The short answer is this low. Rates have trended lower for the past week due to much of the uncertainty with the debt ceiling issue as well as some of the economic reports that were released showing the economy is still on very shakey ground. Interest rates are back to their lowest levels in the last three years. Many borrowers dont know rates have dropped because the news has been focused on the congressional debate of the debt ceiling and the concern over a default.
Now that congress has agreed on a package and the president has signed off on it we are back to a situation where default is not something that is an immediate concern for US Bond investors. With the big default issue gone and poor economic data interest rates have dropped substantially over the past week. Last week we learned that the GDP of the previous two quarters was over stated and the economy actually grew at a slower pace than thought. We also have seen with the consumer confidence and retail numbers that most people arent feeling very optimistic about our economic recovery...if there is one.
As it typically goes in the market as investors flee stocks due to concern over future growth they flock to the save investments of bonds and fixed interest investments. Investors have been buying up bonds and thus driving down the yeilds and home buyers and folks refinancing are now a direct beneficiary of this behavoir.
So you may not have heard rates are at their lowest levels yet on the national media networks I am here to tell you its time to act. By the time the national media picks up on the low interest rates its typically too late and the best rates have passed. If you get this story and know anyone who would benefit from knowing rates are really low again please forward or pass along.
I may not be around in the afternoon this week as its Seafair in Seattle and I will be trying to poke my head out of the office to watch the Blue Angels tear up the Seattle Skyline. Love those guys!
Wednesday, August 3, 2011
Monday, June 27, 2011
When will Greece end?
Its been how long now since the news of Greece defaulting on its obligations hit the news? It seems like its been years, but that may not be the case. Whatever the amount of time has been the news of Greece and its financial woes has really helped mortgage bonds perform well and keep rates down. As Greece goes in for another round of austarity plans and another round of approval within the EU another key event is taking place that may have an impact on rates...just as Greece has had an impact.
Believe it or not the Quantatative Easing 2 is drawing to a close this week. Many have speculated that interest rates would go up as the Fed exists the bond purchase plan they have been doing for over a year now. So far the markets havent made their move. Even though the June 30th date is this week it seems Greece is still carying more weitght than the QE2 ending. I dont know what to draw from this, but I would guess that Greece stability, QE2 ending, and the CPI figures from last week all spell out a future with interest rates going higher.
Oh..this sounds so familiar...how many years have I said rates will be going higher? I feel like the kid who has cried wolf one (more like 50) too many times. I guess I have to qualify what I mean by higher rates and what time frame I would expect. I do think rates will climb higher...I dont expect them to jump higher as the economic outlook isnt exactly red hot, but inflation does seem to be present at the producer/manufacturer level and that will eventually move into the price of goods. Also...like it or not the Federal Reserve has been keeping rates lower than they may have otherwise been with their bond purchase plan.
So don't become too complacent on rates being in the 4% range as it may not last indefinately...though it could last through the year.
Believe it or not the Quantatative Easing 2 is drawing to a close this week. Many have speculated that interest rates would go up as the Fed exists the bond purchase plan they have been doing for over a year now. So far the markets havent made their move. Even though the June 30th date is this week it seems Greece is still carying more weitght than the QE2 ending. I dont know what to draw from this, but I would guess that Greece stability, QE2 ending, and the CPI figures from last week all spell out a future with interest rates going higher.
Oh..this sounds so familiar...how many years have I said rates will be going higher? I feel like the kid who has cried wolf one (more like 50) too many times. I guess I have to qualify what I mean by higher rates and what time frame I would expect. I do think rates will climb higher...I dont expect them to jump higher as the economic outlook isnt exactly red hot, but inflation does seem to be present at the producer/manufacturer level and that will eventually move into the price of goods. Also...like it or not the Federal Reserve has been keeping rates lower than they may have otherwise been with their bond purchase plan.
So don't become too complacent on rates being in the 4% range as it may not last indefinately...though it could last through the year.
Thursday, May 12, 2011
why high oil prices will push rates higher
There are so many things that affect mortgage rates: Geopolitical news, currency exchange, stock market, employment...you name it. The main thing that will push rates higher or lower is inflation. The reason inflation is ultimately the largest influence on interest rates is that inflation erodes the return an investor will receive on a bond investment. If a bond yields 3% and inflation is around 1% (as it is now) an investor is actually going to receive a 2% net return on their money.
If inflation moves up to 2.5% (still within the target range for the Federal Reserve) that same bond will only net .5% which is not very attractive to investors. So as inflation rises investors will require a higher yield on treasury's and mortgage bonds. If inflation moves up to 2.5% you will likely see the yield on a bond also move up to 4.5% to net the same 2% yield.
