Fear over Coronvirus drives home loan rates lower

Home Loan Rates

In the past 10 years there are only three times when mortgage rates have been lower than they are today.  Interest rates continue to benefit from a “flight-to-safety” in reaction to the Coronvirus outbreak.

Virus in China

Over 4,500 cases of the Coronvirus have been reported in mainland China.  There is still a lot of fear about the potential for the illness to spread and cause more severe health impacts around the globe.  Thus far there have been less than 100 known cases of Coronvirus outside of mainland China.

Should the outbreak become more severe then we  may see rates go even lower.  However, if the virus appears to be contained then I would expect mortgage rates to increase slightly.

Stock Market

US stocks are off about 2% of recent highs which has pushed capital into “safer” havens including for mortgage-backed bonds which has helped drive mortgage rates lower.

Housing News

Earlier today the Case Shiller Home Price Index was released.  The report showed that over the past 12 months home prices in the 20-city composite, of which Portland is included, increased by 2.6%.

Yesterday we got numbers for new home sales.  Although the number of new home sales declined in December from the prior month, they were still up 10% for 2019.  Given that there is still an acute shortage of housing in many of the major west coast metropolitan areas an increase in new home sales is welcome news.

The week ahead

It’s Fed week which means we’ll hear from the Chairman Powell on Wednesday.  The Fed is not expected to change its tune regarding monetary policy but we always need to stand guard for changes to their wording.

Current Outlook: floating


Weakness in stocks is helping home loan rates remain low

Home Loan Rates

Although mortgage note rates are unchanged from last week the associated closing costs are slightly lower so in fact the rate environment has improved.

Stocks and home loan rates

Weakness in the stock market is helping mortgage rates improve.  Why are stocks suffering?

Virus in China

Over 300 people in China and Taiwan have been infected with the coronavirus which health officials fear could spread into a pandemic.  The outbreak is happening just before the lunar new year when over 400 million Chinese citizens are expected to travel.

The health scare is causing a flight-to-safety in the Asian financial markets.  The Hong Kong stock index was down ~3% today which is creating demand for US-based fixed-income securities and driving down yields.

Stock Valuations

Citigroup conducts a statistical model which measures stock market sentiment.  As of today the model has reached a level they define as “Euphoira”.  80% of the time when this model reaches this level stock prices are lower 12 months later.  Furthermore, the last time this model hit this level was April of 2019 and stocks declined 7% the following month.

Furthermore, the Shiller Cyclically Adjusted Price to Earnings Ratio is currently back above 30 for the first time since 2018.  Prior to 2018 the only other times stock valuations had reached this lofty level was 1929 and 1999.

Should stock prices retreat it will likely help mortgage rates remain low.

The week ahead

This week’s economic calendar is light.  The only significant highlight is the existing home sales report due out on Wednesday.

Momentum appears to be on our side so I will recommend a floating position.

Current Outlook: floating

Home loan rates slightly worse on “phase one” trade deal

Home Loan Rates

Mortgage rates are mostly unchanged to slightly worse compared to last week.  The catalyst which pushed rates higher last week was an announcement pertaining to US-China trade relations.

Phase One

On Thursday, it was announced that the US and China had agreed to a “phase one” trade agreement.  On the announcement the US stock market rallied and mortgage rates increased.  However, after analysts had a chance to read the details of the agreement stocks and rates recovered slightly because the initial plan is less substantial than the markets had thought.

The Fed

Last week the Federal Reserve Open Market Committee met and elected to make no changes to short-term interest rates.  Although the Fed does not directly control mortgage rates their comments can, at times, impact their direction.

The markets currently are not expecting any cuts or hikes to the Federal Funds rate in 2020.

Home Construction

Data released earlier today shows strength for home building in 2020.  According to the Commerce Department housing starts were up 8.5% in October compared to a year earlier.  Furthermore, building permits hit the highest level in over 12 years.

More housing supply should help soften home price appreciation in the near-term.

The week ahead

This week’s economic calendar is relatively light.  I will be watching for existing home sales (Thursday), leading economic indicators (Thursday), and the Personal Consumption Expenditure Price Index (Friday).

From a technical perspective there is more room for mortgage rates to worsen than there is for them to improve.  I will maintain a locking bias this week.

Current Outlook: Locking bias

Mortgage rates improve to best levels in over 12 months

If fruit grows on a fruit tree then what does chicken grow on?….A poultry.

