Tag: Portland mortgage rates

Home prices increase at a decreasing rate, mortgage rates modestly better

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

“In the book of life, the answers aren’t in the back.”-Charlie Brown  

On this day in 1950 the Peanuts comic-strip made its debut in newspapers.  

Italy

Lawmakers in Italy are looking for answers to their financial problems.  Earlier today a prominent Italian politician publicly remarked that Italy could solve many of its issues if it abandoned the euro and reverted to its own currency.  

His remarks have created some financial uncertainty which is helping US mortgage rates improve modestly.

Home Prices

What’s happening in the housing market?  

In the past week we’ve gotten the latest readings on nationwide home prices from the FHFA Home Price Index, Case-Shiller Home Price Index, and (this morning) the Corelogic Home Price Insights report.

Although each of these reports have different methodologies for calculating changes in home prices they all share similar results.  They each showed that home prices increased by 5.5%-6.4% over the past 12 months. Home prices continue to increase but at a decelerating rate (not to be confused with decreasing home prices).    

Corelogic projects that home price appreciation will continue to soften.  They predict home prices will increase by 4.7% in the next 12 months. By coincidence, 12 months ago they also predicted home prices would increase by 4.7% which turned out to be an underestimation.

Oil Prices

The media loves to focus on the Federal Reserve and the Federal Funds rate when trying to predict the future of home loan rates.  However, we know the Fed does not directly control mortgage rates.

I think they should play closer attention to oil prices.  Oil prices have increased by ~30% in 2018 and we know home loan rates have increased as well.  Energy prices are highly inflationary because they impact virtually every sector of the economy and inflation is the primary driver of mortgage rates.

The Week Ahead

The main economic event on the calendar for this week is the all-important jobs report due out Friday. I will remain in a floating bias but feel less confident than I did last week.

Current Outlook: floating bias

Mortgage rates continue to trend higher

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

Today marks the 17th anniversary of the horrible 9/11 attacks.  Virtually every US citizen’s life were altered that day. If you’ve never heard the incredible and inspiring story of Welles Crowther (AKA “the man in the red bandana”) I encourage you to take a moment to watch THIS today.

 Mortgage Rates

Last week I recommended locking and that proved to be the right call.  

Since the end of April conventional 30-year fixed rates have traded within a range of 4.625%-4.875%.  As recently as August 24th mortgage rates were available at the lower end of that range but as of today we are at the top end.  

The last few times mortgage rates have hit these levels they have reversed lower.  I am not confident that pattern will repeat itself this time.

The Fed

The Fed is scheduled to meet in two weeks and according to CME Group there is currently a 98% chance they hike rates by +.25%.  It is basically a certainty.

Yield Curve

As of today there is a .22% difference between the yield on the US 10-year treasury note and the 2-year treasury note.  After the Fed hikes rates in two weeks we could see the yields on par which means we’d have a flat yield curve.

If this happens I would either expect an economic recession in the next 12-24 months or  longer-term interest rates to increase (including for mortgages).

On a side note the flattening of the yield curve is also reducing the difference between 30-year and 15-year fixed rate mortgages.  There is currently only a .25% advantage for 15-year amortizing loans.

The Week Ahead

There are a number of Fed officials speaking this week and their comments can always influence the markets.  On Thursday we’ll get the latest Consumer Price Index report and on Friday we get the latest reading for Retail Sales.

Momentum is not on our side.  I think mortgage rates will worsen by another .125% before stabilizing.  I will maintain a locking bias.

Current Outlook: locking

Rates modestly worse, home prices projected to increase at a decreasing rate

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

On this day in 1998 two graduate students from Stanford University incorporated their business which was named after the mathematical term for 10 to the 100th power (“1” followed by 100 zeros).

Had you invested $100 in their internet search engine business on that day your initial investment would be worth over $41 million today (91% annualized return).  Don’t believe me? Google it.

Housing

Although investing in a home is not as profitable as being an early investor in a business like Google it can still be fruitful.  

Corelogic released it’s monthly Home Price Insights report earlier today.  The report showed that nationwide home prices increased by 6.2% on average in the past year.  It went on to forecast that home prices will increase by 5.1% in the next year.

