Category: Rate Update

Home loan rates remain flat, risk of break out build

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

It all started with $6,000 in February of 1940 when the US Government granted that sum to a group of researchers who were curious about the potential for fissionable materials to be used for military purposes.  The original $6,000 later ballooned to over $2 billion and on this day in 1945 the Manhattan Project first “successfully” tested the atom bomb.

Home Loan Rates

Mortgage rates have been anything but explosive over the past two weeks.  Home loan rates have remained flat over that timeline.

Inflation

Price pressure is the primary driver of long-term interest rates.  

Last week both the Producer Price Index and the Consumer Price Index showed price increases above the Fed’s target of 2.0%.  The reports lend credibility for the Fed to maintain its rate tightening policy. It also increases the probability that mortgage rates will increase and not decrease.

Retail Sales

Although consumers may be paying higher prices for goods it does not seem to be slowing sales.  This morning the retail sales report showed better than expected activity.  Many analysts are pointing to federal income tax cuts as the primary reason why.  

Good news for the economy tends to be bad news for mortgage rates.

The Week Ahead

The economic calendar is fairly light this week.  Fed Chairman Jay Powell will be speaking on Tuesday.  On Wednesday we’ll get a look at housing starts and building permits.  On Thursday we’ll get leading economic indicators.

Technical signals

Mortgage rates have remained relatively flat for almost three weeks.  Any time rates remain flat for extended periods of time it increases the chances of a “break-out” which is when they move sharply higher or lower.  There is no telling when they will “break” and if they will break in our favor. The safe play is to lock in but ultimately it is a coin flip.

Current Outlook: neutral

Mortgage rates at best level since April, time to lock

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

On this day in 1846 the United States captured a small settlement called Yerba Buena located in a bay.  This site is now home to one of the most expensive housing markets in the world. SEE HERE for a parody on some of the rental offerings in this city which was later named San Francisco.  

Home Loan Rates

Mortgage note rates remained unchanged last week although the underlying closing costs improved modestly.  Pricing on mortgage rates are at the best levels since April.

Jobs

Last Friday’s all-important jobs report is being referred to as “goldilocks”, not too hot and not too cold.  It showed 213,000 new jobs created during the month of June and the US unemployment rate at 4.0%.  Wages increased moderately.

Overall, it was a healthy report but not too healthy to stoke inflation fears and push mortgage rates higher. 

 

The Week Ahead

There are not a lot of economic releases scheduled for this week but there will be some key events.  On Wednesday we’ll get the Producer Price Index, which reports on prices at the wholesale level of our economy, and on Thursday we’ll get the Consumer Price Index, which reports on prices at the retail level.  

Inflation is the primary driver of long-term interest rates including mortgages.  Inflation has been ticking higher but not enough to pressure rates too badly.  Any signal that inflation is accelerating would be bad for home loan rates.

The US Treasury is set to deliver $69 billion in fresh debt supply this week.  This is 23% more than was offered last year at this time.  The extra debt is being issued to fund the federal income tax cuts.  The additional debt supply will make it harder for mortgage rates to improve.  

After improving over the past couple weeks I think interest rates are ripe for reversal.  I am going to recommend a locking position.

Current Outlook: locking

Holiday shortened week could cause volatility

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

If we celebrated the day that the Continental Congress voted on the Declaration of Independence from Great Britain then we wouldn’t be in the office today. It was actually on July 2, 1776 that the colonies voted to approve the Declaration of Independence. However, following the nearly unanimous vote Thomas Jefferson took the document, made a few edits, and it was adopted on July 4, 1776. Happy 4th!

Mortgage rates adopted modest improvements last week.

The Week Ahead
It is a holiday week and the financial markets will close early on Tuesday and remain closed until Thursday. During holiday weeks trading desks tend to be lightly staffed. With fewer buyers and sellers in the marketplace we have to be on guard for volatility.

Jobs
The economic calendar this week is compressed with the highlights coming Thursday and Friday. On Thursday we’ll get minutes from the last Fed meeting at which they hiked short-term rates.

On Friday we get the all-important jobs report. Analysts are expecting ~190,000 new jobs created. A number north of that estimate would likely pressure rates higher and vice versa.

US Stocks
US stocks continue to slide on fears of trade tensions. Since the middle of July the S&P 500 is off about 3% and mortgage rates have improved by ~.125%.

Technical Trading Patterns
The yield on the US 10-year treasury note continues to trade below 2.90%. As long as we remain at or below 2.90% I will continue to recommend a floating position.

Current Outlook: floating

Stocks slide on trade fears helping mortgage rates

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

How does a team go undefeated in the World Cup and not win the whole thing?  Easy, not qualify. For those US soccer fans there is reason to celebrate today.  On this day in 1950 the US men’s soccer team beat England in a major upset.  

Mortgage rates traded sideways last week.

US Stocks

The US stock market is not celebrating the trade threats that continue to escalate between the US and China.  Over the weekend the Trump Administration announced rules which will limit Chinese companies from investing in US technology companies.  

