Last week was another fairly boring week for mortgage rates. Rates were flat until midweek, and then rose a bit as bonds sold off on Wednesday and Thursday. Freddie Mac’s Primary Mortgage Market Survey showed that rates were unchanged from the week before, with the average rate on a 30-year fixed-rate mortgage staying at 3.59% with 0.5 points. As always, we note that the survey results are issued on Thursday, and most of the survey responses are collected earlier in the week. As a result, the rate reflected by the survey doesn’t reflect the mid-week bond sell-off. The lowest 30-year mortgage rate of the year (according to Freddie Mac) was 3.58%. Rates are a little higher than that now, but not significantly. It remains a good time to get a mortgage, but there are some risks to mortgage rates later this week.
Click here to get today’s latest mortgage rates.
Today’s economic data:
There’s quite a bit of data this week, but only a couple of salient items today. New Home Sales data for March and the Dallas Fed Manufacturing Survey will be out later this morning.
The week that was:
I would describe last week as dull. There was little significant economic data, and few if any significant overseas developments. Stocks and oil rallied through midweek, and then those rallies sputtered toward the end of the week. Bonds were flat early in the week, sold off on Wednesday and Thursday, and then plateaued. The yield on 10-year Treasuries began the week around 1.79%, rising to the 1.90% range, where they remain this morning. Mortgage backed securities sold off along with Treasuries, and mortgage rates rose a bit.
The easy explanation for this would be to say that stocks rallied because of oil rallying, and that bonds moved in the opposite direction, as they typically do. However, that doesn’t really explain why bonds continued to sell off on Thursday when oil and stocks sold off. I’m inclined to think that last week’s bond sell-off was about profit-taking, momentum, randomness, and people getting out of short positions (in addition to whatever impact oil and stocks may have had). That hypothesis is, at best, an educated guess – take it with a grain of salt. Generally speaking, bond prices have been stable for some time, and nothing in last week’s data should have changed the status quo as the data was mixed. The bond market has been in a holding pattern, waiting for the Fed to act (or at least waiting for data to arise that would prompt the Fed to act – signs of actual, sustainable inflation, for instance).
I’m sort of inclined to look at last week’s rise in rates and shrug. Not everything has an easily ascertainable explanation, and I don’t think last week was the beginning of fundamental directional shift in the market. Just one observer’s $0.02.
Don’t wait for rates to rise. Start your mortgage process now.
This week’s Fed meeting:
There’s a good deal of significant economic data coming this week, but the main event is going to be the Fed meeting – I guess. The thing is that it seems basically assured that the Fed will not hike rates this week. The implied probability of a rate hike according to Fed Fund futures prices: 2%. So we’ll be left trying to read between the lines, to see if the Fed *might* be preparing for a hike in June (implied probability of a June hike: 21%). The last Fed statement was interpreted as being somewhat more dovish than was anticipated. What has changed since now and March? I suppose that global turmoil has subsided to a degree, but with the Brexit looming, there could be a fresh dose of turmoil right around the corner.
So will the Fed begin to foam the runway for a possible June hike? It’s possible. Assuming the FOMC is alright with the present employment situation and believe that inflation is occurring or is about to occur, they will want to get ahead of inflation. I can’t really see how we can have sustainable inflation* until we see real wage growth (which we’re not), but I suppose this is a possibility.
Here’s what I think is the most probable scenario: The Fed does not hike in this week. In their statement, they leave the door open for a potential hike in June, saying that the decline in energy prices is transitory, and that employment data continues to be strong in the U.S. Then they counter-balance this with mentions of global instability/headwinds. They emphasize the path forward is data dependent, and in the end, the statement is generally pretty neutral, maybe leaning a little to the hawkish side of the spectrum. There’s no press conference after this meeting, so we won’t get anything but the statement.
In the end, I think this Fed meeting will have a pretty minimal impact on the markets and on mortgage rates, and that we’ll be playing the waiting game until June. And then until July. I think the July or September meetings are good candidates for a rate hike. Consider this a semi-informed guess. Bear in mind that there is some risk ahead for rates if the statement is more bearish than anticipated. Probably just a mild risk, but a risk nonetheless.
*I’m not really anyone to question the Fed’s economists, but I will note that they have consistently predicted rising inflation for, I dunno, four or five years now, and it still hasn’t occurred.
Click here to get today’s latest mortgage rates.
What’s the takeaway for rates?:
The takeaway is approximately the same as it has been for some time now: rates are very favorable. Despite rising a bit last week, rates are only a little above the lowest rates of the year, and are reasonably close to all-time lows. Eventually, this is bound to change, and I think that it is a reasonable statement to say that it is more probable than not that rates will rise as monetary policy normalizes.
When will this happen? That’s anyone’s guess. I thought it was going to happen two years ago, but here we are. This is why I’ve stopped predicting where rates will go. I’d just offer this: don’t try to time the market. If you are looking to refinance, and can save money, shorten your term, or otherwise benefit yourself, don’t wait. If you’re looking to purchase a new home, now is a great time to lock in a low rate. If something apocalyptic happens, or the economy completely goes into the tank, you can always refinance if rates drop.
And now for something completely different:
Last week, Clayton Kershaw threw a 46 MPH eephus pitch. I am not entirely clear whether he meant to or not, but I am a sucker for a good eephus pitch.
Don’t wait for rates to rise. Start your mortgage process now.
Notable events this week:
Monday:
- New Home Sales
- Dallas Fed Manufacturing Survey
Tuesday:
- Durable Good Orders
- S&P/Case-Shiller Home Price Index
- Consumer Confidence
- Richmond Fed Manufacturing Index
Wednesday:
- International Trade
- EIA Petroleum Status Report
- Pending Home Sales
- Fed Statement
Thursday:
- GDP
- Weekly Jobless Claims
Friday:
- Personal Income and Outlays
- Employment Cost Index
- Chicago PMI
- Consumer Sentiment
from Total Mortgage Underwritings Blog http://ift.tt/1SZJSqj
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