Yesterday the technical correction began after continual increases. The 10 year note -4 bps, MBS prices +34 bps. Hadn’t seen that kind of near-term excess since a year ago. This morning the improvement continues, at 9 am ET the 10 year note yield down another 5 bps and MBS prices up 26 bps.
August PCE released at 8:30 am: month/month +0.4% against estimates of +0.5% but compared to July the month/month increased from +0.2%; year/year expected +3.5% as reported +3.5% up from +3.4% in July. Looking at the more important core PCE, month/month expected +0.2% increased 0.1% and down from +0.2% in July, year/year core estimates +3.9% reported at +3.9% but as with the overall inflation dipped from July’s 4.2%. The increase month/month in August driven largely by increasing energy prices (crude oil). Crude at $93.00 early this morning, up $1.29.
August personal income increased 0.4% as expected, personal spending thought to be +0.5% increased 0.4%.
A government shutdown is looming, the deadline is Saturday at 12 pm. Hopefully it won’t last long. If a shutdown were to last even a few weeks, it will disrupt data flows and confuse the Fed and pundits about the economy’s pace. The debt ceiling issue resurrects every year or two.
U.S. homes in 2023 are collectively valued at around $52 trillion, a 50% increase since January 1st, 2020, according to an analysis by Zillow. The top five states with the housing markets that have increased the most in value over that time include California, Florida, New York, Texas, and New Jersey.
At 9:30 am the DJIA opened +214, NASDAQ +133, S&P +31. 10 year at 9:30 am 4.52% -6 bps. FNMA 6.0 30 year coupon at 9:30 am +34 bps and +80 bps from 9:30 am yesterday.
At 9:45 am Sept Chicago purchasing managers index expected at 47.9, as reported the index dropped to 44.1, deeper in contraction and down from 48.7 in August.
At 10 am the final Sept University of Michigan consumer sentiment index estimated at 67.7 the same as mid-month. The index 68.1.
PRICES @ 10:00 AM
10 year note: 4.52% -6 bp
5 year note: 4.57% -5 bp
2 year note: 5.04% -3 bp
30 year bond: 4.65% -5 bp
30 year FNMA 6.0: @9:30 am 99.08 +34 bp (+80 bps from 9:30 am yesterday)
30 year FNMA 5.5: @9:30 am 97.05 +33 bp (+80 bps from 9:30 am yesterday)
30 year GNMA 5.5: @9:30 am 97.41 +27 bp (+63 bps from 9:30 am yesterday)
Dollar/Yuan: $7.2970 -$0.0034
Dollar/Yen: 149.24 -0.07 yen
Dollar/Euro: $1.0587 +$0.0019
Dollar Index: 105.94 -0.29
Gold: $1889.60 +$11.00
Bitcoin: 26,931 -156
Crude Oil: $91.57 -$0.14
DJIA: 33,772 +105
NASDAQ: 13,364 +165
S&P 500: 4327 +27
Richard Sardella has been actively managing and providing services in the mortgage industry for over 30 years. Richard serves on the board of directors as President of Colorado Home Mortgages Inc.
All information furnished has been forwarded to you and is provided by thetbwsgroup only for informational purposes. Forecasting shall be considered as events which may be expected but not guaranteed. Neither the forwarding party and/or company nor thetbwsgroup assume any responsibility to any person who relies on information or forecasting contained in this report and disclaims all liability in respect to decisions or actions, or lack thereof based on any or all of the contents of this report.
MLO of record MLO.100007700 / NMLS#233568 / CHM NMLS#127716.
The 10 year note continues to increase early this morning, up 2 bps at 4.64%, stock indexes fractionally better in futures trading. Treasuries are on track for a higher start, making for a continuation of their recent weakness. Treasury futures held their ground through the bulk of the night, but selling pressure began building once attention turned to action in Europe, where sovereign debt is also on the defensive. The government debt ceiling runs into a possible default unless some kind of debt extension is accomplished by Saturday night. A few months back Congress struggled with increasing the debt allowance, the reaction sent Moody’s and Fitch rating agencies to lower US debt ratings, generally ignored though, the US still the safest country for government debt.
