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Today’s Mortgage Rates in Sept 2024
Sept 03, 2024
After rates moved a bit higher last week, we are at a point where we should see rates soften a bit. Just be careful going into Friday’s labor report. We could see volatility more rates in one direction or the other depending upon the results.
🏠The Great Waiting Game: Millennials & Gen Z on the Sidelines
Pent up demand for young people who feel they have been priced out of homeownership due to high interest rates and record home prices continues to grow. In fact, right now we have the highest number of young Americans living with their parents since the 1940’s. The concerning thing is that even a 2% drop in rates from their recent peak has not spurred the buying frenzy that many expected. It seems that most buyers remain sidelined just waiting for rates to fall further. Of course, the risk to this is that home values have continued to climb higher, making waiting even more costly than buying at a higher interest rate with the plan to refi as rates fall.
💰Solar Power, Zero Down: The HOPER Program is Here
A new program to help more homebuyers with a down payment to be able to purchase a home is spreading wildly through the real estate market in key states, including Utah. It has limited availability and is only offered through certain mortgage companies. It is called the HOPER Program, which provides up to a $13,000 payment towards the purchase of a home to homebuyers who are willing to participate in an educational process that is geared towards teaching financial literacy and to reduce mortgage defaults. The key restriction is that a solar system must be added to the home, which is 100% financed into the mortgage. At that point, the buyer owns their power, without a separate loan or lease agreement. If you would like to learn more, or find a mortgage lender who offers the program, just respond to this email.
🎢Fed’s Tightrope Walk: Soft Landing or Economic Rollercoaster?
While most economists continue to believe that the Fed will pull off a “soft landing,” many still see significant risks that could lead to a prolonged economic slowdown in 2025. Economic reports are showing mixed signals, with some supporting the need for rapid rate cuts, and others pointing towards a continued thriving economy at today’s high rates. Friday’s Personal Income Expenditures report, for example, showed that inflation grew at a .2% pace in the month of August. This is still hotter than the Fed would like to see, which adds concerns to a Fed who would love to be able to cut rates. The next major milestone will come on Friday when the Bureau of Labor Statistics releases their estimates of new job creations. If that report is strong, we can bet on the Fed cutting by only ¼%. However, a weak report could lead to a ½% cut when the Fed meets on the 18th.
Aug 21, 2024
Rates have improved the past few days. While we are on a downward trend, it could be prudent to float on longer term transactions while watching the market closely in case there is news reported that rocks the markets.
Retail Therapy or Red Alert? 🛒
Retail sales in July pulled a fast one on the market, clocking in at a 1% jump—more than triple the expected 0.3%. But before you sound the inflation alarm, here’s the catch: June’s numbers were quietly revised downward, and back-to-school shopping gave July an artificial boost. When you zoom out and look at the 12-month run rate, we’re seeing a much tamer 2.7% increase. In other words, the retail world might not be as red-hot as it seems.
Jackson Hole: Where the Financial Elite Meet ✈️
If you were thinking about taking a private jet to Jackson Hole this week, the private airport may be full, as the beautiful town of Jackson is filled with some of the most influential financial policy makers, academics, and media experts. It’s the week where they come together to discuss economic conditions, financial development, policy issues, and how they will impact the decision of our central banks. The headline speech will be on Friday, when Fed Chairman, Jerome Powell, takes the stage to share his thoughts and insights surrounding the Fed and its policies moving forward. Since the Fed is expected to start cutting rates in September, this year’s meeting is much less concerning than the previous meeting in 2023.
Job Report Oops! The Labor Market Overhype 💼
Turns out the job market wasn’t as booming as we thought. The Bureau of Labor Statistics just admitted that they overshot job growth numbers by a whopping 818,000 from April 2023 to March 2024. That’s nearly a third of the reported gains that never happened. This overestimation has had a ripple effect, pushing mortgage rates higher than they needed to be. If the BLS had gotten it right the first time, we could’ve seen lower rates and a more relaxed Fed. Here’s to hoping future numbers are a little closer to reality.
Aug 13, 2024
Rates are currently on a slow downward path. Wednesday’s CPI report could change this. If you feel like taking a risk, float into the CPI report. However, if you are not comfortable taking risks, now is a good time to lock.
