Category: Rate Update

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

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

“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 cycle to 7-year highs

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

Happy Birthday to Lance Armstrong who is celebrating the start of his 48th trip around the sun.  Many people believe Lance is the greatest abuser of performance enhancing drugs in cycling history but I’m not sure.  I think Elliott from the movie ET has some answering to do.

Mortgage Rates

Home loan rates have been cycling higher since the end of August.  Mortgage rates have now increased by +.25% and are at 7-year highs.  

Trade Wars

Earlier today President Trump announced the US would be imposing tariffs on approximately $200 billion worth of Chinese imports.  The Chinese government wasted no time in announcing counter tariffs on roughly $60 billion of US exports.  

Normally I would expect these announcements to potentially help US interest rates because it would be a bad sign for the stock market.  However, the US stock market is trading higher today and US interest rates are suffering.

More Contradictions

Last week it was reported that average hourly earnings increased by 2.9% for American workers.  This was hotter than expected and stoked fears of wage-based inflation which is not friendly to home loan rates.  However, in a separate report the Consumer Price Index was reported to have only increased by 2.2% which is very close to the Fed’s target.

The Fed

Speaking of the Fed they will be meeting next week and announcing a +.25% hike to short-term interest rates on Wednesday.  The Fed does not directly influence home loan rates (don’t believe me? See HERE).  Furthermore, we already know the Fed will be hiking rates and that news is built into the mortgage rates available today.

The Week Ahead

This week’s economic calendar is heavy on housing date with housing starts, building permits, and existing home sales due out.  

I am hopeful that mortgage rates reverse lower but for now momentum is not on our side.  I will remain in a locking stance.

Current Outlook: locking

Mortgage rates continue to trend higher

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

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

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

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.

Housing

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

Home Loan Rates modestly worse, Portland home prices entering “Goldilocks” range

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

A recent survey by the national maritime association revealed that 3.14% of sailors are pi-rates.  Why do I share this important statistic with you? Just because yesterday was national Just Because Day.   

Mortgage Rates

Although mortgage note rates are unchanged from last week the accompanying closing costs are modestly worse.

US 10-year Treasury

As I highlighted in last week’s ‘rate update’ the US 10-year treasury note had hit a multi-month low at 2.81%.  Although we were hopeful the yield may dip below this level and drag home loan rates lower it didn’t happen.

The US 10-year treasury yield responded the same way it has since the beginning of June which is higher.  As a result mortgage rates are priced modestly worse than last week.

US Stocks

The equity markets are responding warmly to news that the Trump Administration is close to revised trade agreements with Mexico and Canada.  Good news for stocks is often bad news for US interest rates.

Housing

The latest Case-Shiller Home Price Index report was released earlier today.  According to the data in the report home prices in Portland increased by 5.8% year-over-year ending in June.  

It’s important that consumers understand that the pace of home price gains is declining but home prices are still increasing.  I would argue we’re entering “Goldilocks” territory where the market is not too hot or too cold.  

Technical Trading Patterns

Given that rates are trending modestly higher I think it makes sense to lock now instead of waiting.  

Current Outlook: locking

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

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

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.  

Housing

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

Turkey helps US mortgage rates

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

Born this week in 1945 iss one of the greatest financial planning minds in US history.  This brilliant financial mind first appeared on late night TV spreading messages such as, “Don’t buy stuff you can’t afford”.  OK, maybe Steve Martin is known more for his comedy but his memorable SNL skit still resonates for me.  

Mortgage Rates

Home loan rates improved modestly late last week thanks to economic turmoil in Turkey.  After Turkish officials jailed a US pastor President Trump doubled trade tariffs against Turkey which caused panic in their financial system.  

Turkey

The Turkish Lira has depreciated rapidly and the financial markets grew concerned that the contagion would spread to other emerging economies.  Uncertainty tends to help US interest rates.

It appears that conditions have stabilized and that panic will not spread but if that changes later this week we may see mortgage rates hit near-term lows.

The Week Ahead

The economic calendar features a couple notable events.  On Wednesday we’ll get the latest reading on retails sales.  Also on Wednesday we’ll see the Home builders confidence index.  More telling may be Thursday’s release of new housing starts and building permits.  

As long as Turkey’s woes remain contained I would expect home loan rates to give back the .125% improvement they experienced at the tale end of last week.

Current Outlook: locking

Fed stays put as do mortgage interest rates

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

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

Mortgage rates steady despite strong economic growth

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

Need another reminder to be on the lookout for wire scams?  Check out THIS ARTICLE which describes how an Oregon couple nearly lost $379,000.  Want a free, easy, and significant way to help prevent this activity?  Set up two factor authentication! (see HERE)

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

Home loan rates move higher along with oil prices

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

Sometimes our best ideas are formed when we least expect it. This is true for the guitarist Slash who during a band warm up played a string skipping riff that he initially disdained.

However, the rest of the band asked him to play it again and later the riff formed the foundation of “Sweet Child of Mine” which entered the Billboard top 40 on this day in 1988. The hit would eventually climb all the way to #1 and ultimately help catapult Guns N’ Roses to become one of the most famous rock bands of all time.

Home Loan Rates
Mortgage rates are also climbing higher. Last week I warned that we may be in store for a “break-out” following three weeks in which home loan rates remained flat.

Unfortunately, rates decided to break higher instead of lower.

Oil prices
You may have noticed that US consumers are paying more at the pump. Oil prices have risen by ~20% in 2018. Prices spiked this morning after President Trump sent a threatening tweet directed at the president of Iran.

Nearly 40% of the global oil market flows through Iran so if there were a disruption it would certainly move prices higher. Higher prices for oil would be inflationary which would not be good for home loan rates.

Existing Home Sales
The National Association of Realtors released its monthly existing home sales report today. It showed that the number of sales declined modestly in June.

The median home price for the US reached an all-time high at $276,900.

The most interesting part of the report was that the total inventory of homes increased for the first time since June of 2015. Might this be a signal that a more balanced market is near?

The Week Ahead
This week’s economic calendar is relatively light. We’ll get new home sales on Wednesday and Q2 gross domestic product on Friday.

Momentum is not on our side. I recommend locking.

Current Outlook: locking.