Weekly jobless claims at 8:30 am ET expected at 211K, up 204K +2K from the prior week. Its 4-week average continues to decline, at 211K from 217.5K the prior week; very low number of job losses, indicating the economy is still on firm ground. Unemployment claims typically rise when the economy weakens, and a recession approaches.
The final read for Q2 GDP, expected at 2.3% increased at an annual rate of 2.% in the second quarter of 2023, according to the “third” estimate. In the first quarter, real GDP increased 2.2% (revised from 2.1%). The increase in the second quarter primarily reflected increases in business investment, consumer spending, and state and local government spending that were partly offset by a decrease in exports. Imports, which are a subtraction in the calculation of GDP, decreased.
Fed Chair Jerome Powell and a handful of other central bank officials are set to speak later today. Hawkish commentary from central banks has dashed hopes for a pivot toward lower rates any time soon, making September the worst month for global stocks in a year and the weakest for global bonds since February. Powell at a town hall meeting with educators while Richmond Fed President Tom Barkin, Chicago Fed President Austan Goolsbee make speeches.
At 9:30 am the DJIA opened -18, NASDAQ -59, S&P -9. 10 year at 9:30 am 4.64% +3 bps from yesterday; FNMA 6.0 30 year coupon -11 bps from yesterday’s close and -68 bps from 9:30 am yesterday.
At 10 am August pending home sales were expected at -0.1% declined 7.1% and down 18.7% year/year.
At 1 pm Treasury will complete this week’s borrowing with $37B of 7 year notes.
Comments from Fed officials and Powell’s press conference last week continue to push rates higher; meantime many economists still forecasting that the economy isn’t going to fall into recession, recent recession definitions are being changed to fit those forecasts of no recession. One support for the outlook, the low unemployment claims translating to a strong economic outlook. Pushing back on that outlook consumer data over the last month (consumer confidence from the Conference Board and U. of Michigan consumer sentiment index) have shown the consumer is not as encouraged as investors believe. Consumer debt is increasing, savings are slowing, the cost of everyday life is increasing, crude oil approaching the possibility of $100.00/barrel price.
Technically the 10 year note is as overbought, yet the momentum overall shows little sign of abating.
10 year note: 4.64% +3 bp
5 year note: 4.68% -2 bp
2 year note: 5.09% -5 bp
30 year bond: 4.76% +4 bp
30 year FNMA 6.0: @9:30 am 98.28 -11 bp (-68 bps from 9:30 am yesterday)
30 year FNMA 5.5: @9:30 am 96.25 -13 bp (-74 bps from 9:30 am yesterday)
30 year GNMA 5.5: @9:30 am 96.64 -13 bp (-68 bps from 9:30 am yesterday)
Dollar/Yuan: $7.3017 -$0.0083
Dollar/Yen: 149.36 -0.28 yen
Dollar/Euro: $1.0543 +$0.0039
Dollar Index: 106.35 -0.32
Gold: $1890.10 -$0.60
Bitcoin: 26,497 +258
Crude Oil: $92.57 -$1.11
DJIA: 33,633 +83
NASDAQ: 13,117 +24
S&P 500: 4285 +11
After the FOMC last Wednesday the bellwether 10 year note broke above 4.35% a technical resistance that had held since late August. The reaction sent the 10 year note from 4.35% to 4.56% yesterday with relentless buying driven by increasing belief rates and inflation would continue, the idea of a soft landing and no recession grew sending stock indexes lower and rates higher.
This morning some relief with rates overbought for the near term. At 9 am ET the 10 year note -5 bps to 4.50%, MBS prices +19 bps. Yesterday rates began quietly then shot higher in the afternoon. Early trading stock index futures were improving.
Weekly MBA mortgage applications last week declined again; the composite index -1.3% from +5.4% the prior week, purchase index -1.5% from +2.3% the week before, re-finances index -0.9% from +13.2%.