🚗The Fed’s Tug-of-War: Gas Pedal or Brake?
The Federal Reserve’s balance sheet runoff plan (Quantitative Tightening – QT) is now garnering attention, as economists debate whether the Fed will continue to allow their holdings of US Treasuries and mortgage-backed securities to fall off their balance sheet, or if they will change their policy to reinvest 100% of the proceeds back into the bond market.
If the Fed is cutting rates to stimulate the US economy to help avoid a recession, it would not make sense for the Fed to continue to allow assets to roll off their balance sheet. This would be the equivalent to driving with one foot on the brake and one on the gas pedal. However, if the Fed it cutting to help bring interest rates to a more normal level, then QT could continue. Placing an end to the roll-off QT plan would be great news for mortgage interest rates, as this creates additional liquidity in the bond markets.
📊CPI Watch: Will Inflation Chill or Keep Us Sweating?
This Wednesday’s Consumer Price Index (CPI) report will provide an update on the pace of consumer inflation in the month of July. With the Fed being “data dependent,” markets trade heavily based on each significant inflation report. We have now had a few months of reports showing that the pace of inflation is slowing. If we can again support this trend with a reasonable CPI report, expectations of a Fed rate cut in September will strengthen, which could help mortgage rates take another step lower. With the general market consensus expecting to see a .2% increase in both the Headline and Core rates, it may take a reading of .1% or lower to spark continued hopes of a deeper rate cut beyond the .25% most are now expecting. With motor vehicle insurance already climbing at a 19.5% pace, this could be one area where we see a better-than-expected report.
🔮 Goldman Sachs’ Reality Check: Recession Odds on the Rise
Goldman Sachs has increased their odds of a recession to a 41% probability. While still not a high probability, it is a significant move from the 29% chance they had assigned back in April of this year. Our economy is digressing at a faster pace than most believed just a few months ago. If this trend continues, we can expect to see the Fed cut rates at a faster pace than planned, and for mortgage interest rates to fall more rapidly than anticipated.
Aug 05, 2024
Given the tailwinds of a weakening US economy and the likelihood of impending Fed rate cuts, the downward trend in mortgage rates is likely to continue. Our strategy will be to float on longer-term locks while monitoring daily market movements for short-term decisions. Despite the strong drop at the end of last week, short-term volatility is expected. We may lose ground today but are likely to recover soon.
Job Report Comes In Shockingly Low📊📉
Friday’s Bureau of Labor Statistics (BLS) report showed that only 114,000 new jobs were created in July, falling short of the 175,000 anticipated by the market. Additionally, the unemployment rate rose from 4.1% to 4.3%, surpassing the Fed’s projections for 2024. This unexpected rise in unemployment is alarming for the Fed and will likely alter the tone of future statements from Fed members.
Just a few weeks ago, several members were advocating for additional rate hikes, highlighting the difficulty the Fed and economists face in predicting economic changes accurately.
The Fed’s Tone Has SHIFTED
The Fed met last week and decided to maintain interest rates at current levels, which was before the disappointing BLS report. This has led to questions about whether the Fed has delayed rate cuts for too long. Historically, the Fed’s timing on rate cuts and hikes has been less than perfect. Recent news suggests a 100% chance of a Fed rate cut in September, with the possibility of a 0.5% rate cut now on the table, a shift from expectations just days ago.
Stock Market Repercussions 📈 💹
US stock markets have taken a hit in recent weeks as recession fears and potential declines in corporate profits loom. Continued weakness in the labor market could extend this downtrend. However, this scenario benefits mortgage interest rates, which tend to fall as economic conditions worsen. City Creek Mortgage is currently quoting rates in the 5% range for well-qualified conventional borrowers, which could encourage potential homebuyers to enter the market and spur refinance activity. This is positive news for the real estate and mortgage industries, which have struggled over the past six quarters.
July 30, 2024
While mortgage rates are on a clear downward trend, they are currently at the bottom of the trading channel, which makes the risk of going into the Fed announcement and BLS report more risky. Hopefully, tomorrow’s Fed press conference gives mortgage rates the strength to break lower. If you choose to float, be aware of the risks that are inherently involved with Fed announcements as well as labor market reports.