It’s important that consumers understand that although the pace of price appreciation is projected to decline home prices are still increasing.  If a consumer put 5% down and purchased a home today and the home appreciated by 5% in the next year their cash on cash return (on paper) would be 100%.  

Mortgage Rates

Last week I recommended a locking bias.  Pricing on mortgage rates indeed worsened modestly.  Interest rates are currently in the middle of the range they have established dating back to the beginning of the summer (30yr fixed: 4.625%-4.875%).  

Technical Trading Patterns

Momentum appears to be working against us but mortgage-backed bond prices and the yield on the US 10-year treasury are trading up against technical barriers.  If yields can bounce lower we may see rates improve by .125%.  However, if yields blow through these levels then expect +.125% higher rates by the end of the week.

The Week Ahead

There are a number of significant economic reports due out this week but none more important than the all important jobs report on Friday.  US-Canada trade talks are scheduled to resume on Wednesday.  If talks indicate a free trade agreement on the horizon I expect US stocks to rise which will hurt mortgage rates.

Current Outlook: locking

Yield on US 10-year treasury note holds key to direction of mortgage rates

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

Housekeeping: This weekly ‘rate update’ email will now be delivered each Tuesday instead of Monday.  

You may be here today but will you be gone to Maui?  On this day in 1959 Hawaii became the 50th state of the union.  I plan to celebrate when I am on Kauai in January.   

Mortgage Rates

Home loan rates improved modestly last week.  That said, during the month of August mortgage rates have barely budged.  

Housing

Those of in the real estate industry are acknowledging a modest slowdown in activity.  My personal view is that 2018 is the first year since 2014 for where we experience seasonality with demand.

Last week the Commerce Department reported that permits for single family homes decreased by 10% in the western region.  It appears that builders are having a harder time finding affordable and sufficient skilled labor.

This week the National Association of Realtors will release date on existing home sales on Wednesday and new home sales on Thursday.

Aside from that the only significant economic event on the calendar is durable goods which is also due out on Thursday.

Technical Trading Patterns

In the absence of a lot of economic data I expect mortgage rates to react to the stock market (when stocks do well mortgage rates tend to suffer and vice versa) and technical trading patterns.

The yield on the US 10-year treasury note, which home loan rates tend to track, is currently trading at 2.85%.  This is as good as interest rates have been all summer.  

If yields can find a way to break below 2.82% then we could see home loan rates improve by another .125%-.25%.  However, the past couple times that yields have hit this point they have reversed higher and home loan rates have worsened by .125%.

Current Outlook: cautiously floating

Turkey helps US mortgage rates

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

Born this week in 1945 iss one of the greatest financial planning minds in US history.  This brilliant financial mind first appeared on late night TV spreading messages such as, “Don’t buy stuff you can’t afford”.  OK, maybe Steve Martin is known more for his comedy but his memorable SNL skit still resonates for me.  

Mortgage Rates

Home loan rates improved modestly late last week thanks to economic turmoil in Turkey.  After Turkish officials jailed a US pastor President Trump doubled trade tariffs against Turkey which caused panic in their financial system.  

Turkey

The Turkish Lira has depreciated rapidly and the financial markets grew concerned that the contagion would spread to other emerging economies.  Uncertainty tends to help US interest rates.

It appears that conditions have stabilized and that panic will not spread but if that changes later this week we may see mortgage rates hit near-term lows.

The Week Ahead

The economic calendar features a couple notable events.  On Wednesday we’ll get the latest reading on retails sales.  Also on Wednesday we’ll see the Home builders confidence index.  More telling may be Thursday’s release of new housing starts and building permits.  

As long as Turkey’s woes remain contained I would expect home loan rates to give back the .125% improvement they experienced at the tale end of last week.

Current Outlook: locking

Fed stays put as do mortgage interest rates

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

Seventy one years ago a wood raft carrying five people arrived at an island near Tahiti after a 101 day journey from Peru.  The raft was captained by Norwegian Thor Heyerdahl and supported his thesis that Polynesia’s earliest inhabitants may have migrated from South America.  

The story was later made popular in the best-selling book Kon-Tiki.  

The Fed

It looks like it will be about 101 days from the Fed’s last rate hike to the next one.  

