The Fed cuts and mortgage rates don’t budge. Explain that one….

It’s counter-intuitive that when a person blushes, presumably because they are embarrassed, we tend to like them more.

Do you know what else is counter-intuitive?

Home Loan Rates & The Fed

It can be confusing for consumers when the Fed cuts interest rates and mortgage rates go up.

Since July the Fed has made three rate cuts totaling -.75%.  However, consumers should know that the Federal Funds Rate, which is what the Fed controls, has a very obscure purpose (see HERE).

Mortgage rates today are effectively the same as they were when the Fed started this campaign.

Mortgage rate forecast

Nobody has a crystal ball but it’s worth noting that Fannie Mae released its latest forecast for housing and interest rates.  They are predicting that mortgage rates will average 3.5%-3.6% in 2020.  Their forecast includes interest rates with discount points but nevertheless they believe rates will be the same and moderately lower next year.

Trade Talks

Sentiment over US-China trade talks have played a significant role in the direction of the stock market and interest rates recently.  Over the past two weeks the financial markets have been optimistic that the US and China will iron out a new trade deal which has hurt mortgage rates and pushed stocks to all-time highs.

However, last week President Trump disputed progress so it’s tough to know what is going on behind the scenes.  The President is scheduled to speak in New York City today to a group of economists so any news could drive sentiment and influence the direction of mortgage rates.

The week ahead

This week’s economic calendar features the Consumer Price Index on Wednesday, the Producer Price Index on Thursday, and Retail Sales on Friday.  In addition there are Fed officials scheduled to speak through the week.

I recommended locking last week but am going to switch to floating.

Current Outlook: floating

Rates modestly worse but long-term trend in tact

Congratulations to the US Women’s soccer team who capped a dominating performance on Sunday by winning the World Cup.  The US recorded 26 goals during their seven games in the World Cup and only gave up 3!

Interest Rates

Mortgage rates are modestly worse to start the week after the Bureau of Labor Statistics released a stronger than expected employment report on Friday.

Jobs Report

The all-important jobs report showed that 224,000 new jobs were created during the month of June and eased recession concerns.  Yields increased modestly following the release.

Home Loan Performance

A strong labor market and healthy home price appreciation is creating conditions for low delinquency.  CoreLogic’s monthly Home Loan Performance Insights Report was released earlier today and shows delinquency is currently at a 20-year low across the US!  It’s hard to imagine a housing crash is on the horizon given that statistic.

The Fed Speaks

Fed Chairman Jerome Powell is scheduled to speak Wednesday and Thursday this week.  The Fed’s Open Market Committee is scheduled to meet July 31st and there is currently only a 5% probability that the Fed will cut rates at that time (the markets assign a 60% chance of a cut at the Sept. 18th meeting).

The minutes from the last Fed meeting are also scheduled to be released on Wednesday.  Should his comments or the minutes alter the outlook for a rate cut it could cause some volatility in the financial markets.

The rest of the week

Aside from Fed speak we’ll be watching the Consumer Price Index scheduled for release on Thursday and the Producer Price Index on Friday.  Hotter than expected inflation could put upward pressure on rates.

The long-term trend remains in our favor so will remain in a floating stance.

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 continue to move lower

Give a man a fish and he eats for a day.  Teach a man to fish and he will neglect his job and family thereafter.”- anonymous

Today is National Go Fishing Day!  As anglers take to the waterways mortgage rates are sinking!

Mortgage Rates

Mortgage rates continue to trend lower prompting many homeowners to evaluate their refinance options.  The Mortgage Bankers Association reported that refinance applications jumped 47% last week compared to the prior week.

European Interest Rates

Yields in the US are following European interest rates lower.  Concerned with declining economic growth European Central Bank President Mario Draghi stated earlier today that he is prepared to cut short-term interest rates and accelerate bond-buying programs with the hopes of driving interest rates down.

The yield on a German 10-year bund is currently negative .30%.  Comparatively the yield on a US 10-year treasury note is trading at ~+2.06%.

The Fed

The US central bank begins their regularly scheduled two-day monetary policy meeting today.  Tomorrow they will announce any changes to US short-term interest rates.  I don’t expect they will cut rates tomorrow but their comments could help mortgage rates improve further.

The Week Ahead

The weekly economic calendar is relatively light.  The highlights include the aforementioned Fed announcement (Wednesday) and Existing Home Sales (Friday).

Momentum is on our side which is why I shifted to a floating bias last week.  I will maintain that position.

Current Outlook: floating bias

Home loan rates remain low as payment performance improves

On this day in 1950, Ben Hogan bested two other golfers in an 18-hole play-off to win the US Open.  The remarkable aspect of the win was only 16 months earlier Hogan was involved in a near fatal car crash that left him unable to walk for months.  Doctors predicted he may never golf again.

The win was Hogan’s third major championship.  Where did Hogan win his first major championship?  Right here in Oregon at the Portland Golf Club!

Mortgage Rates

Home Loan rates have increased very modestly in the past week as trade tensions have eased and US stocks have rallied.  If stock finish in positive in positive territory today it will mark the 7th straight day of gains.

