Tag: mortgage rates

Home Loan Rates stable….for now

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

With today being the first Monday after daylight savings I think we can all agree this is the “Mondayest” Monday of the year.

Mortgage rates stable?

Mortgage rates fared ‘OK’ last week.  For the most part home loan rates were unchanged despite US stock indexes moving higher.  Normally interest rates worsen when stocks do well.

Don’t look now but mortgage rates have traded within a .125% range since mid-February.

Jobs report

Last Friday’s all-important jobs report showed much stronger employment growth than was expected.  However, wage growth actually slowed modestly which is probably why mortgage rates didn’t move higher on the news.  Higher wages can lead to inflation which is the nemesis of mortgage rates.

Rates getting squeezed

The technical outlook for interest rates has me concerned that we may experience a “breakout”.  The yield on the US 10-year treasury note is trading in a tight range between technical support and resistance.  When this happens we sometimes see yields sharply bounce outside of the compressed range.

The week ahead

This week’s economic calendar features a variety of reports that can drive interest rates. Later today the US Treasury will auction off $21 billion in US 10-year treasury notes.  If demand weakens for this asset it would likely pressure home loan rates higher.

On Tuesday we’ll get the latest reading of the Consumer Price Index, on Wednesday Retail Sales, and on Thursday the Producer Price Index.

The safe play is to lock and avoid any possible breakout.

Current Outlook: locking bias

Despite stock market losses home loan rates rose last week

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

The winter Olympics are fully underway in South Korea and I find it inspiring to watch all the athletes who have trained tirelessly for the past four years to compete for gold.  My idea of training?  I named my dog six miles so I could tell people that ‘I walked six miles today’.

Typically when stocks perform poorly interest rates benefit.  Last week the US stock market lost ~5% of its value yet interest rates continued to march higher.  Why?

S & D

I wrote about the topic last week and I am going to harp on it again.  One of the primary factors pressuring interest rates higher is supply and demand.

The supply of US Treasury notes is expected to increase following passage of the tax reform bill and the latest two-year federal budget.  Both create substantial deficit spending which will have to be financed with a greater supply of US debt.

Meanwhile, demand for US Treasury securities is expected to decline as central banks around the world cut back on quantitative easing measures which are a legacy of the great recession.

An increase in supply met with a decrease in demand drives prices lower which in turn pressures yields higher.

Four-year highs

The average rate for a conventional 30-year fixed rate mortgage is now at the highest level since 2014.  15-year fixed rate loans are at the highest level in over five years.

Since September mortgage rates have increased by over .50%.  A .50% increase to interest rates has the same impact on mortgage payments as home appreciation of 6%.  In other words, even without appreciation homes “feel” more expensive for buyers.

Interestingly, according to a recent survey only 6% of respondents said they would cancel their plans to buy a home if mortgage rates surpassed 5%.

The week ahead

The meat of this week’s economic calendar kicks off Wednesday with retail sales and the Consumer Price Index.  On Thursday we’ll get industrial production and the homebuilders’ index.  On Friday we’ll see housing starts and consumer sentiment.

The technical outlook is mixed.  Interest rates are currently trading at important technical levels that could help them reverse and move lower.  However, recent momentum is too much for me to ignore so I will maintain the locking position we;ve held for the past month.

Current Outlook: locking

How home affordability is impacted by higher mortgage rates

Posted on by Evan in Housing & Real Estate, Swanson Home Loans Blog - Mortgage Rate Updates and More

 

As you may be aware mortgage rates are on the rise which is negatively impacting home affordability.

Over the past five weeks average fixed rate home loan rates have increased by ~.50%.  Many analysts think that rates will continue to rise for the remainder of the year.

How much does higher interest rates impact home affordability?  Take a moment to watch the video below for an explanation.

A .50% increase to mortgage rates effectively translates to a +6.3% increase to home prices.

In other words, a +.50% increase to interest rates for a conventional 30-year fixed rate mortgage has the same impact on monthly payments as if interest rates were unchanged and homes were 6.3% more expensive.

If rates should increase by an additional .50% over the remainder of the year this would make homes ~12% more expensive even homes don’t appreciate as a result of the basic tenets of supply and demand.

Given that many analysts think both mortgage rates and home prices are expected to increase for the remainder of 2018 it may be significantly less affordable to buy a home in the future than it is today.