So how does oil work into this...?? Oil is used to manufacture & deliver just about every product in the world. So if a farmer has to pay more for oil/gas to harvest their crop that will force them to charge more for their product to offset the higher cost to them. Then the company that delivers the produce from that farmer to the store is paying more for oil which again adds another increase in that same product to offset their costs. This occurs for just about every product and as the consumer has to pay more for the goods they consume inflation moves up.
So you can see that the speculators of oil forcing the price per barrel to artificially move higher are actually going to eventually drive prices higher at your local store which will then drive mortgage rates higher as investors will not buy mortgage bonds or treasuries if they feel inflation will erode their returns.
So don't just get mad when you are at the gas station paying $4 a gallon gas. The speculators who are keeping the price of oil above what most economists say it should be are costing us a lot more than a higher cost at the gas station...they will ultimately cost us all a lot more for mortgage interest rates and all the good and services we consume on a daily basis.
What can you do? Contact your senator/representative and lets see if we can get something done to limit the type of investor who can speculate on Oil futures. I am a supporter of free markets, but the this case..there are too many unintended consequences that will negatively impact our economy and the recovery of our housing market to leave open to a Wall Street hot shot speculating with our future.
If inflation moves up to 2.5% (still within the target range for the Federal Reserve) that same bond will only net .5% which is not very attractive to investors. So as inflation rises investors will require a higher yield on treasury's and mortgage bonds. If inflation moves up to 2.5% you will likely see the yield on a bond also move up to 4.5% to net the same 2% yield.
So how does oil work into this...?? Oil is used to manufacture & deliver just about every product in the world. So if a farmer has to pay more for oil/gas to harvest their crop that will force them to charge more for their product to offset the higher cost to them. Then the company that delivers the produce from that farmer to the store is paying more for oil which again adds another increase in that same product to offset their costs. This occurs for just about every product and as the consumer has to pay more for the goods they consume inflation moves up.
So you can see that the speculators of oil forcing the price per barrel to artificially move higher are actually going to eventually drive prices higher at your local store which will then drive mortgage rates higher as investors will not buy mortgage bonds or treasuries if they feel inflation will erode their returns.
So don't just get mad when you are at the gas station paying $4 a gallon gas. The speculators who are keeping the price of oil above what most economists say it should be are costing us a lot more than a higher cost at the gas station...they will ultimately cost us all a lot more for mortgage interest rates and all the good and services we consume on a daily basis.
What can you do? Contact your senator/representative and lets see if we can get something done to limit the type of investor who can speculate on Oil futures. I am a supporter of free markets, but the this case..there are too many unintended consequences that will negatively impact our economy and the recovery of our housing market to leave open to a Wall Street hot shot speculating with our future.
Tuesday, April 26, 2011
What a week!
This week is full of news that will certainly have investors (and me) keeping a close eye. The Federal Reserve president Ben Bernanke is holding a first-ever news conference tomorrow. It will be interesting to see what he has to say about the state of the economy, concerns about budget deficits, how oil prices are effecting business growth/profits, QE2, and the future outlook. This public pow-wow could be a huge market mover if Bernanke provides an honest look into our collective situation.
Another big event to watch this week is the auction of $99,000,000,000 (99billion) in Treasuries. That's a big number...a very big number. Given the down-grade by Standard and Poor of the US's credit outlook from 'Stable' to 'Negative' I would imagine investors won't be chomping at the bit to buy up Treasuries with a yield at the lowest level in months. If the auction results are poor we could see rates take a quick jump higher as bonds will fall and the yields will climb as a result.
As if those two juicy events weren't enough...the Case Shiller 20-city index for February showed prices collectively moved 3.3% lower year over year. This is the 8th straight monthly decline. With the housing market still struggling to get its feet under it and the general state of the economy as it is...guess what I am going to say.
If you are looking for a home loan...you should be making application as soon as possible and once you have found the lender/broker you want to work with you should lock in your rate immediately. The past few years we have seen rates rise and fall several times. I have blogged, tweeted and screamed from the roof tops that rates are going higher. I have been surprised (happily) that rates have remained at the levels they have for so long. I will warn you that at some point the interest rates will start a climb higher that we will not see reverse for a very long time.
That is all pretty depressing huh? Well, I guess the optimist would say that today is a great day to get a mortgage! Have a great week!
Another big event to watch this week is the auction of $99,000,000,000 (99billion) in Treasuries. That's a big number...a very big number. Given the down-grade by Standard and Poor of the US's credit outlook from 'Stable' to 'Negative' I would imagine investors won't be chomping at the bit to buy up Treasuries with a yield at the lowest level in months. If the auction results are poor we could see rates take a quick jump higher as bonds will fall and the yields will climb as a result.