As expected the Fed did not hike short-term interest rates last week.  According to CME Group there is a 93% probability that the Fed will hike by .25% when they meet in mid-September.  The Fed last hiked short-term interest rates back in mid-June.

As a reminder the Fed does not directly control mortgage rates but their comments and actions can influence them.  

Jobs Report

This past Friday the Labor Department released its monthly employment report.  It showed that the US economy created 157,000 jobs during July and wages grew modestly.

With the unemployment rate at 3.9% the labor market is deemed to be tight which we would expect to pressure wages higher.  If wages grow too quickly then it could lead to inflation which is not friendly for mortgage rates.

The Week Ahead

Speaking of inflation it is about the only significant event scheduled for release this week.  On Thursday we’ll get a look at the Producer Price Index and on Friday we’ll get the latest reading of the Consumer Price Index.

In the absence of a heavier economic calendar I would expect interest rates to react to technical trading patterns.  The technical signals suggest it will be much harder for rates to improve this week than for them to worsen.  I would recommend carrying a locking bias into the latter half of this week.

Current Outlook: locking

Mortgage rates steady despite strong economic growth

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

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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

Home loan rates move higher along with oil prices

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

Sometimes our best ideas are formed when we least expect it. This is true for the guitarist Slash who during a band warm up played a string skipping riff that he initially disdained.

However, the rest of the band asked him to play it again and later the riff formed the foundation of “Sweet Child of Mine” which entered the Billboard top 40 on this day in 1988. The hit would eventually climb all the way to #1 and ultimately help catapult Guns N’ Roses to become one of the most famous rock bands of all time.

Home Loan Rates
Mortgage rates are also climbing higher. Last week I warned that we may be in store for a “break-out” following three weeks in which home loan rates remained flat.

Unfortunately, rates decided to break higher instead of lower.

Oil prices
You may have noticed that US consumers are paying more at the pump. Oil prices have risen by ~20% in 2018. Prices spiked this morning after President Trump sent a threatening tweet directed at the president of Iran.

Nearly 40% of the global oil market flows through Iran so if there were a disruption it would certainly move prices higher. Higher prices for oil would be inflationary which would not be good for home loan rates.

Existing Home Sales
The National Association of Realtors released its monthly existing home sales report today. It showed that the number of sales declined modestly in June.

The median home price for the US reached an all-time high at $276,900.

The most interesting part of the report was that the total inventory of homes increased for the first time since June of 2015. Might this be a signal that a more balanced market is near?

The Week Ahead
This week’s economic calendar is relatively light. We’ll get new home sales on Wednesday and Q2 gross domestic product on Friday.

Momentum is not on our side. I recommend locking.

Current Outlook: locking.

Home loan rates remain flat, risk of break out build

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

It all started with $6,000 in February of 1940 when the US Government granted that sum to a group of researchers who were curious about the potential for fissionable materials to be used for military purposes.  The original $6,000 later ballooned to over $2 billion and on this day in 1945 the Manhattan Project first “successfully” tested the atom bomb.

Home Loan Rates

Mortgage rates have been anything but explosive over the past two weeks.  Home loan rates have remained flat over that timeline.

Inflation

Price pressure is the primary driver of long-term interest rates.  

Last week both the Producer Price Index and the Consumer Price Index showed price increases above the Fed’s target of 2.0%.  The reports lend credibility for the Fed to maintain its rate tightening policy. It also increases the probability that mortgage rates will increase and not decrease.

Retail Sales

Although consumers may be paying higher prices for goods it does not seem to be slowing sales.  This morning the retail sales report showed better than expected activity.  Many analysts are pointing to federal income tax cuts as the primary reason why.  

Good news for the economy tends to be bad news for mortgage rates.

The Week Ahead

The economic calendar is fairly light this week.  Fed Chairman Jay Powell will be speaking on Tuesday.  On Wednesday we’ll get a look at housing starts and building permits.  On Thursday we’ll get leading economic indicators.

Technical signals

Mortgage rates have remained relatively flat for almost three weeks.  Any time rates remain flat for extended periods of time it increases the chances of a “break-out” which is when they move sharply higher or lower.  There is no telling when they will “break” and if they will break in our favor. The safe play is to lock in but ultimately it is a coin flip.

Current Outlook: neutral

Mortgage rates at best level since April, time to lock

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

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.

Jobs

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