Are you curious to learn about the options you have to purchase a home today?  Contact us for a no obligation review.

State of the Union speech may pressure mortgage rates higher

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

On Tuesday President Trump will deliver the annual State of the Union Address to Congress.  Some people think that Congress should work towards increasing the Federal minimum wage.  If anyone knows about doing the minimum for their wage it seems like a great place to start.

What legislative priorities will the President focus on in his speech? Any emphasis on infrastructure spending could add fuel to the fire in terms of mortgage rates increasing.

The tax reform law which passed in December has already added $1.5 trillion in deficit spending over the next decade.  Additional infrastructure investment without means to pay for it would put further pressure on interest rates to move higher (CLICK HERE to learn how).

Interest rates are currently at the highest levels since April of 2014.  There are a variety of factors contributing to higher home loan rates.

Notably the Fed has been hiking short-term interest rates for the past couple years and the longer end of the yield curve has remained flat.  It appears longer durations are following suit.

In addition, although inflation measures remain tepid the economy is growing and unemployment is near historic lows.  Speaking of employment we’ll get a new all-important jobs report this Friday.  The markets are currently expecting ~190,000 new jobs.

On Tuesday the latest S&P Corelogic Case-Shiller Home Price Index will be released as well as Consumer Confidence.

This column has been recommending a locking position ever since the US 10-year treasury note eclipsed 2.50% back on January 10th.  Since then mortgage rates have increased by .25%-.375%.  I continue to recommend a locking stance.

Current Outlook: locking

A busy economic calendar and potential vote to drive mortgage rates

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

Happy Birthday to John Burr Williams who would have turned 117 years old today!

In case you’re not familiar with that name (see HERE) he wrote a book called The Theory of Investment Value in 1938 which is widely regarded as the foundation of “Fundamental Analysis”.  His theories are critical to evaluating investments in real estate (and other assets).

Mortgage rates are essentially sideways from last week which is good news given the fact that US stocks traded at all-time highs.

Following a relatively quiet economic holiday week the calendar is jam packed for the next few days.

Housing in the news

Earlier today new home sales were reported and were much stronger than expected (+6%).  The pace of new home sales is currently at the highest level in 10 years!

Tomorrow we’ll get the latest S&P Case-Shiller Home Price Index and on Wednesday we’ll see pending home sales from the National Association of Realtors.

Inflation and the Fed

On Thursday the Personal Consumption Expenditure price index will be released which is the Fed’s favorite gauge of inflation.  Analysts do not expect a large uptick in inflation but if prices rose at a faster clip than is expected it would likely hurt home loan rates.

The Fed is widely expected to raise rates when they meet in a couple weeks.  Since the markets are already expecting this action that move will not impact mortgage rates (despite what the media coverage says).

Tax reform?

The big question is whether or not the Senate will vote on the tax overhaul bill.  Should legislation pass it is assumed that the stock market will benefit which would likely hurt mortgage rates.

From a technical perspective interest rates appear to be in a sideways pattern.  Unless it appears that tax legislation will be voted on and pass I will maintain a floating bias.

Current Outlook: cautiously floating

GOP Tax Plan still in focus for mortgage rates

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

I want to take a moment to wish you and your family a Happy Thanksgiving!  I am grateful for my audience that values professional and competent home loan advice.

Last week mortgage rates mostly held steady although pricing did worsen modestly.

This week’s economic calendar is relatively light with the highlights coming on Wednesday when we’ll see durable goods orders and the minutes from the last Fed meeting.

DON’T FEAR THE FED

We are now 23 days away from the next Fed meeting and the markets are currently assigning a 92% probability that the Fed will hike short-term interest rates by .25%.  I anticipate the media will pick up on this coverage after the Thanksgiving Holiday.  As a reminder, the Fed DOES NOT directly control mortgage rates.

GOP TAX OVERHAUL

I believe mortgage rates will sway with sentiment on the GOP tax overhaul plan.  If the House or Senate tax bill passes then the United States will experience higher deficit spending which is not good for mortgage rates.

Therefore, if it appears more likely that a bill will pass I expect home loan rates to worsen and vice versa.  I believe the road to passage will be difficult so will recommend floating.

Current Outlook: cautiously floating

Mortgage Rate Update August 21, 2017

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

In case you forgot to “planet” and missed the solar eclipse you can view live feeds HERE, HERE, and HERE.