As if those two juicy events weren't enough...the Case Shiller 20-city index for February showed prices collectively moved 3.3% lower year over year. This is the 8th straight monthly decline. With the housing market still struggling to get its feet under it and the general state of the economy as it is...guess what I am going to say.
If you are looking for a home loan...you should be making application as soon as possible and once you have found the lender/broker you want to work with you should lock in your rate immediately. The past few years we have seen rates rise and fall several times. I have blogged, tweeted and screamed from the roof tops that rates are going higher. I have been surprised (happily) that rates have remained at the levels they have for so long. I will warn you that at some point the interest rates will start a climb higher that we will not see reverse for a very long time.
That is all pretty depressing huh? Well, I guess the optimist would say that today is a great day to get a mortgage! Have a great week!
Monday, March 28, 2011
Safe Haven Trade to Unwind
Mortgage rates had a nice run from February through most of March. Much of the improvement with rates was due to major disasters in New Zealand and Japan along with the unrest in the middle east. Geopolitical concerns and unrest drive investors to the bond market as a 'safe' place to put their money when there are times of uncertainty. This played out nice for mortgage rates as the increase in the demand for mortgage bonds drove down rates. Though the situation in Libya and mess in Japan are still front page news events their immediate threat has passed a bit and mortgage rates are starting to trend higher. Along with the average investor starting to pull out of bonds the Treasury department has began to unwind their holdings of mortgage bonds and the Federal Reserves QE2 program ends in June. All these events along with the 1.6 TRILLION dollar budget deficit will need to be funded with new bonds being issued in the market place. 1,600,000,000.00 LOTS OF ZEROS!! That's a lot of supply that will hit the markets which will likely push rates higher through the next year. I have tried to stress to my clients that rates have been extremely low the past four years...and that typically rates are around 7%-8%. When...and I did mean to use the word 'when'... rates go up many will have a harder time affording homes due to the higher payments that will come along with those higher rates. We are living in a very unique time. With these low rates and the drop in prices buyers have a great opportunity to jump into home ownership with rates they will be able to brag about for decades to come. If you need a home loan...now is the time to lock it in!
Wednesday, March 16, 2011
Whats up with advice?
So I have been tweeting and blogging and FB-ing for weeks now that its a prudent choice to lock in your rate if you are a current homeowner shopping for a refinance or a new buyer trying to figure out if you should lock or float on your interest rate. I have been very consistent on my advice. I have said...'lock' and 'lock today' and 'lock now'...you get the picture. Along the way each day rates seemed to improve a bit and my advice may have seemed wrong.
I am certainly capable of admitting when I am wrong (just don't ask my wife), but in this case I stand by my advice and still suggest its the time to lock. Though rates have managed to improve over the past few weeks due to the events in the middle east and the disaster in Japan (that is still playing out) the improvement has been part of a defensive play for investors. The fundamentals are still pointing in the direction of economic recovery and real signs of inflation...both of which are ultimately going to drive rates higher.
So if you have been reading my posts, my tweets, my Facebook page and think I have lost my mind...I haven't. I just think those out there who are playing the float game will eventually (likely very soon) get burned on the volatility working against them and when rates do move higher I don't see them coming back down again...unless there is an even more devastating natural/human disaster than Lybia and Japan have experienced.
What are the odds things will get worse than what we have seen...those are the same odds that we will see rates get lower from here.
Lock 'em if you are looking to do a loan in the next 30 days!
I am certainly capable of admitting when I am wrong (just don't ask my wife), but in this case I stand by my advice and still suggest its the time to lock. Though rates have managed to improve over the past few weeks due to the events in the middle east and the disaster in Japan (that is still playing out) the improvement has been part of a defensive play for investors. The fundamentals are still pointing in the direction of economic recovery and real signs of inflation...both of which are ultimately going to drive rates higher.
So if you have been reading my posts, my tweets, my Facebook page and think I have lost my mind...I haven't. I just think those out there who are playing the float game will eventually (likely very soon) get burned on the volatility working against them and when rates do move higher I don't see them coming back down again...unless there is an even more devastating natural/human disaster than Lybia and Japan have experienced.
What are the odds things will get worse than what we have seen...those are the same odds that we will see rates get lower from here.
Lock 'em if you are looking to do a loan in the next 30 days!
Tuesday, March 15, 2011
Japan-Safe haven in bonds
What a sad story coming out of Japan. The earthquake wasn't enough. Then a tsunami...still not enough. Now the potential melt down of their nuclear facilities. This massive disaster has investors pulling out of the equity markets and going to the safe haven of bonds as a way to protect their investment funds in such an uncertain time.