Today is National Poultry Day which means that turkey sandwich you consume for lunch is actually your way of celebrating.

Mortgage Rates

Mortgage rates continue to improve reaching the best levels in over a year.  Whether or not they continue to improve or reverse higher will likely depend on the Fed’s comments due out tomorrow.

The Fed

The Federal Open Market Committee meets every six weeks and generally speaking their announcements tend to fall in line with analysts’ expectations.  In other words, there is typically not much uncertainty headed into a Fed announcement.

However, that is not the case for tomorrow when the Fed concludes its regularly scheduled two-day meeting.  For many months the Fed has allowed $4 trillion to fall off its balance sheet in an effort to unload assets it acquired during the economic recovery.

However, the Fed announced earlier this year that it may decelerate the pace at which its balance sheet shrinks by reinvesting some of the proceeds it receives back into the fixed-income markets.

Translation: If the Fed begins to buy up treasuries and mortgage-backed securities they would create significant demand that could help drive yields lower.

What to Expect

If the Fed announces tomorrow that they will immediately begin to reinvest into the fixed income markets I would expect mortgage rates to improve.

However, I fear that the markets have already priced an aggressive announcement from the Fed.  If the Fed delivers a more gradual message then we could actually see mortgage rates rise.

The Week Ahead

Aside from the Fed’s announcement due out on Wednesday the remainder of the economic calendar is light.  I recommend a locking bias headed into tomorrow.

Current Outlook: locking

Mortgage Rates at multi-month lows but expected to rise during 2019

Happy New Year!  77% of US citizens set financial goals for their new year’s resolutions.  Did you?  Unfortunately only 1 in 5 are able to see their resolutions through February.

I hope 2019 brings you good health and prosperity!

Mortgage Rates

Interest rates start off the new year at the best levels since the spring of 2018.  Weakness in the stock market helped mortgage rates improve during the final two months of 2018.

Trend line

A look at the chart of the US 10-year treasury note, which mortgage rates tend to follow, shows that yields fell from 3.22% at the beginning of November to 2.55% on January 2nd.  During that time home loan rates improved by .50%.

Currently the US 10-year treasury note is at 2.70% which is right up against the two month trend line.

Near-term Outlook

Should yields bounce lower off this trend line then mortgage rates are likely to improve by another .125%-.25%.  However, if the yield closes above 2.70% then I expect rates to move higher.

Longer-term Outlook

Most Wall Street Analysts believe that yields will increase by .50%-1.00% during 2019.  Therefore, I think the best buying opportunities will exist in the initial three to four months of the New Year!

 Current Outlook: locking bias

As 2018 draws to an end home loan rates benefit from stock market weakness

Happy holidays from all of us at Swanson Home Loans!  This will be the last ‘rate update’ post of 2018 as the next two Tuesdays fall on a holiday.  The next ‘rate update’ will be posted on January 8th!  Have a safe and joyous season!

Stock Market

Home loan rates continue to benefit from weakness in the stock market.  The S&P 500 index is off 13% from the highs reached back in early October.

If you are a consistent reader of this post then you know we started expressing concerns over stock valuations all the way back in the beginning of the year so we are not surprised to see this correction.

The Fed

The Federal Reserve Open Market Committee begins its regularly scheduled two-day monetary policy meeting today.  Tomorrow they will announce their latest monetary policy decision.

According to CME Group there is currently a 73% probability that they will hike by another .25% tomorrow.  The Fed does not directly control mortgage rates so we’ll have to see how they react.

Should the Fed defy the odds and not hike I expect the stock market to rally which would likely hurt home loan rates.

Yield Curve

Should the Fed hike the Federal Funds rate tomorrow by .25%, as expected, it will be interesting to see how the yield curve responds.  The 2-year treasury note is currently yielding 2.66% and the 10-year treasury note is yielding 2.83% a difference of only .17%.

If the 2-year yield surpasses the yield on the 10-year treasury note it will be the first time that the yield curve has inverted since 2005-2007.  Every time in recent history the US yield curve has inverted an economic recession has followed.


Unfortunately many analysts are growing pessimistic on their economic outlook which is partially why we’ve seen home loan rates improve in the past month.  As long as this viewpoint holds I will recommend floating.

Current Outlook: floating

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

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

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

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.


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

Mortgage rates at best level since April, time to lock

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.


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

Fed flattens yield curve

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