As the path of the eclipse trends east and south across the United States interest rates are following a similar path.   Below is a graph of the yield on the US 10-year treasury note dating back to the beginning of July.

Over that time the yield on the US 10-year treasury note has improved by ~.20% while mortgage rates have improved by .125%-.25%.  I don’t expect this trend to last forever but momentum remains favorable for now.

Should the yield break below and close under 2.18% that would be a very good sign for rates to improve further.  However, if 2.18% holds then I think we’ll need to shift to a locking bias.

The economic calendar for this week is relatively light until you get to Thursday-Friday.  The Federal Reserve Bank will host its annual symposium of central bankers in Jackson Hole, Wyoming starting this Thursday.  Both Janet Yellen and European Central Bank President Mario Draghi are scheduled to speak.

Investors are listening for clues as to when the US central bank will begin to unwind its balance sheet and when the European Central Bank will end its version of quantitative easing for the European economy.

I will maintain a floating bias until technical trading patterns shift course.

Current Outlook: floating

Mortgage Rate Update January 5, 2017

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

Happy New Year!  I hope you had a safe and joyous holiday season and that 2017 is off to a great start!

Mortgage rates are off to a good start.  As we know mortgage rates increased by .50%-1.00% following the election on expectations that the new administration would engage in aggressive fiscal expansion (increased spending and reduced tax revenue).

A larger government budget deficit requires that the US Treasury issue more debt.  The greater supply of debt drives prices lower on existing bonds which consequently drives yields higher.  Hence, mortgage rates rise as well.

However, mortgage rates have improved modestly this week for a couple reasons.

First, the financial markets are finally scaling down expectations for the new president’s fiscal expansion.  There are too many fiscal conservatives in Congress to allow for such a large increase in the deficit.

Second, tomorrow we get the all-important jobs report and expectations are that the results will be weaker than expected.  Bad news for the economy is often good news for interest rates.

From a technical perspective mortgage rates have momentum heading in a positive direction.  That said, we have to cautious because the longer-term trend is working against us.  I am going to recommend that we take our gains off the table and lock in ahead of tomorrow’s jobs report.

Current Outlook: locking

PIMCO’s Scott Simon on mortgage rates and housing

Posted on by Evan in Economics & Interest Rates

Normally I’m not a huge PIMCO follower.  In case you don’t know PIMCO is the world’s largest bond investment money manager and home to many top name economists and analysts.  The comments made by PIMCO officials often get headlines almost like an official of the Fed. And although I don’t “goon” for PIMCO like many do I came across this blog post this morning and found Scott Simon’s comments interesting.  So, I guess I’ll jump on the band wagon and publicize them too:

-On mortgage rates:

We are unlikely to see a significant market disruption in the Agency market stemming from the Fed’s retreat. … if and when we see mortgages cheapen, we expect to see private institutions stepping in to buy. Even a 15 basis point move could spark a flurry of buying. Therefore, we don’t expect a major widening of mortgage spreads …

Translation: He doesn’t expect to see mortgage rates move sharply higher following the Fed’s expiration of the TALF program which helped subsidize mortgage rates over the past year.

-Will the Fed reenter the MBS market and buy rates down again?

Probably not. Barring a major double dip in the economy or housing, private balance sheets have plenty of room to add Agency MBS (unlike in late 2008, when the Fed program began).

-On housing:

We continue to believe that lower-priced homes bottomed last year. Higher-priced homes should bottom later this year. If one labels recovery as prices rising dramatically, we do not foresee that anytime soon.

Rate Update July 27, 2009

Posted on by Evan in Rate Update

Mortgage rates are unchanged from Friday.

This week’s schedule for US Treasury fixed-income securities auction:
The US Treasury is scheduled to sell a high volume of T-bills, notes, and bonds this week. On Monday, $6 billion in Treasury-inflation-protected 19.5-year notes will be auctioned; along with $32 billion in 13-week bills and $31 billion in 26-week bills. On Tuesday, $27 billion in 52-week bills will be auctioned, along with a heart-stopping $42 billion in two-year notes. On Wednesday, the Treasury will auction $39 billion in five-year notes. And on Thursday, $28 billion in seven-year notes will be auctioned. In total $205 billion in securities will be sold.

Here is a link to read the blog post on the new mortgage rules which could delay real estate closings.

Current Outlook: bias towards locking on short-term transactions with additional supply of treasury bills.