Fed Watch 🔍: Rate Cut Hints & Market Moves
The Federal Reserve begins its two day FOMC meeting today, which will conclude tomorrow at 12:00 pm MDT with an announcement on interest rates, along with a press conference from Fed Chairman, Jerome Powell. While the Fed is not expected to cut rates at this meeting, it is widely expected that Chairman Powell will indicate that a rate cut is likely to happen in September. It is clear that the Fed is becoming more worried about a weakening labor market than the fear of inflation once again spiking. As long as this belief is confirmed, we could see optimism for lower rates surge.
Job Numbers Jamboree 💼: What’s the Forecast? 📊
This is Jobs Week, with ADP providing their estimate of private payroll growth in the month of July Wednesday, and with the Bureau of Labor Statistics (BLS) set to release their estimate on Friday. The most closely watched of the two, the BLS report, is expected to show that there were 175,000 new jobs creates, and for the unemployment rate to remain at 4.1%. With the BLS becoming known for releasing stronger than expected reports, only to post significant downward revisions in the months to come, we could once again see a strong number in this report. That would not be good for the near term direction of mortgage rates.
Inflation Update 📈: The Core PCE Check-In 💹
Last Friday’s Personal Consumption Expenditures (PCE) report showed that Core inflation rose by .2% in the month of June. This was higher than the .1% anticipated by the markets, so there was little reaction to mortgage interest rates. For inflation to reach the Fed’s target rate of 2%, we need to have a 12 month average rate of 1.67%. Although we are heading in the right direction, we need to see more dramatic reductions in the months to come.
July 23, 2024
I don’t see much hope for improvement prior to Friday’s PCE release. Realize that there is risk of an upward surprise that could push rates higher. However, most experts are advising floating into Friday’s report.
Jobless Claims: The Fed’s Secret Weapon? 🛠️
Last Thursday’s jobless claims data shows a continued weakening in the labor market, with 243,000 new workers filing for benefits in the prior week. Although this is not supportive of an expanding US economy, it is exactly what the Federal Reserve needs to see to feel confident that inflation is on a path to get down to 2%. It has been the strength of the labor market that has led the Fed to hold rates in the 5.25% – 5.5% range, despite Core inflation falling from its recent peak of 6.8% in June of 2022 down to the current level of 2.6%.
While they talked about inflation levels remaining elevated, the reality is that the labor market was so strong that it presented a real fear of inflation once again spiking. Hopefully, we are nearing a balance point where the labor market is no longer a threat, so the Fed can focus on transitioning to a cutting cycle in September.
China’s $53.3 Billion Power Play💸
In what could be a retaliatory move, China dumped a record $53.3 billion worth of US Treasuries and agency bonds (such as mortgage-backed securities) in the first quarter of this year. As they dump supply on the market, it sucks money out of the market that could have otherwise been used to purchase more debt from the US Treasury, which pushes interest rates higher. They could be using tools to remind that US of the power they have over control our currency prices, as well as the impact they can have on interest rates. Trade wars are not good for inflation, or mortgage rates. We will have to see how this plays out in the months and years to come.
PCE Report: The Fed’s Crystal Ball 🔮📊
The near-term direction of mortgage rates will be heavily influenced by Friday’s Personal Consumption Expenditures (PCE) report, which happens to be the Fed’s favorite gauge of inflation. Based on current estimates, this is widely expected to be a favorable reading, which could bring the annualized rate of Core inflation down to the 2.4% – 2.5% range. With the Fed’s target rate of inflation being 2%, we could be within ½% of achieving their goal.
Since the Fed Funds rate is still at the high rate in their cycle, there is little justification for not cutting in the near-term. Given that current inflation rates have dropped significantly from the high peak, it’s certainly time to consider cutting now.
July 15, 2024
Yields on the 10-Year Treasury Note hit a hard floor of support on Friday and are now moving higher. The safe play remains to lock.
Last Weekend – What It Means for Your Wallet
As our nation continues to process the heinous and evil attempted assassination on former President Trump’s life, we are seeing a growing and strengthening base form around Trump, which is making his reelection bid highly probable at this point in the election cycle. As a result, we can expect to see market changes in anticipation of what investors feel a Trump presidency will bring. If the economists polled by the WSJ are accurate, we would likely see inflationary pressures increase, which is not good news for mortgage interest rates.