Home Loan Performance

Corelogic released its monthly Loan Performance Insights report earlier and it showed that only 4% of all mortgages in the United States are 30 days or more delinquent.  This is down from 4.3% a year earlier and is near historic lows.

Mortgage loan portfolios are performing extremely well which means credit standards should remain accommodating in the near future.

Home Equity

Contributing to strong loan performance is the fact that most homeowners have a significant amount of equity built up in their homes.  According to the most recent Corelogic Homeowners Equity Insights report the average homeowner has seen a +5.7% increase to their home equity since last year.  

Here in Oregon the average homeowner gained ~$7,000 in equity which is why homeownership is still one of the best ways to build long-term financial wealth.

The Week Ahead

Last week’s all-important jobs report disappointed the markets showing only 75,000 new jobs created during May.  

This week the economic calendar holds significant data released on Wednesday (Consumer Price Index), Thursday (Import/ Export prices), and Friday (Retail Sales & Consumer Sentiment).  

Momentum remains on our side so I will shift to a floating bias.

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

Existing Home Sales a mixed bag, mortgage rates slightly worse to start the week

Owning your home is still one of the best ways to achieve wealth and as Plato once said “Wealth is known to be a great comforter.”  Happy Birthday to Plato who would have turned 1,592 years old today and he lived forever.

Mortgage Rates

We shifted to a locking bias last week and that proved to be the correct call.  Although mortgage note rates are mostly unchanged the pricing has worsened meaning the accompanying closing costs are modestly worse.

Home Sales

Earlier today the National Association of Realtors released the monthly existing home sales report.  It showed that the number of homes sold during April actually contracted by nationwide.  However, on the west coast the number of existing home sales actually accelerated by 1.8% from March.

Coincidentally, the average number of days on market contracted from 36 days down to 24.  There is no question that the housing market is less frantic than it was a couple years ago but demand remains strong.

The Week Ahead

This week’s economic calendar is relatively light.  On Wednesday we’ll get the minutes from the most recent Federal Reserve monetary policy meeting but no fireworks are expected.  On Thursday we’ll see numbers for new home sales.

Stock Market

In the absence of significant economic data I expect mortgage rates to take direction from the stock market.  If stocks rally then I expect home loan rates to worsen and vice versa.

Investors remain concerned over US-China trade talks and the ongoing Brexit saga.  Any signals that either of these story lines will resolve themselves sooner rather than later would be bad for mortgage rates.

Current Outlook: neutral

 

Mortgage rates improve on heightened trade tensions

A HUGE THANK YOU to all the teachers and educators who work hard to support our children in their growth and development.  Today is National Teacher Appreciation Day.

I’d like to thank Professor Randy Grant of Linfield College who helped me find a passion for economics and finance.  Thank you Randy!  You are an excellent person and educator.

Mortgage Rates

Mortgage rates have improved modestly in the last couple days thanks to uncertainty around a new trade deal with China.

Over the weekend US trade officials threatened China with additional trade tariffs if an agreement was not reached soon.  In reaction to heightened trade tensions US stocks have declined yesterday and today which has helped home loan rates improve.

Home Price Appreciation

Earlier today CoreLogic released its Home Price Index report for March.  It showed that national home prices increased by 3.7% from last year.  It also forecasted that home price appreciation would accelerate to +4.8% in the next year.

Demand for housing

Zillow released THIS POST yesterday which highlights the demographics of the US and how it is supportive of demand for housing.  According to the article an additional 3.11 million people which reach “prime first-time home-buying age” (34 years old) over the next eight years.  Portland’s age demographics mirror this forecast.

The Week Ahead

The economic calendar is light this week.  There are a handful of Fed officials with scheduled speeches including Chairman Powell who will speak on Thursday.  On Friday the Labor Department will release the latest reading of the Consumer Price Index.

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

As stocks rally mortgage rates pressured higher

Think your life is busy?  Each year the IRS receives over 290 million tax returns which the IRS receives.  According to the IRS only .50% of all filed tax returns are audited.

The IRS also reports that over 9,000 tax returns are filed where the taxpayer makes more than $200,000/ year but pays $0 income tax.  Has the President released his tax returns yet?

Stock Market

Earnings season is underway and analysts expect in aggregate that corporations will report stable or declining profits compared to last year.

However, financial companies appear to be bucking that expectation.  Last Friday Chase Bank reported better than expected financial results and earlier today Bank of America did the same.

The US Stock market has now completely recovered the declines it incurred at the end of 2018 and the S&P 500 is only 35 points away from all-time highs.  If profits fail to grow and stock prices continue to rally it may reignite concern over valuations which I wrote about last summer (HERE).

Mortgage Rates

As stocks rallied last Friday it pushed mortgage rates up by ~.125%.  See why HERE.

10-year treasury note

The yield on the US 10-year treasury note is currently trading at 2.58% which just below an important technical layer of resistance.  If yields break above this level then I expect mortgage rates to increase an additional .125%.

The Week Ahead

The economic calendar is heavy on new residential construction this week.  Earlier today the Home Builders’ Index was released and showed greater optimism amongst home builders compared to last month.

On Friday we’ll see fresh numbers for building permits and new housing starts.

Current Outlook: locking bias