steadily since March 22nd.  Given that financial markets tend to operate in cycles I am growing concerned that mortgage rates may be poised to reverse and move higher.  Having said that the US 10-year treasury yield still has some room to the downside so it’s a tough call.

The safe play is to lock in with a long-term perspective that these rates are as good as we’ve seen throughout the past few decades.

Current Outlook: locking bias

Mortgage Rate Update April 7, 2016

Posted on by Evan in Rate Update, Swanson Home Loans Blog - Mortgage Rate Updates and More

Did you know that according to a recent survey approximately 40% of millennials think that lenders require a minimum of 15% down payment?  This misconception is keeping many from enjoying the benefits of homeownership.  Feel free to pass THIS POST on to others so we can spread the message that 0%-3% down options exist.

Mortgage rates have held steady this week and 2016 lows.

As I wrote on Monday the economic calendar has been light this week so it is not a surprise to see rates hold steady.  Lower yields in Germany and Japan continue to help suppress US interest rates.

Wall Street legend Art Cashin released a note this morning advising market watchers to pay attention to money supply.  This is a measure of how much currency exists in our economy and how frequently it turns over as a result of transactions.  The reason this rather obscure measure is important to watch is because of an equation which states that, “MV=PQ”, also known as the Quantity Theory of Money.

04-07-MVPQ

If money supply (M) increases along with velocity (V) and GDP (Q) holds steady or grows slowly then according to the equation inflation (P) must increase.  Inflation is the nemesis of mortgage rates.  More to come on this in future rate updates.

From a technical perspective the US-10 year treasury yield still have room to the downside so I will remain in a floating position.

Current Outlook: floating

Mortgage Rate Update April 4, 2016

Posted on by Evan in Rate Update, Swanson Home Loans Blog - Mortgage Rate Updates and More

Mortgage rates improved modestly last week and remain very near multi-month lows.

Friday’s all-important jobs report was in line with market expectations.  215,000 new jobs were created during the month of March and the unemployment rate crept up to 5.0% as more citizens entered the workforce.  Mortgage rates held steady on the release.

In case you missed it the S&P Case-Shiller Home Price Index was released last week for the month of January.  For a second straight month Portland led the nation in year-over-year home price appreciation (11.8%).  Good news if you are a seller and not as much for prospective buyers.

This week’s economic calendar is very light.  There are a few Fed officials scheduled to speak throughout the week and minutes from the most recent monetary policy meeting are also scheduled for release.  Barring any surprises with those events we’d expect mortgage rates to react to technical trading patterns and global influences.

From a technical perspective mortgage rates look like they could make a run for another .125% improvement.  The US 10-year treasury yield is currently trading at 1.77% and recent lows occurred back in mid-February at 1.55%.

04-04-10yr yield-portland or mortgage broker

In comparison, Germany’s 10-year bund is currently trading at .14% and Japan’s equivalent is trading at -.08%.  That’s right, investors in Japan’s 10-year government bond  are actually paying .08% to invest.  As long as these rates remain low the US should experience low mortgage rates.

Current Outlook: floating

Mortgage Rate Update March 28, 2016

Posted on by Evan in Rate Update, Swanson Home Loans Blog - Mortgage Rate Updates and More

Welcome back if you were away for spring break!  Mortgage rates worsened slightly last week but remain very attractive.

US stocks ended last week slightly lower.  This follows five weeks of strong gains.  As I wrote about on Thursday (see HERE) I think the stock market looks vulnerable which could lead to lower mortgage rates.

Contributing to losses in the stock market last week were comments made by Fed officials.  Federal Reserve Bank of Atlanta President Dennis Lockhart said in a speech that a rate hike could take place as soon as the April meeting, which is scheduled for April 26th-27th.  In a separate speech Federal Reserve Bank of Richmond President Jeffrey Lacker said he was confident inflation would continue to increase to the Fed’s target of 2%.  Prior to these comments the markets had thought the next Fed hike would not be until later in 2016 if at all.  Fed Chairwoman Janet Yellen is scheduled to deliver a speech tomorrow so analysts will be listening closely to her comments for additional clues.

The economic calendar is jam packed with significant economic data this week.  The highlight will be Friday’s all-important jobs report.  The markets are expecting ~200,000 new jobs created for the month of March.  Another strong report would likely push rates higher and vice versa.

Earlier today the Fed’s favorite gauge of inflation was released.   The Core Personal Consumption Expenditures Price Index (Core PCE) was up 1.7% year-over-year which is unchanged from last month and still below the Fed’s target.

I am going to maintain a cautious floating bias.