August durable goods orders. New orders expected -0.3% were up 0.2% (July new orders -5.6%); excluding transportation orders expected +0.2% increased 0.4%, core capital goods increased 0.9% from -0.4% in July. The improvement driven by defense spending, durable-goods orders minus defense fell 0.7% last month. The increase in the core positive with future investments ahead.
JPMorgan Chase CEO Jamie Dimon has been active recently on his forecasts: “Going from zero to 2% was almost no increase. Going from zero to 5% caught some people off guard, but no one would have taken 5% out of the realm of possibility. I am not sure if the world is prepared for 7%.” While financial markets don’t necessarily envision a world with 7% interest rates, they are adjusting to a higher-for-longer stance at the Fed.
Minneapolis Fed’s Neel Kashkari commenting this morning sees one more rate hike this year then no more increases in 2024. He said the possibility of a government shutdown that presently lurks, or the UAW strike drags on could slow economic growth would allow the Fed to sit quietly. “If these downside scenarios hit the US economy, we might then have to do less with our monetary policy to bring inflation back down to 2% because the government shutdown or the auto strike may slow the economy for us,” he said in an interview Wednesday on CNN. “I’m not hoping for that, but there’s an interaction there.”
At 9:30 am the DJIA opened +68, NASDAQ +53, S&P +14. 10 year at 9:30 am 4.52% -2 bp after ending yesterday unchanged on the day at 4.54%. FNMA 6.0 30 year coupon at 9:30 am +21 bps from yesterday’s close and -2 bps from 9:30 am yesterday.
At 1 pm Treasury will auction $49B of 5 year notes. Yesterday’s 2 year auction was decent with good demand that generally matched the averages over the last 12 2 year auctions.
10 year note: 4.53% -1 bp
5 year note: 4.61% -1 bp
2 year note: 5.09% +1 bp
30 year bond: 4.66% -2 bp
30 year FNMA 6.0: @9:30 am 98.96 +21 bp (-2 bp fem 9:30 am yesterday)
30 year FNMA 5.5: @9:30 am 96.99 +16 bp (-6 bp from 9:30 am yesterday)
30 year GNMA 5.5: @9:30 am 97.32 +16 bp 9-9 bp from 9:30 am yesterday)
Dollar/Yuan: $7.3111 -$0.0004
Dollar/Yen: 149.43 +0.27 yen
Dollar/Euro: $1.0518 -$0.0056
Dollar Index: 106.51 +0.28
Gold: $1904.90 -$14.90
Bitcoin: 26,646 +499
Crude Oil: $92.28 +$1.89
DJIA: 33,636 +17
NASDAQ: 13,123 +59
S&P 500: 4283 +10
Markets were taken aback last week when the Fed and other key central banks made it clear rates are going to stay higher longer than had been thought. The Fed and ECB hanging on to their 2.0% inflation goals may still consider another rate increase later this year according to many Fed officials speaking out recently, whether it happens depends on incoming data. Two Fed officials last week said at least one more rate hike is possible and that borrowing costs may need to stay higher for longer for the central bank to ease inflation back to its 2% target. While Boston Fed President Susan Collins said further tightening “is certainly not off the table,” Governor Michelle Bowman signaled that more than one increase will probably be required. On Friday, the August PCE inflation report, the core year/year forecast is 3.9% down from 4.2%. Powell continues to look mostly at the core (ex-food and energy) although with energy prices increasing higher costs will likely feed through the economy; the year/year overall PCE expected at 3.5% from 3.3% in July. Traders are increasingly concerned that rising oil prices risk fanning inflation, which will make it difficult for policymakers to reduce rates anytime soon.
A risk-off mood is setting the stage for today, with stock futures in the red as Treasury yields keep reaching for the sky. Don’t look to JPMorgan CEO Jamie Dimon to calm things down, as he warned that even 7% interest rates are possible. Investors need to be prepared for 7% interest rates and most of them aren’t. That’s the stark warning from JPMorgan Chase CEO Jamie Dimon over potential risks for the U.S. economy. “Going from zero to 5% caught some people off guard, but no one would have taken 5% out of the realm of possibility. I am not sure if the world is prepared for 7%,” Dimon said in an interview with the Times of India.
