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Today’s Mortgage Rates in May 2024
May 13, 2024
The upcoming CPI report poses considerable risk for floating mortgage rates. Only opt to float if you’re prepared to weather potential rate increases post-Wednesday’s release.
Consumer Debt Surpasses All-Time Highs 📈💳💰
Consumer debt in the US continues its upward trajectory, hitting record highs, fueled in part by homeowners tapping into home equity loans for various purposes. With interest rates at elevated levels, the cost of servicing this debt has soared, raising concerns about financial strain, especially if wage growth decelerates. Economists are puzzled by consumers’ continued aggressive spending habits. My belief is that the extra cash is a product of wages continue to rise while so many people are locked into low mortgage payments.
CPI Report Impact on Mortgage Rates 📉💲📊
Wednesday brings the much-anticipated Consumer Price Index (CPI) report, offering insights into consumer inflation. Investors are bracing for potential market shifts, with mortgage rates likely to hold steady in the lead-up to the release. Optimism about declining inflation in recent weeks has tempered rate movements. However, an unexpected inflation uptick could drive rates higher, while confirmation of slowing inflation could signal a downward trajectory for rates.
Biden Administration’s Tariff Announcement
The Biden Administration unveiled significant tariffs on Chinese imports, particularly targeting green energy products. This move aims to bolster US companies unable to match China’s pricing, affecting electric vehicle and solar equipment costs. Homeowners considering solar installations may want to act promptly before potential price increases take effect.
May 6, 2024
After a nice week, mortgage rates are starting today above their 200-day moving average. If this holds, we can expect to see rates improve in the near term. However, floating remains risky. Do so only if you are willing to take the chance of a reversal in this downward move.
Job Report Surprise: Fed’s Rate Cut Hopes Soar📉
Last week’s Bureau of Labor Statistics (BLS) report delivered a jaw-dropping twist that left economists doing double takes. Job creations for April fell short of expectations, sending ripples of excitement through the Federal Reserve. With only 175,000 jobs on the books against the anticipated 243,000, the stage is set for potential rate cuts in 2024.
Plus, the Unemployment Rate taking a leap from 3.8% to 3.9% has folks crossing fingers that higher interest rates might just cool down the red-hot labor market. Are we in for some rate cut action? Stay tuned!
Fed’s Balance Sheet Moves: Surfing the Waves of Liquidity🌊
The Federal Reserve’s latest move is making waves in the bond market! While interest rates stayed put last week, the Fed’s announcement to ease up on their balance sheet reduction plan is causing a stir. How, you ask? By injecting extra liquidity into the bond market, the Fed aims to tackle the government’s deficit spending head-on. And here’s the kicker: this liquidity boost is poised to trickle down to the mortgage bond market, ushering in potential drops in mortgage interest rates down the line. Hang tight, mortgage enthusiasts, because smoother sailing might just be on the horizon!
Recession Whispers: The Tale of a Rolling Economic Tide🌀
Economic rollercoaster, anyone? While the US economy hasn’t plunged into a full-blown recession, whispers of a “rolling recession” are keeping us all on our toes. Picture this: after a wild ride, the manufacturing industry took a gut punch but is now flexing its muscles again. Meanwhile, the real estate market is navigating choppy waters, and guess what? The service industry, once the poster child of post-COVID expansion, is now tapping the brakes and flirting with contraction territory. What does this mean for the Fed and interest rates? Could a slowdown be looming on the horizon? Hold onto your hats, folks, because the economic tide might just be shifting.
April 30, 2024
Given the Federal Reserve’s less-than-friendly stance towards the mortgage market, exercising caution is paramount. If you’re considering floating into tomorrow’s statement, keep a close eye on market movements and be ready to lock in rates as needed.
Feel free to reach out for further discussion or assistance.
Federal Reserve Announcement 🏦💬
Wednesday’s Federal Reserve announcement takes center stage in the mortgage interest rate arena. While a rate reduction isn’t expected, there’s optimism that the Fed will shed light on their plans to slow the Quantitative Tightening process. Scaling back the amount of money exiting their balance sheet could inject much-needed liquidity into the bond market, exerting downward pressure on mortgage rates.