This is pretty typical behaviour during a time of uncertainty, but it is usually just a short term move as the uncertainty will eventually not be as 'uncertain.' Mortgage bonds have benefit ted tremendously over the past three weeks and we are seeing rates at the same levels we saw back in January. Though this is great for the still struggling housing market it will likely be short lived.
The trouble in Japan will be less cloudy and once the government of Japan and the insurance companies in Japan start pulling funds to clean up and rebuild the mortgage bonds and US Treasuries will take it on the chin. Japan is the 2nd largest owner of US Bonds. Japan will likely sell some of their holdings in US Bonds to pay for the repairs and clean up...the amount they will have to spend to repair the damage is going to be a very big number. Bonds will very likely fall when Japan begins to sell and investors feel the worst is behind them.
So those of you who may be celebrating these low rates and may be looking to buy a house in a few months or later this summer...don't get too carried away because rates may be back in the 5's on a 30-year fixed mortgage by the time you actually get ready to close.
Now is a great time for those homeowners who were going to refinance last year, but waited a little too long...don't wait any longer and miss this opportunity a 2nd time...you really will kick yourself in the backside if you wait for things to get better from here.
My thoughts and prayers go out to the families and communities affected by this disaster in Japan. I hope things improve each day and that country can begin the process of recovery.
This is pretty typical behaviour during a time of uncertainty, but it is usually just a short term move as the uncertainty will eventually not be as 'uncertain.' Mortgage bonds have benefit ted tremendously over the past three weeks and we are seeing rates at the same levels we saw back in January. Though this is great for the still struggling housing market it will likely be short lived.
The trouble in Japan will be less cloudy and once the government of Japan and the insurance companies in Japan start pulling funds to clean up and rebuild the mortgage bonds and US Treasuries will take it on the chin. Japan is the 2nd largest owner of US Bonds. Japan will likely sell some of their holdings in US Bonds to pay for the repairs and clean up...the amount they will have to spend to repair the damage is going to be a very big number. Bonds will very likely fall when Japan begins to sell and investors feel the worst is behind them.
So those of you who may be celebrating these low rates and may be looking to buy a house in a few months or later this summer...don't get too carried away because rates may be back in the 5's on a 30-year fixed mortgage by the time you actually get ready to close.
Now is a great time for those homeowners who were going to refinance last year, but waited a little too long...don't wait any longer and miss this opportunity a 2nd time...you really will kick yourself in the backside if you wait for things to get better from here.
My thoughts and prayers go out to the families and communities affected by this disaster in Japan. I hope things improve each day and that country can begin the process of recovery.
Monday, March 14, 2011
current market
What a weekend of news. I am amazed at the devastation in Japan that occurred last Friday. The pictures are heartbreaking. I am sure the situation in Japan is just as difficult for you to watch as it is for me. This natural disaster along with the continued trouble in the middle east has caused our markets to take a pause.
Mortgage rates are often a beneficiary of instability and times of uncertainty. With these latest events mortgage rates have improved and have moved back to the levels we were seeing late last year. Though the reason rates are lower is sad it does provide an opportunity for home owners and buyers to take advantage of what may be the last chance to lock in really low rates.
My concern with many consumers is that there is often a sense that things will stay the way they are for a while. Rates were on the rise earlier this year and I expect they will rise again throughout the year as other economic trends become more obvious. So my advice now is for home owners (and buyers) to lock in their interest rate (if possible) and take advantage of this current situation as it will soon be resolved and once it has rates will likely be back on the rise.
With both Japan and the middle east we will likely see economic events that will ultimately have a negative affect on mortgage rates result so now really is the time.
Mortgage rates are often a beneficiary of instability and times of uncertainty. With these latest events mortgage rates have improved and have moved back to the levels we were seeing late last year. Though the reason rates are lower is sad it does provide an opportunity for home owners and buyers to take advantage of what may be the last chance to lock in really low rates.
My concern with many consumers is that there is often a sense that things will stay the way they are for a while. Rates were on the rise earlier this year and I expect they will rise again throughout the year as other economic trends become more obvious. So my advice now is for home owners (and buyers) to lock in their interest rate (if possible) and take advantage of this current situation as it will soon be resolved and once it has rates will likely be back on the rise.
With both Japan and the middle east we will likely see economic events that will ultimately have a negative affect on mortgage rates result so now really is the time.