The S&P CoreLogic Case-Shiller 20-city house price index rose 0.9% in July, as compared with the previous month. Prices were up for the sixth month in a row. Year-over-year home prices in the 20 major metro markets in the U.S. were up 0.1% nationally. The forecasts were for year/year at -0.6%.
At 9:30 am the DJIA opened -195, NASDAQ -87, S&P -29. 10 year at 9:30 am -2 bp to 4.52%. FNMA 6.0 30 year coupon at 9:30 am +9 bps -5 bps from 9:30 am yesterday. On the day yesterday the 6.0 coupon was down 46 bps as the 10 year increased 10 bps.
At 10 am August new home sales, expected at 699K sales declined to 675K from July’s revised 739K from originally 714K.
Sept consumer confidence declined; the index expected at 105.8 declined to 103.0 but August revised from 106.1 to 108.7.
10 year note: 4.52% -2 bp
5 year note: 4.60% -2 bp
2 year note: 4.13% -1 bp
30 year bond: 4.64% -1 bp
30 year FNMA 6.0: @9:30 am 98.98 +9 bp (-5 bps from 9:30 am yesterday)
30 year FNMA 5.5: @9:30 am 97.05 +12 bp (-4 bp from 9:30 am yesterday)
30 year GNMA 5.5: @9:30 am 97.41 +12 bp (-8 bp from 9:30 am yesterday)
Dollar/Yuan: $7.3097 -$0.0021
Dollar/Yen: 148.98 +0.10 yen
Dollar/Euro: $1.0592 unch
Dollar Index: 105.97 -0.03
Gold: $1925.70 -$10.90
Bitcoin: 26,236 -58
Crude Oil: $89.79 +$0.11
DJIA: 33,824 -182
NASDAQ: 13,132 -140
S&P 500: 4301 -36
This morning the 10 year note pushed to 4.52%, + 8 bps from Friday. MBS prices began the day -10 bps.
Nothing on the calendar today but there is another major inflation release on Friday and two measures for consumers, the Conference Board’s consumer confidence index and the University of Michigan consumer sentiment index, new home sales and pending home sales later this week.
Last week’s FOMC meeting made it clear rates are going to stay higher longer than had been thought. There was plenty of speculation prior to the meeting about higher for longer but until the Fed put its imprimatur on it, rates had held steady for the prior week.
At 9:30 am the DJIA opened -78, NASDAQ -62, S&P -14. 10 year 4.53%. FNMA 6.0 30 year coupon -32 bps from Friday’s close and -17 bps from 9:30 am Friday. The 10 is now the highest going back to 2007 just prior to the global financial crash in 2008.
Mr. Powell continues to favor ignoring food and energy when viewing inflation, that doesn’t float anymore. The recent increase in energy prices continues to feed through the system and keep inflation from declining. The labor market is staying firm, defying the Fed’s idea that energy prices are transitory. That may be the case although defining transitory is an uncertain outlook. Fed Bank of Chicago head Austan Goolsbee said it’s still possible for the US to avoid a recession. “I’ve been calling that the golden path and I think it’s possible, but there are a lot of risks and the path is long and winding,” he said in a CNBC interview. Boston Fed President Susan Collins said further tightening “is certainly not off the table,” Governor Michelle Bowman signaled that more than one increase will probably be required. Wages are going to be difficult to control after the UAW strike is settled with higher wages.
The debt ceiling set to expire at the end of the week, probably be extended, US debt is going to total $1.3 trillion this fiscal year for a grand total of $3.1 trillion.