Current Outlook: cautiously floating

Mortgage Rate Update March 24, 2016

Posted on by Evan in Rate Update, Swanson Home Loans Blog - Mortgage Rate Updates and More

Mortgage rates are unchanged from last week.

It’s been a relatively quiet week with regard to economic news.  Not only are people not paying attention because they’re on spring break but there is also not much to pay attention to.

Quietly, the US stock market has been on a nice rally.  Since mid-February the S&P 500 has had 21 positive trading days and only 8 negative days.  Over that timeline the S&P 500 has risen by ~11.5%.

03-24SP500-Portland mortgage rates

Is the market overheated?  One contrarian predictor of the stock market is investor sentiment.  When investors are “bullish” on the markets it’s usually a great time to sell and vice versa.  In a recent research note Peter Boockvar of CNBC pointed out that investor sentiment is currently at its highest level since July 2015.  In case you need a reminder on what happened in August last year refer to the chart above.

If stocks react lower in the coming weeks, as many analysts are starting to predict it would likely generate demand for safe-haven assets including US debt instruments which would drive yields lower.  I am going to maintain a floating bias to see if this pattern comes to fruition.

Current Outlook: cautiously floating

Mortgage Rate Update March 17, 2016

Posted on by Evan in Rate Update, Swanson Home Loans Blog - Mortgage Rate Updates and More

Good news!  Mortgage rates have improved this week.  I switched my outlook to ‘floating’ on Monday and for those who followed that guidance they are being rewarded with rates that are .125% better.

The catalyst for the shift in direction for interest rates was yesterday’s Federal Reserve monetary policy statement.  The markets were anticipating the Fed to sound upbeat on the labor market and more cautious regarding inflation.  However, in their statement the Fed did not acknowledge either of those factors and instead focused on the economic risks posed by international weakness.

The markets are now pricing the highest probability for the Fed to hike short-term rates only one more time in 2016.  If you’ll remember back the Fed had implied they may hike four times this year.  The Fed does not directly control mortgage rates but their view on the US economy carries a lot of weight and bad news for the economy tends to be good news for mortgage rates.

Hoping a little St. Paddy's Day luck will bring lower rates next week.
Hoping a little St. Paddy’s Day luck will bring lower rates next week.

The economic calendar has basically run its course so today and tomorrow I expect mortgage rates to react to technical trading patterns.  I rarely recommend getting greedy but given today is St. Patrick’s day I’m going to maintain a floating bias.  If rates can push below current technical support levels we could see them improve by another .125%.

Current Outlook: cautiously floating

Mortgage Rate Update March 14, 2016

Posted on by Evan in Rate Update, Swanson Home Loans Blog - Mortgage Rate Updates and More

Mortgage rates continued to creep higher last week.  Since late February interest rates have been moving higher but still remain below where we started the year.

3-14-10yr-portland-or-mortgage-source

Although there is no significant economic news out today the remainder of the week features a busy schedule.  On Tuesday we’ll receive the monthly report on retail sales and the Producer Price Index.  On Wednesday we’ll see the Consumer Price Index, industrial production, and the Fed’s monetary policy statement.

The Fed is not expected to raise short-term interest rates at this meeting (reminder: the Fed does not directly set mortgage rates).  However, we won’t be surprised if they sound a little more upbeat regarding the US economy.  Furthermore, recent inflationary measures have revealed that price pressure may be building and that could encourage them to lay the groundwork for another rate hike in June.  Inflation is the enemy of mortgage rates.

From a technical perspective momentum over the past couple weeks has carried mortgage rates higher.  Is this move higher running out of steam?  Trading signals suggest this may be the case.  I will recommend a floating position for now but we need to be cautious as the Fed’s comments can overshadow technical trading patterns.

Current Outlook: cautiously floating

Mortgage Rate Update March 10, 2016

Posted on by Evan in Rate Update, Swanson Home Loans Blog - Mortgage Rate Updates and More

Mortgage rates have worsened by ~.125% this week.

The big news story of the week is the European Central Bank’s (ECB) announcement that they are enhancing quantitative easing measures designed to boost economy activity in their economy.  ECB President Mario Draghi outlined a multitude of aggressive measures including charging banks interest for depositing excess reserves (negative interest rates) and purchasing corporate bonds in addition to government bonds.

The US stock market initially reacted positively to the announcement but have since reversed into negative territory.  Despite the fact that stocks are trading lower US interest rates have been pressured higher.  The US 10-year treasury yield is not trading above an important technical level of 1.90%.

03-10-US 10yr-portland-or

This is a bad sign for mortgage rates.  As I wrote about on Monday (see HERE) there is room for the yield to move up by another .20% which could push mortgage rates up another .125%-.25%.

Current Outlook: locking