US stocks opened sharply lower this morning. Bad news for the economy tends to be good news for home loan rates.

Housing

Last week the National Association of Realtors announced that the pace of existing home sales had slowed in May.  However, the median home price continued to climb on tight supply.  The median home price in the US has increased for 75 straight months.

Earlier today the Commerce Department announced that the number of contracts for the purchase of newly constructed homes increases substantially year-over-year.  This is welcome news given that there continues to be a shortage of housing.

Technical Trading Patterns

The yield on the US 10-year treasury note has broken below an important technical layer.  If it can close below 2.88% then it may be a signal of lower rates on the horizon.  Fingers crossed.

The Week Ahead

This week’s economic calendar kicks off tomorrow with the Case-Shiller Home Price Index.  On Wednesday we’ll see durable goods and pending home sales. On Friday we’ll get personal income and the Fed’s favorite gauge of inflation.  

I recommend floating as long as the US 10-year treasury note is at or below 2.90%.  If it reverses higher then we’ll need to lock in.

Current Outlook: floating

Fed flattens yield curve

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

On this day in 2006 the Oregon State Beavers baseball team lost its opening game in the College World Series.  They would come back to win five of its next six games to claim the national championship. We’ll see if the 2018 team can follow the same pattern!  

Mortgage rates improved modestly last week.

The Fed

As expected the Fed did hike short-term interest rates on Wednesday of last week.  As a reminder the Fed does not directly set mortgage rates.  They also set the expectation that they would hike two more times in 2018 and two to three more times in 2019.  

Yield Curve

The yield curve has flattened over the past three years with rates at the short-end of the curve increasing by ~1.5% while rates at the long-end have increased less.  

Some economists believe that a flat yield curve is an indicator for a recession.  This coupled with low unemployment (see HERE) have me feeling more and more like we will see an economic slowdown in the next 12-24 months.

US Stocks

The US stock market was trading lower on Monday in response to tariff threats between the US and China.  Late last week President Trump approved 25% tariffs on approximately $50 billion of Chinese exports.  China countered over the weekend with penalties on US products sold in China. Although tariffs will help some industries most economists agree it will not be favorable for the economy as a whole.

Bad news for the economy tends to be good news for home loan rates.

The Week Ahead

This week’s economic calendar is relatively light.  There are significant housing related reports such as housing starts & building permits (Tuesday), existing home sales (Wednesday), and leading economic indicators (Thursday).  

Current Outlook: cautiously floating

Are mortgage rates likely to increase or decrease? Anyone? Anyone?

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

On this day in 1986 one of the greatest movies of all time was released. Does anyone know which movie? Anyone? Anyone? (see movie reference HERE).

Last week US stocks rallied and home loan rates moved which direction? Anyone? Anyone? They increased modestly.

The Week Ahead
The calendar is full of significant events this week. There won’t be anytime to take a day off (had to sneak in another movie reference).

Treasury auctions
The US Treasury has auctioned $32 billion of 3-year and $22 billion of 10-year notes already this morning. Tomorrow they will auction an additional $14 billion of 30-year bonds. The added supply of fresh debt will make it hard for home loan rates to improve this week.

Inflation
On Tuesday and Wednesday we’ll get fresh readings on the Consumer Price Index and Producer Price Index. Inflation has been trending higher and remains the primary driver of long-term interest rates including for mortgages.

The Fed
The Federal Open Market Committee meets Tuesday-Wednesday and is expected to announce a +.25% hike to the Federal Funds Rate mid-week. The Fed does not directly control mortgage rates but their comments and actions can influence them. If you have not locked in a rate don’t fret. The .25% rate hike is already baked into the rates you see today.

Technical trading patterns
Momentum is not on our side. Rates worsened modestly last week and have more room to worsen this week. I think we have more to lose than to gain so will maintain a locking outlook.

Current Outlook: locking

Might low unemployment signal a recession near?

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

On this day in 1896 the chief engineer of Edison Illuminating Company first test drove the “Quadricycle” he had developed.  That engineer’s name was Henry Ford and the “quadricycle” would eventually be commonly known as a car.  

The next stage of automobile evolution is expected to be the driverless car.  CLICK HERE to learn how they may impact real estate values.  

Jobs, Jobs, Jobs

Friday’s all-important employment report showed continued strength in the Labor Market.  According to the release the US economy added 223,000 new jobs, average hourly wages rose, and the unemployment rate decreased to 3.8%.  

Seemingly a healthy jobs market is a great indicator for the housing market.  However, there are two concerns that arise from the report.

#1: Inflation & Home Loan Rates

Job growth coupled with a low unemployment rate means employers will have to pay higher wages to attract workers.  This is great for employees but also can lead to wage-based inflation where producers are forced to charge higher prices.  

Since inflation is the primary driver of mortgage rates strong job growth becomes a double edged sword for housing demand.

#2: Recession near?