10 year note: 4.52% +8 bp
5 year note: 4.61% +3 bp
2 year note: 5.12% +2 bp
30 year bond: 4.63% +10 bp
30 year FNMA 6.0: @9:30 am 99.03 -32 bp (-17 bp from 9:30 am Friday)
30 year FNMA 5.5: @9:30 am 97.09 -45 bp (-27 bp from 9:30 am Friday)
30 year GNMA 5.5: @9:30 am 97.90 +1 bp (+18 bp from 9:30 am Friday)
Dollar/Yuan: $7.3108 +$0.0128
Dollar/Yen: 141.82 +0.51
Dollar/Euro: $1.0601 -$0.0044
Dollar Index: 105.89 +0.31
Gold: $1945.70 -0.10
Bitcoin: 26,150 -370
Crude Oil: $89.88 -$0.15
DJIA: 33,889 -83
NASDAQ: 13,200 -12
S&P 500: 4315 -5
Overnight the 10 year note increased to 4.51%, +3 bps from yesterday’s US close, by 7 am ET the note traded down 3 bps to 4.46%. MBS prices began the day +7 bps. After the fed made it clear Wednesday inflation will stay higher than previous estimates and yesterday’s decline in weekly jobless claims that added additional concerns of continuing employment gains, today nothing on the calendar but two Fed officials speaking, Lisa Cook a Board governor and Mary Daly SF Fed pres.
This week central banks left interest rates unchanged; our Fed, Bank of Japan today, Australia’s central bank, the Swiss bank, the Bank of England all passed on increases. Citigroup now saying there is only a 35% chance of another interest rate hike from the Fed. European Central Bank policymaker Nagel said that it is unclear if rates have peaked while policymaker Kazaks said that rates will have to remain restrictive for quite a while.
At 9:30 am the DJIA opened -22, NASDAQ +55, S&P +9. 10 year at 9:30 am 4.48% -1 bp. FNMA 6.0 30 year coupon at 9:30 am +12 bps and +12 bps from 9:30 am yesterday.
At 9:45 am the Sept PMI Flash release of the manufacturing and service sector indexes; the composite index at 50.1, manufacturing index 48.9 from 47.8, service sector index 50.2 unchanged from August.
10 year note: 4.45% -4 bp
5 year note: 4.57% -6 bp
2 year note: 5.01% -4 bp
30 year bond: 4.54% -3 bp
30 year FNMA 6.0: @9:30 am 99.20 +12 bp (+12 bp from 9:30 am yesterday)
30 year FNMA 5.5: @9:30 am 97.36 +12 bp (+5 bp from 9:30 am yesterday)
30 year GNMA 5.5: @9:30 am 97.72 +10 bp (unch from 9:30 am yesterday)
Dollar/Yuan: $7.3014 -$0.0065
Dollar/Yen: 148.27 +0.69 yen
Dollar/Euro: $10654 -$0.0009
Dollar Index: 105.57 +0.21
Gold: $1945.80 +$6.20
Bitcoin: 26,601 -4
Crude Oil: $91.26 +$1.63
DJIA: 34,083 +13
NASDAQ: 13,278 +54
S&P 500: 4339 +10
At 9 am ET the 10 yield at 4.33% -3 bps, MBS prices +14 bps.
At 9:30 am the DJIA opened +66, NASDAQ +11, S&P +8. 10 year note 4.33% -3 bp. FNMA 6.0 30 year coupon at 9:30 am +15 bps from yesterday’s close and +3 bps from 9:30 am yesterday.
Weekly MBA mortgage applications this morning increased; the composite +5.4%, purchase apps +2.3% and refinances jumped 13.2% from the prior week. Mortgage applications increased last week. Purchase apps -26% year/year, refinances -29% year/year. The refinance share of mortgage activity increased to 31.6% of total applications from 29.1% the previous week. The adjustable-rate mortgage (ARM) share of activity decreased to 7.2% of total applications.
Look for quiet now until 2 pm through 3:30 pm when volatility will occur, digesting the policy statement and Powell’s press conference. The Federal Open Market Committee will keep rates steady at its meeting in a range of 5.25% to 5.5%, a 22-year high. The rate decision and committee forecasts will be released at 2 pm in Washington. Chair Jerome Powell will hold a press conference 30 minutes later. The increase in food and energy costs, usually ignored by the Fed is going to get questions for Powell this afternoon.