Economic Insights: GDP Slowdown and Rising Inflation 📉📈💰
Recent news reveals a concerning GDP slowdown, dropping from 3.4% in Q4 2023 to 1.6% in Q1 2024. Moreover, consumer inflation is surging beyond healthy levels, raising fears of stagflation—an economic nightmare where inflation spikes amidst slowing growth. This poses a significant threat to the lower and middle class, the bedrock of our economy.
Shift in Rate Cut Expectations and Market Impact 🔄💲
2024 started with Wall Street forecasting six rate cuts, but odds now favor only one at year’s end—a dramatic reversal. This shift has spurred a notable spike in mortgage rates. The Fed’s inability to meet objectives through higher rates has sparked debate, with some defending rate hikes and others attributing rising wages and economic growth to them. However, the primary culprits could be government deficit spending and record wage increases, leaving consumers with substantial disposable income.
April 22, 2024
Mortgage bonds seem to have found a level of reasonable stability the past few trading days. However, we remain in an upward trending rate environment, so floating is a risky choice to make.
Riding the Rollercoaster of Home Values and Mortgage Rates 🎢
As both home values and mortgage rates continue their upward climb, reaching record highs and levels not seen since last November, the challenge for home buyers to afford their dream homes intensifies. Yet, this trend also signifies a wealth-building opportunity for those who opt for a home within their budget instead of renting.
While buyers can’t turn back time to secure past home prices, they do have the flexibility to potentially lower their mortgage interest rates through refinancing. This dilemma poses a tough choice for many, but those who made purchases in recent years have likely seen a positive impact on their overall net worth. Real estate ownership is a long-term investment, often requiring short-term sacrifices to fulfill our long-term aspirations.
The Fed’s Forecast Fiasco: A Tale of Missed Marks 🎩
The Federal Reserve is facing scrutiny over its forecasting methods, as recent policy decisions have fallen short of expectations. This has led to a reversal of previous statements, as the US economy shows signs of inflation resurgence and unexpected labor market strength. With market expectations shifting towards potential rate hikes instead of cuts, the Fed’s credibility is on the line. To address this, the Fed may shift towards incorporating scenario analysis in its communications, providing more insight but potentially less certainty to the market. This change aims to avoid the confusion caused when the Fed fails to deliver on anticipated moves.
The Great Downsizing Dilemma: Homeowners Hold Tight
One of the key factors contributing to the recent uptick in consumer inflation is the rising cost of housing. Despite the Federal Reserve’s initial projections that their rate hikes would bring down home values, they underestimated the impact of the historically low rates seen in 2020-2021 on homeowners. Particularly, consider the group of empty nesters who are looking to downsize to a more suitable home. Many of them have discovered that downsizing wouldn’t significantly reduce their mortgage payments, prompting them to hold off until interest rates reach a more favorable level.
Once rates do eventually decrease, we can expect to see a surge in homeowners making the move. This increase in available homes on the market could potentially slow down the rapid appreciation of home values, which would be positive news for the Federal Reserve.
April 16, 2024
Amidst the ongoing upward trend in rates since early January, maintaining a locking bias seems prudent. Until this trend reverses, we’ll monitor market developments closely to keep you informed and empowered.
Clarification on Buyer Agent Commissions 🏠💼💡
Exciting news for homebuyers and real estate agents alike! Fannie Mae and Freddie Mac have brought clarity to the confusion surrounding buyer real estate agent commissions. The announcement assures that buyer agent commissions will not eat into the maximum allowed seller contributions on conforming loans. This means homebuyers can breathe a sigh of relief, no longer worrying about scraping together funds for both a down payment and their agent’s commission. Agents, too, can negotiate compensation without adversely affecting buyers—a win-win for everyone involved.
Unconventional Theory on Fed Rate Hikes 📈🤔💸
A burgeoning chorus of Wall Street analysts is challenging the conventional wisdom that attributes the unexplained economic boom to Fed rate hikes. This alternative theory suggests that rate hikes might paradoxically fuel economic prosperity by empowering the wealthy, whose stock portfolios reach unprecedented highs and money market accounts yield nearly 5%. With record wage increases and a populace ensconced in low mortgage payments, consumers enjoy unprecedented disposable income, driving up spending and inflation. Could the cure for this economic vibrancy lie in lowering rates? Check out this interesting article:
https://timesofindia.indiatimes.com/business/international-business/what-if-fed-rate-hikes-are-actually-sparking-us-economic-boom/articleshow/109350709.cms
Surprising Retail Sales Surge 🛍️📈💳
March brought a remarkable surprise in retail sales, with a whopping 0.7% jump—more than doubling consensus expectations of a 0.3% gain. Even after excluding autos and gas, sales surged by 1%, once again surpassing the anticipated 0.4% increase. This unexpected pace of economic growth raises concerns about its sustainability and calls for a more substantial response to curb spending. Perhaps a combination of higher taxes and reduced government spending could help rein in disposable incomes and stabilize the economy.