The US economy has been growing for more than eight years now making it one of the longest expansions in recent history.  Dating back to World War II recessions have always followed cyclical low points in the unemployment rate as the chart above shows (grey shadowing signals recessions).  

I subscribe to the belief that we are 12-24 months away from a recession.  Mortgage rates tend to drop during recessions so it might make sense for homebuyers to consider 5/1 & 7/1 ARM’s at this time.

The Week Ahead

This week’s economic calendar is relatively light.  The US Treasury will auction 10-year notes and 30-year bonds this Thursday.  The additional supply of longer-duration securities will make it difficult for rates to improve.  Furthermore, the political drama in Italy seems to be quieting down.  I will recommend a locking bias.  

Current Outlook: locking

Turmoil in Italy helps US mortgage rates improve

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

Have you seen the $170 paperclip from Prada (seriously-see HERE)?  I wonder how many will sell today given that it is National Paperclip Day.  I will be “celebrating” with a more modest version.

Italian political woes

US mortgage rates are benefitting from political turmoil in Italy.  Over the weekend the Italian President blocked the formation of a coalition government that would have given more power to the anti-European Union parties.  Remember what happened to US interest rates 3 years ago when Greece threatened the stability of the union?  (hint: they were lower.)

Interest rates in Italy and Spain spiked over the weekend which has prompted a flight to safety in the global financial markets.  Anytime uncertainty grows the US tends to benefit because it is considered a relatively safe place to invest capital.  As a result of heightened demand for US securities, including mortgage-backed bonds, mortgage rates have improved.

Housing Market

Earlier today the most recent version of the S&P Case-Shiller Home Price index was released.  The data showed continued gains in home prices across the nation. According to the report home prices in Portland increased by 6.7% over the past twelve months.  Seattle showed the highest appreciation at 13%.  

As long as the supply of homes for sale remains low I expect home prices to hold firm.

The Week Ahead

The economic calendar is full of significant releases.  On Wednesday we’ll get the Fed’s beige book and the ADP employment report.  On Thursday we’ll see personal income, core inflation, and pending home sales.  On Friday we get the all-important jobs report.  

The drama in Italy could overshadow these reports.  For now we’ll recommend floating as momentum is on our side.  However, I don’t expect the longer-term trend of rates worsening to change.

Current Outlook: floating

Mortgage rates enter new range

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

Although it is illegal to sell a body part in the United States thousands of people do it every day.  On this day in 1881 the American Red Cross was founded.  Since then people have been selling pints of blood for a cup of juice and a cookie nearly every day.  

Mortgage Rates  

Mortgage rates worsened modestly last week.  The US 10-year treasury note, which home loan rates tend to track, is now yielding over 3.00%.  It is at the highest level since 2011.

Most every analyst’s interest rate prediction for 2018 has been surpassed including my own.  I thought mortgage rates would increase to 4.625%-4.875%. Here is what others thought:

Source: mortgagereports.com

US Stocks

The Dow Jones Industrial Average reacted positively to comments made by US Treasury secretary Steve Mnuchin earlier today.  He stated that the trade dispute between the US And China was “on hold”. The Dow spiked 350 points at the opening bell.

When stocks rally it tends to hurt mortgage rates.

The Week Ahead

This week’s economic calendar is fairly light.  On Wednesday we’ll get minutes from the May 2nd Fed meeting which can always move the markets.  Aside from that I’ll be watching New Home Sales (Wednesday), Existing Home Sales (Thursday), and the FHFA Home Price Index (Thursday).

Outlook

It appears that rates have entered into a new trading range.  I expect the current level of rates to be at the lower end of the range with room for them to be .25% higher than current levels.  I recommend locking.

Current Outlook: locking

Higher oil prices pressure home loan rates higher

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

They say that weddings are getting more and more expensive.  In fact, the average cost of one surpassed $30,000 in 2017.  That is enough to put 5% down and pay closing costs for a median priced home in Portland, OR..   

As I type there are four days, six hours, and 27 minutes until the royal wedding for Prince Harry and Meghan Markle.  That ceremony is estimated to cost $2.8 million which could be used to put 5% down on THIS HOME.

Mortgage Rates  

Unfortunately mortgage rates worsened modestly last week as US stocks rallied.  The US stock market registered its best week in over two months which put upward pressure on home loan rates.

Oil prices

Geopolitical tension in the middle east coupled with uncertainty around Iran economic sanctions further supported oil prices last week which are now at three and a half year highs.

Higher oil prices are problematic for interest rates because they tend to be inflationary and inflation is the primary driver of mortgage rates.  

The Week Ahead

This week’s economic calendar is relatively light.  It features a slew Fed officials speaking around the country.  The Fed does not directly control mortgage rates but their comments can certainly influence them.  

According to CME Group there is currently a 95% probability that the Fed will hike short-term interest rates at the next meeting on June 13th.  There is a 50% probability that the Fed will hike short-term rates three more times in 2018.

Outlook

Due to momentum and the longer-term trend for interest rates I favor a locking position this week.

Current Outlook: locking