10 year note: 4.33% -3 bp
5 year note: 4.48% -3 bp
2 year note: 5.07% -4 bp
30 year bond: 4.40% -3 bp
30 year FNMA 6.0: @9:30 am 99.75 +15 bp (+3 bp from 9:30 am yesterday)
30 year FNMA 5.5: @9:30 am 98.06 +15 p (+3 bp from 9:30 am yesterday)
30 year GNMA 5.5: @9:30 am 98.43 +15 bp (-4 bp from 9:30 am yesterday)
Dollar/Yuan: $7.2904 -$0.0069
Dollar/Yen: 147.72 -0.13 yen
Dollar/Euro: $1.0716 +$0.0036
Dollar Index: 104.87 -0.33
Gold: $1963.20 +$9.50
Bitcoin: 27,164 -18
Crude Oil: $90.88 -$0.22
DJIA: 34,662 +144
NASDAQ: 13,712 +34
S&P 500: 4458 +14
Marking time ahead of the FOMC statement and Powell’s press conference tomorrow. The meeting is starting now with a lot to plow through. The Fed will not increase rates tomorrow, that is a given based on every economist, analyst and trader; the Fed does not want to surprise markets. The issue is inflation outlooks have changed over the last two weeks, the markets reassessing inflation forecasts as well as the fed. Wages have held steady, the number of job openings has declined, the labor participation rate improving. If that isn’t enough the recent increase in energy prices has become concerning for the Fed. The view that the Fed may have one more increase in November then halt rate increases in 2024 has been the recent consensus, not as much so now with wages likely increasing, energy prices increasing.
Crude oil has increased 30% the last 90 days, this morning at $93.00 up $1.21 at 8:30 am ET. When crude prices increased in the 70s, early 80s, and in 1992 the economy rolled over. Now it is about how long energy prices will stay high and possibly increase further. The FOMC has a lot to think about. The Fed generally doesn’t put much emphasis on food or energy prices focusing all its attention on the core (ex-food and energy), believing both are transitory and volatile elements that don’t last long. Mark Zandi, chief economist at Moody’s Analytics; “The run-up in oil prices is at the very tip top of my worries at this point, “Anything over $100 for any length of time and we’re going to be very sick.”
At 8:30 am August housing starts and permits; starts fell hard to 1.283 mil against 1.435 mil and 1.447 mil in July. Permits increased to 1.543 mil against 1.440 mil expectations and 1.443 mil in July.
At 9:30 am the DJIA opened -30, NASDAQ -62, S&P -10. 10 year note 4.35% +4 bps. FNMA 6.0 30 year coupon at 9:30 -8 bps from yesterday’s close and +12 bps from 9:30 am yesterday.
The 10 year note at 4.35%, the key technical level that has held since October 2022. Will it hold? Depends on how markets take the policy statement, the 2 year Fed projections and Powell’s press conference tomorrow.
10 year note: 4.34% +3 bp
5 year note: 4.49% +4 bp
2 year note: 5.10% +6 bp
30 year bond: 4.41% +2 bp
30 year FNMA 6.0: @9:30 am 99.72 -8 bp (+18 bp from 9:30 am yesterday)
30 year FNMA 5.5: @9:30 am 98.03 -13 bp (+12 bp from 9:30 am yesterday)
30 year GNMA 5.5: @9:30 am 98.47 -15 bp (+14 bp from 9:30 am yesterday)
Dollar/Yuan: $7.2935 +$0.0018
Dollar/Yen: 147.66 +0.05 yen
Dollar/Euro: $1.0695 +$0.0003
Dollar Index: 105.00 -0.20
Gold: $1954.70 +$1.30
Bitcoin: 27,192 +429
Crude Oil: $92.32 +$0.85 (high this morning $93.60)
DJIA: 34,496 -128
NASDAQ: 13,602 -109
S&P 500: 4432 -22
More of the same, but hope springs eternal for homebuyers
Round and around it goes and where it stops, nobody knows. Sound like a hustler at a state fair? Sometimes it feels like that to the home-buying public when it comes to interest rates lately. Because after two weeks of declines, mortgage rates rose again this past week.