April 08, 2024
There remains little hope of any meaningful fall for mortgage interest rates. We will maintain a locking bias.
Jobs Report Delivers Shockwaves 💥
The latest Bureau of Labor Statistics report dropped a bombshell on the economy, with a whopping 303,000 new jobs added in March alone! But that’s not all—unemployment rates took an unexpected dip to 3.8%, sending ripples through the market. Plus, hourly earnings are on the rise, throwing a curveball at hopes for a rate cut from the Fed. Buckle up, folks—looks like May and June’s meetings could bring further disappointment to mortgage rates.
Rate Cut Dreams Dashed 🚫
Hold onto your hats, because it seems the Fed’s rate cut plans might be hitting a snag. With inflationary pressures on the rise, some Fed members are even hinting at the possibility of now rate cuts in 2024 at all! Cue the panic in the bond market as planned expectations for rate cuts in 2024 go out the window. And you guessed it—mortgage rates are feeling the heat, climbing higher and higher.
Inflation Blues: The Vicious Cycle Continues 🔄
Ever wondered what fuels inflation? Look no further than the age-old tale of too many dollars chasing too few goods. With income levels soaring and homeowners enjoying low mortgage payments, disposable incomes are at an all-time high—cue the surge in demand for consumer goods and services. Brace yourselves, because unless we see a dramatic income slowdown, inflation isn’t going anywhere fast. It’s a rollercoaster ride of rising prices, demanding workers, and unstoppable inflation.
March 25, 2024
Mortgage rates have seen wild swings the past week, and are currently 3/8% off their highs. Given the volatility, floating remains risky.
Unlocking the Mortgage Market: The Cure for Our Economic Illness?
As the Fed looks at the current inflation problem and considers whether they will be able to lower rates by 3/4% this year or not, it’s important to consider one primary issue that is keeping prices higher.
In a balanced economy, there is a healthy percentage of household income that homeowners allocate to their largest expense, which is their mortgage. The low rate environment of 2020 and 2021 created an opportunity where most homeowners were able to significantly reduce their mortgage payments, which lowered their overall debt ratio. This freed up disposable income, which has been used on luxury spending, such as vacations, entertainment, and other types of luxury goods and services. The increased demand led to businesses charging higher prices, which then sparks a demand for workers to earn higher wages.
So now we have many homeowners who have experienced lower debt payments combined with rapidly rising incomes, which just keeps the demand cycle spinning. My belief is that until we unlock the housing market and get more homeowners spending more in their house payments and less on luxury purchases, we will continue this cycle.
Sometimes, the cure to the illness is actually the disease that creates the symptom. We need lower mortgage interest rates.
A Personal Message From Mortgage Mike
If you are a real estate agent, I would like to share with you one of the most important messages I have received in my career. It was back when the mortgage broker was under attack and was forced to disclose our income. While most brokerages closed down or became a net branch of a larger mortgage lender, the CEO of a well known bank told me to put my blinders on and ignore everything that I was hearing.
At the time, mortgage bankers were trying to convince me to give up and become a branch of their organization, saying that the mortgage broker would soon be extinct. We held our ground and ignored the clutter.
Today, the mortgage broker is the fastest growing segment of our industry. Know that everything will work out. You may have to master a conversation that in the past you were able to avoid. Buyer agents are necessary and will remain a critical part of the home buying process. Put on your blinders, learn how to have the conversation of compensation, and take advantage of the opportunity of this presents for agent who remain committed to their profession.
Fed’s Next Move: What Quantitative Tightening Means for Your Mortgage 🏦
The Federal Reserve is expected to soon release plans to cut back on their Quantitative Tightening policy, also know as their balance sheet reduction plan. This means the Fed will be reinvesting more money into mortgage backed securities and 10-year treasury notes, which will add downward pressure to interest rates across the board, including mortgage rates.