Unless we get a bump, rates today should officially be LOWER year-over-year for the first time since November 2016. Jumbo rate is 4.30%, no points:
Category Archive: ‘Interest Rates/Loan Limits’
It sounds like mortgage rates will be rangebound for the foreseeable future, which is good for buyers – but not necessarily for sellers. Without the threat of rates going higher, buyers will be even more patient:
It’s true that markets were already expecting a dovish Fed announcement. This created an asymmetric risk that the Fed would only be as friendly as they needed to be and that rates would have been positioned too low for such a thing. As it happened, however, the Fed was noticeably friendlier than most anyone guessed.
They dropped their verbiage pertaining to additional rate hikes. This effectively begins an era where rates will remain at current levels until economic data or other considerations motivate a change. Big news indeed!
They also dropped the reference to economic risks being balanced. The only way to be any friendlier to bonds would have been to say that economic risks had tilted to the downside (which can already be inferred from this change).
They also said they were prepared to adjust the balance sheet normalization policy if needed (i.e. they could start buying MBS again). Unsurprisingly, MBS liked this news and improved at a faster clip than 10yr Treasuries. Part of the 10yr’s problem was the big advantage the Fed’s announcement provided for shorter maturity Treasuries. In other words, traders were buying Treasuries, but most of the love went to the 2-5yr sector.
In the bigger picture, this is just another decently-sized green day for 10yr Treasuries, but reading between the lines, there’s a bit more to like. For MBS, it was easily the best day since January 4th. Not only that, but there’s a chance we look back at this as the day the Fed confirmed the end of the rising rate environment of the past 2 years. Granted, the past 2.5 months already did quite a bit in that regard, but it’s going to take a bit more time and stability to get comfortable with that idea.Link to Article
Nice improvement today, and lowest in last 12 months – Jan 31st:
Does weather affect home sales?
Yes, buyers don’t mind the distraction when the market is uncertain!
But now that the holidays are over, the Chargers are done, more houses are coming to market, and mortgage rates are a half-point lower than they were three months ago, we are (over)due for a surge of activity.
There are two big NFL games on Sunday afternoon, which leaves Saturday wide open – and it has the best weather of the week.
No big games the following weekend, so if the weather holds out, buyers should be fully engaged – and if they aren’t, then that says something too.
It’s hard enough just trying to sell – if you have to schedule around the weather and other conflicts (graduations, for example), it narrows down the chances even more. But if we can anticipate opportunities, let’s take advantage.
What’s it going to take to get the real estate market going?
You could say that sales and pricing were at full speed between 2013 and 2017. What’s the common denominator? Low mortgage rates.
In the graph above, it’s apparent there’s been rate-tolerance up to the 4.2% range over the last few years – which had to fuel home sales.
In the Frenzy of 2013, rates didn’t matter much, but by 2014 you can see it took some incentive to keep the party going. National home sales:
The times when rates have risen over 4.2%, they retreated quickly – except in early 2018. Once we got into the second half of last year and rates had risen into the high-4s, the housing market stalled out.
The stock market helped too, but now it’s nervous time over there:
A jittery stock market could help housing if people take money off the table, and diversify (which is code for Help the Kids With Their Down Payment).
Are mortgage rates going to go down further?
We dodged a bullet on Friday when the monster job report was released – there was enough concern about the negative variables that rates didn’t jump much:
We can’t count on any help coming from the Fed, the stock market, Trump, Congress, AOC, etc. – we’re going to have to handle it ourselves.
Whoever can solve the mortgage-rate riddle, and get them under 4.2% – or because of the other turbulence, under 4.0%, should win the game.
Mortgage rates have come down nicely – let’s hope they stick!
Higher rates are what keep buyers on the couch. When they see rates go up, they expect sellers to lower their prices to compensate.
But if we can get rates back into the low four-percent range, or gasp, maybe under four percent (with some buydown), it might cool off the buyers’ demand for an offset.
The extra drama isn’t good for anyone.
If we can keep the focus on just one single thing – the price – we’ll be fine.
I think sellers are willing to be reasonable, it’s just a matter of when.
My Rule of Thumb for Sellers:
- If you’re getting offers, your list price is about right.