“As for where those rates might head next, that will hinge heavily on what happens on Tuesday and Wednesday, when the Federal Reserve is slated to meet about whether or not to hike benchmark rates in its ongoing fight against inflation,” says Margaret Heidenry of Realtor.com.
While worries swirl over the U.S. Department of Labor report released last week announcing that the producer price index increased by 0.7% in August—higher than July’s 0.4%—some market experts still predict that the Fed won’t raise rates this week.
Heidenry quotes economic analyst Hannah Jones, saying, “As both core inflation and employment have shown signs of cooling, markets expect the Fed to hold rates steady in next week’s meeting as the committee aims to ease the economy into health without overshooting.” If the Fed leaves rates alone next week? This could spell good news for housing. “Should incoming data continue to fall in line with market expectations, the housing market can look forward to stability, allowing buyers and sellers to plan for the future more effectively,” Jones adds.
Affordability, however, will remain a challenge. “In addition to optimistic predictions about the Fed’s next move, autumn tends to be an advantageous season for homebuyers,” says Heidenry, who echoes Jones. “Though today’s housing market is decidedly challenging, the fall typically ushers in more favorable buying conditions relative to the rest of the year.” So far at least, though, these buyer-friendly conditions seem slow to unfold, particularly on the affordability front.
She goes on to explain how in August, home prices hovered at a median of $435,000 — only 0.7% below what they were last August, which means prices seem to be holding more or less steady annually. “As the summer begins its transition to fall, prices have settled below the year’s peak but continue to hover around last year’s level,” says Jones.
The biggest obstacle? There just aren’t enough homes for sale. Active inventory officially hit a three-month slump for the week ending Sept. 9. And high mortgage rates are yet again to blame for this bleak lack of inventory, as sellers feel “locked in” to their current lower-rate mortgages—and their homes by extension.
One workaround desperate buyers have been exploring in bigger and bigger numbers is new-construction homes. Why? Because a growing number of builders have been willing to offer concessions such as lower interest rates than buyers might get on the open market.
But Heidenry asks that buyers take note: Those few sellers who are willing to list their homes are facing a historically slow time in the market. And this cracks open a significant opportunity for buyers who are paying attention. Again, she quotes Jones, who says, “As the summer’s busy market slows, buyers may see less competition and relatively more homes than in the last few months. Active inventory continues to lag last year’s level, but is improving.”
How Rates Move:
Conventional and Government (FHA and VA) lenders set their rates based on the pricing of Mortgage-Backed Securities (MBS) which are traded in real time, all day in the bond market. This means rates or loan fees (mortgage pricing) moves throughout the day, being affected by a variety of economic or political events. When MBS pricing goes up, mortgage rates or pricing generally goes down. When they fall, mortgage pricing goes up. Tracking these securities real-time is critical. For more information about the rate market, contact me directly. I'm among few mortgage professionals who have access to live trading screens during market hours.
Rates Currently Trending: Neutral
Mortgage rates are moving sideways today. The MBS market worsened by -29 bps last week. This may have been enough to increase mortgage rates or fees. The market experienced high volatility last week.
This Week's Rate Forecast: Neutral
Three Things: These are the three areas that have the greatest ability to impact rates this week. 1) The Fed, 2) Central Banks and 3) Oil.
1) The Fed: On Wednesday we will get their latest interest rate decision and policy statement. The markets are not currently pricing in a rate hike at this meeting. However, we could see a lot of volatility in response to their Economic Projections.
2) Central Banks: We will get key interest rate decisions out of the People's Bank of China and the Bank of England. The BofE is the one central bank that is expected to continue to press higher with their rates and guidance.
3) Oil: Oil Prices are a major factor in inflationary input and have been on tear upward in September. Increased pressure higher will be bad for rates while a reversal in oil prices (a large drop lower) will be helpful.
This Week's Potential Volatility: High
This morning markets were under some initial pressure but have recovered. Volatility will be high this week as markets wait on FOMC.
If you are looking for the risks and benefits of locking your interest rate in today or floating your loan rate, contact your mortgage professional to discuss it with them.