Mortgage rates at all time lows. Might they go even lower?

Home Loan Rates

Mortgage rates are presently at all-time lows which were originally established in 2012 and again in 2016.  Could home loan rates go even lower?

The Coronavirus

Although new cases of the Coronavirus are slowing in China the number of people infected in other countries is growing.  Furthermore, there is fear that some countries are underreporting the true number of citizens infected with the virus.

Fear over the spread of the illness is now having a significant impact on financial markets around the globe.

Impact on Financial Markets

On Monday US & European stock markets fell by ~3% and today they are off over 1%.  Japan’s stock market fell 3.3% on Monday.

When stocks decline it tends to drive capital into the bond market which pushes interest rates lower.  The US 10-year treasury note is now trading at 1.322%, an all-time low) and the yield curve is now inverted.

An article published by Bloomberg reported that unless economic activity resumes 66% of small to medium sized businesses inside China are poised to run out of cash within two months.

Home Prices

According to the S&P CoreLogic Case-Shiller Home Price Index appreciation picked up nationwide at the end of 2019.  The report showed that homes increased by 3.8% during 2019.

With interest rates hitting all-time lows I expect home price appreciation will remain healthy for the foreseeable future.

The week ahead

There is plenty of significant economic data being reported this week.   Specifically, I will be paying attention to New Home Sales (Wednesday), Gross Domestic Product (Thursday), Pending Home Sales (Thursday), and Personal Income (Friday).

However, news regarding the Coronavirus is the primary driver of interest rates at this moment.  If it appears that the illness continues to spread then I expect stocks to continue to falter and mortgage rates to improve further.

Current Outlook: Floating

Historically low mortgage rates help home prices accelerate

Have a happy and safe 4th of July!  Our offices will be closed on Thursday but otherwise around to help your customers!

Interest Rates

US home loan rates continue to benefit from pessimism regarding US-China trade talks.

US-China Trade

This past weekend leaders from the “G20” met in Osaka, Japan.  Headed into the weekend some analysts had predicted progress between US and Chinese trade negotiators which would likely pressure interest rates higher.  However, it appears that little progress was made and as a result mortgage rates remain extremely attractive.

Home Prices

CoreLogic’s monthly Home Price Index report was released earlier today and showed a jump in monthly home price appreciation.  After months of decelerating home price gains the report showed that nationwide homes appreciated by +.9% in May alone (annualized increase of +11%)!

After increasing by +3.6% from last year CoreLogic is predicting that home prices will increase by +5.6% over the next 12 months.

The Week Ahead

The financial markets are closed on Thursday in recognition of the 4th of July holiday.  I expect trading desks will be thinly staffed so we could see some volatility in stocks & interest rates on Friday.

We’ll get the all-important jobs report this Friday.  Expectations are for +170,000 new jobs for the month of June.  May’s results were a big miss which has helped mortgage rates improve.

Current Outlook: floating bias

Mortgage Rates hit 18 month lows! Is a Fed rate cut next?

Today is National Cheese Day which is causing me to face my cheddar cheese addiction.  Luckily it’s only mild….

Cheese connoisseur’s in China will have to pay a little extra for US cheese thanks to recently imposed tariffs.  Will Mexico be next?  Trade tensions are the primary reason why mortgage rates are at the best levels since January of 2018.

Mortgage Rates

Home loan rates have improved substantially over the past couple weeks thanks to weakness in the stock market.  Investors have been selling stocks in favor of “safer” assets as trade tensions rise between the US and China and now Mexico.

President Trump has stated that if Mexico does not take measures to reduce the flow of migrants crossing the US border then he will impose trade tariffs which will gradually increase starting on June 10th.

The Fed

Investors are not the only people tracking trade tensions.  Fed Chairman Jerome Powell announced earlier today that Fed policymakers are monitoring trade tensions closely and might be willing to cut short-term interest rates later this year if the economy demonstrates weakness.

Home Prices

CoreLogic’s Home Price Index report showed that homes across the country increased by 3.6% over the past year.  They forecast that home prices will increase by 4.7% over the next 12 months.

The Week Ahead

This week’s economic calendar is headlined by Friday’s all-important jobs report.  Analysts are expecting +185,000 new jobs created in May.  A number north of that figure could pressure mortgage rates higher and vice versa.

Current Outlook: locking bias

US stock market rally pressures mortgage rates higher

Think owning Portland real estate is a great investment?  Try purchasing a professional sports franchise.

The late Paul Allen purchased the Portland Trail Blazers in 1988 for $70 millionAccording to recent reports the Trail Blazers franchise is currently worth $1.6 billion.

Ignoring annual cash-flow the team has appreciated at a 10.6% annualized rate over that time (which outperforms housing).

The Blazers will try and outperform their 1st round opponents tonight at the Moda Center and advance to the 2nd round of the NBA playoffs.  Go ‘zers!

Mortgage Rates

Home loan rates have been trending modestly higher since the end of March.  They have increased .125%-.25% which is not a surprise given that during that time the yield on the US 10-year treasury note has increased from 2.37% to 2.57% (+.20%).  Mortgage rates tend to track changes in the the 10-year treasury note yield.

Technical Signals

The US 10-year treasury note has been trading at its 50-day moving average for the past week.  The technical signals suggest that bonds are oversold which means that yields may improve in the coming days.

That said, if yields break above this level then mortgage rates are likely to worsen by another .125%-.25%.

US Stocks

Much of the reason interest rates have suffered during the month of April is because the stock market has been rallyingStrong earnings from various companies have pushed investors into stocks and US indexes are now hovering near all-time highs.

The Week Ahead

The remainder of the week is relatively light on economic news so I expect markets to react to technical signals.  Given that momentum is working against us I think the safe play is to lock so will remain with that bias.  That said, I am hopeful the aforementioned technical levels can help interest rates improve.

Current Outlook: locking bias

Is a recession on the horizon? Fear drives mortgage rates to multi-month lows

I hope you took time to celebrate National Roof Over Your Head Day on December 3rd!  I showed up to work and helped people get a new roof over their heads so I’m feeling good about my contribution.  

Mortgage Rates

Mortgage rates continued to improve last week.  They are currently at multi-month lows.

Yield curve

As long-term rates improve the short-end of the yield curve is basically unchanged.  The difference in yield between the US 2-year & 10-year treasury notes is only .015%!  It appears that the yield curve may invert in the coming months.

Going back many decades every time the US yield curve has inverted the economy has gone into recession shortly thereafter.

Housing Prices

Corelogic released its monthly Home Price Index today.  It showed that homes appreciated by +5.4% nationwide in the past year.  Oregon homes appreciated by +6.0% according to the report.  

Home prices are still increasing but at a slower pace.   

The Week Ahead

The financial markets will be closed on Wednesday this week in honor of President George Bush who passed away over the weekend.  On Friday we get the all-important jobs report which can definitely influence the markets.

Current Outlook: floating

Mortgage rates steady despite strong economic growth

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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