- If you are getting visitors, but no offers, then your price is 5% to 10% wrong – or yours is being shown to help sell the better-priced home down the street.
- If you have no showings, your list price is more than 10% wrong.
Once we’re past the holidays and rates get reasonable, we’re out of excuses!
As with the other recent Fed hikes, mortgage rates actually dropped today on the news, and MND’s regular voice thinks it could keep going:
Today’s Fed Statement and forward guidance meshed with investors’ expectations, helping bonds maintain their recent gains. Treasury yields breached resistance, dropping to 2.78% and MBS improved slightly. While the trend to lower rates isn’t etched in stone, we do appear to be headed that way. I’ll lock applications closing within 15 days, and risk averse clients closing within 30. Looks like Christmas is coming a little early for borrowers and lenders! – Ted Rood, Senior Originator
But will potential home buyers notice?
We’ll hear how rates are historically low and two more rate hikes are coming in 2019 so hurry up and buy now, but it sounds like sales talk to those who were already going to wait-and-see anyway.
Jumbo mortgage rates around 4.25% might get them back in the game!
A pause in the Fed hikes was looking good.
First, the WSJ posted an editorial on Sunday – a snippet:
If you think your job is tough, consider Federal Reserve Chairman Jerome Powell. He’s signaled for months that the Fed will raise interest rates again this week, but economic and financial signals suggest he should pause. Meanwhile, Donald J. Trump is beating him up almost daily not to raise rates.
What to do? The right answer is to ignore the politics, inside and outside the Fed, and follow the signals that suggest a prudent pause in raising rates at this week’s Open Market Committee (FOMC) meeting. Get the monetary policy that best serves the economy, and the politics will work itself out. Get the policy wrong, and Mr. Trump will be the least of Mr. Powell’s political worries.
Josh agreed in his tweet above, and it looked like we had a shot!
Trump could have just let it go…..but noooo, he had to tweet one more time:
In case the Fed is looking around for evidence, consider our recent home sales:
End-of-Year Detached-Home Sales and Pricing
|NSDCC # of Sales, 10/1 – 12/15|
|NSDCC Median SP, 10/1 – 12/15|
|SD County # of Sales, 10/1 – 12/15|
|SD County Median SP, 10/1 – 12/15|
The Fed is going to be tempted to make their rate decision based on politics, and show Trump who the boss is. Median pricing is like politics – it makes you want to make decisions based on less-relevant data.
Keep your eyes on sales – they are the precursor of what’s ahead.
Even if the Fed skips this rate hike, we are still going to see sales plummet next year. They could help make it a softer plummet though!
For those who insist on reminding us that rates are still historically low, here’s a colorful demonstration of where we’ve been. Today’s rates are as high as we’ve seen this decade – which is all people remember! (Click to enlarge)
Bob has had a steady grip on the real estate market – his opinions tend to be among the most level-headed of all the prognosticators. He says we are coasting upward, and that the bump in mortgage rates isn’t a turning point:
After today’s NFP report, we can say that 5% mortgage rates (no points) have arrived – sellers can offer to buy down the rate to help ease the pain for buyers. Yesterday’s thoughts from MND:
So is it possible for bonds to see such a reversal? Yes, but it’s equally possible that the pain continues. Either way, it will likely be up to the market’s reaction to the big jobs report in the morning. Traders aren’t necessarily as interested in the payroll count and unemployment rate as they are in the average hourly earnings data–the ingredient that lit the match on September’s rising rate powder keg.
Loan Originator Perspective:
Bonds’ “truly terrible, traumatic week” continued today with further losses ahead of September’s NFP report. If that report shows strong job/wage growth, there’s no telling how much more rates will rise. Conversely, it would take a staggeringly disappointing report to dissuade bond buyers. It truly requires a pronounced penchant for risk to float here, and I, for one, don’t have that. Lock now or relinquish your right to complain about high rates later if you don’t. –Ted Rood, Senior Originator
Today’s Most Prevalent Rates
30YR FIXED – 4.875-5.0%
FHA/VA – 4.5%
15 YEAR FIXED – 4.375-4.5%
5 YEAR ARMS – 4.25%-4.75% depending on the lender