During an annual review an employee is astonished when their boss hands them a $10,000 check and says, “great job this year!”. The employee is speechless. The boss then says, “if you show me the same level of effort next year then bring that check back to your review and I’ll sign it.” Today is National Boss’s Day so be sure to give yours a hard time.
Mortgage rates improved modestly last week despite the stock market gaining for the fifth consecutive week. The cyclically adjusted price to earnings ratio for the S&P 500 remains above 30 which historically has been a signal that stocks are overvalued. Third quarter earnings reports will be issued over the next couple weeks so we’ll see if profits can justify these lofty valuations. In general when stocks do well mortgage rates suffer.
Last week tamer than expected core inflation numbers played a role in helping yields improve. However, oil prices are starting this week higher on news that tensions are flaring between the Iraqi central government and the Kurdish region. If oil prices continue to rise it will likely stoke fears of higher inflation in the future which would hurt mortgage rates.
This week’s economic calendar is heavy with housing data. On Tuesday we get the home builders’ index, on Wednesday we’ll see housing starts/ building permits, and on Friday existing home sales.
From a technical perspective mortgage rates are trending in the right direction but will face significant resistance this week.
Current Outlook: neutral