Tuesday, February 15, 2011
big week
Today reports out of China and Britain show that inflation abroad is a real concern. China has had to make several rate hikes within their banking system to keep inflation from getting away on them. Though inflation here in the US is still low its a global market for investors and if they are able to get a higher yield on investments in China (due to their higher rates) our bonds look less attractive and our rates will have to rise to attract investors.
That being said we have both the Producers Price Index (PPI) and the Consumers Price Index (CPI) figures coming out tomorrow and Thursday. If these numbers show inflation is creeping up here in the US we could very easily see mortgage rates move higher in a hurry. Rates have made a big move higher in recent weeks, but the past few days rates have found a level of support and stabilized. IF these reports are not big surprises we could see rates improve in the short-term, but the long-term outlook is still indicating that rates will be moving higher in 2011.
My next post will address some of the changes coming with Fannie Mae and Freddie Mac along with the new Fed rules coming out in April that relate to the Dodd-Frank bill. All these changes are part of the governments effort to avoid another big disaster in the housing market. The effect they will certainly have is higher rates and costs to the consumer and potentially limiting competition in the mortgage lending industry. Stay tuned.
That being said we have both the Producers Price Index (PPI) and the Consumers Price Index (CPI) figures coming out tomorrow and Thursday. If these numbers show inflation is creeping up here in the US we could very easily see mortgage rates move higher in a hurry. Rates have made a big move higher in recent weeks, but the past few days rates have found a level of support and stabilized. IF these reports are not big surprises we could see rates improve in the short-term, but the long-term outlook is still indicating that rates will be moving higher in 2011.
My next post will address some of the changes coming with Fannie Mae and Freddie Mac along with the new Fed rules coming out in April that relate to the Dodd-Frank bill. All these changes are part of the governments effort to avoid another big disaster in the housing market. The effect they will certainly have is higher rates and costs to the consumer and potentially limiting competition in the mortgage lending industry. Stay tuned.
Thursday, January 6, 2011
What to expect tomorrow?
Rates managed to improve a little today after going higher yesterday due to an ADP payroll report that exceeded all expectations. Though the ADP report has been all over the place and hasn't consistently been a good indication of the actual payroll figures that are released the first Friday of the month. The Non-Farm Payroll report due out tomorrow can be a big market mover.
Technically (technical indicators on the FNMA bond) the bond is set for a bump higher which would mean rates may improve going forward, but technicals take a back seat to this report as a good job number will be bad for mortgage rates and will certainly trump technicals.
So what will happen tomorrow? The number everyone is expecting is 150k new jobs or more. If the number of new jobs created is much larger than this rates will certainly go higher...and quickly. If the number is much below 150k I would expect rates to either improve or hold where they are now. I don't expect rates to improve dramatically even with a miss to the downside...unless its a huge miss.
So what to do? If you are looking to refinance you should have been locking in your rate by now, but if you are trying to figure out if you are going to be able to benefit from a refinance in the next few months I guess you hope for a low employment figure and then lock in the rate pretty quick because rates are on the rise and I don't think that general trend will reverse over the coming months.
Me...I want low rates, but I also want to see the economy improve and jobs added so there are more people out there who can afford to purchase a new home or feel more secure in their current job and make a move to a more expensive home...this is what is needed to really get the housing sector back on solid ground.
Either way I will be here to help with any questions or a new loan if that is in your goals for 2011.
Watch the the number tomorrow morning and you can also follow me on Twitter..where I am a little more timely with info. http://twitter.com/westseattlemtg
Happy new year...it will be a fun one!
Technically (technical indicators on the FNMA bond) the bond is set for a bump higher which would mean rates may improve going forward, but technicals take a back seat to this report as a good job number will be bad for mortgage rates and will certainly trump technicals.
So what will happen tomorrow? The number everyone is expecting is 150k new jobs or more. If the number of new jobs created is much larger than this rates will certainly go higher...and quickly. If the number is much below 150k I would expect rates to either improve or hold where they are now. I don't expect rates to improve dramatically even with a miss to the downside...unless its a huge miss.
So what to do? If you are looking to refinance you should have been locking in your rate by now, but if you are trying to figure out if you are going to be able to benefit from a refinance in the next few months I guess you hope for a low employment figure and then lock in the rate pretty quick because rates are on the rise and I don't think that general trend will reverse over the coming months.
Me...I want low rates, but I also want to see the economy improve and jobs added so there are more people out there who can afford to purchase a new home or feel more secure in their current job and make a move to a more expensive home...this is what is needed to really get the housing sector back on solid ground.
Either way I will be here to help with any questions or a new loan if that is in your goals for 2011.
Watch the the number tomorrow morning and you can also follow me on Twitter..where I am a little more timely with info. http://twitter.com/westseattlemtg
Happy new year...it will be a fun one!
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