They based their beliefs upon expectations of lower tax rates, increased tariffs, and reduced regulation. However, this opinion is also disputed by other reputable sources. On the flip side of this, a Trump presidency is also expected to lower the odds of a recession. So, while it may not be good for interest rates, it could reduce the likelihood of our country facing high levels of job loss. We will have to see how the market responds in the months to come.
Bankruptcy Boom: A Troubling Trend 📈
Corporate bankruptcies just hit a 13 year high, clocking in at 346 year-to-date filings. In June alone, there were 75, which is the highest monthly number since the start of the pandemic when many businesses were failing due to lockdowns. This is not a good sign for the future economic outlook for US businesses and could be a beginning of a more serious issue.
If we do see further slowing in consumer spending, that will hurt business earnings and eventually lead to more layoffs. As Fed Chairman Powell acknowledged his testimony on Capitol Hill last week, delaying too long to cut rates, or not cutting fast enough, puts the US at risk of a recession. Hopefully, this means the Fed will act no later than the September meeting to begin cutting rates and will increase the pace of projected cuts in the future.
Inflation Down, Hopes Up: The Fed’s Next Move 🏡
Last Thursday’s Consumer Price Index (CPI) report showed that consumer inflation continues to fall. Overall inflation was negative by .1%, which brought the annualized rate down from 3.27% to 2.98%. When you remove volatile food and energy prices, the Core rate increased by .1%, taking the annualized rate from 3.41% down to 3.28%. This is great news for the Federal Reserve and clears the path for the Fed to target September for the first rate cut. Once we have the Fed adding support to the interest rate market, we can expect to see home buyer demand improve, which is very much needed to add oxygen to the housing and mortgage industries who have been starving for the past two years.
July 08, 2024
We have had a nice improvement following Friday’s softening labor market report. For rates to move lower, the 10-Year Treasury Note yield will have to fall below a significant floor of support. That is not likely to happen without news showing the economy or inflation is further stalling. The risk of floating at this point is elevated.
🏠 Post-Peak Housing Hustle: What’s Next?
With June behind us, we have now passed the peak of the home buying season. This means that we can expect to find that the number of new listings hitting the market will slow. However, the total home inventory will likely not peak until some time around October. We are already seeing home price appreciation rates slow, with many believing that the rate of home value growth will stall by the end of 2024 and be relatively flat in 2025.
At the same time, the total volume of homes being transacted remains at desperately low levels, which is terrible news for those in the mortgage and real estate industries. Of course, a surprise drop in mortgage interest rates could fuel a surge of home buyers that could buck the trends we typically see as we head into the slower season of winter.
📊Job Market Rollercoaster: BLS Report Breakdown
Friday’s Bureau of Labor Statistics (BLS) report showed that there were 206,000 new jobs created in the month of June, which was a little above the estimate of 190,000 – 200,000. Most importantly, there were 110,000 reductions to the prior two months’ reports. This trend of the BLS initially showing a strong number, only to come in months later and say, oops, we were wrong, continues to frustrate the mortgage industry. If accurate numbers were reported at the time of initial release, we would have had less panic selling in the bond market, which means interest rates would not have risen as high as they did immediately after the over-stated release.
Another good piece of news contained in the report was that the unemployment rate rose from 4% up to 4.1%. This shows a continual weakening of the labor market, which is exactly what the Fed is hoping for. At this point, there is plenty justification to cut rates. The current level of the Fed Fund Rate is too high to justify the realities of inflation now only .6% away from the Fed’s 2% target, combined with a labor market that is clearly showing signs of distress.
📈 Inflation Watch: CPI Report Coming Up
Thursday’s Consumer Price Index (PC) report will show consumer inflation for the month of June. While the monthly rate of increase for Core inflation (inflation less volatile food and energy prices) is only expected to be between .2% to .28%, the annualized rate is not anticipated to show any reduction, or it could move slightly higher. This would not be great news for mortgage interest rates, as markets generally only respond positively to reports that show annualized inflation numbers coming down.
July 01, 2024
With rates jumping significantly higher, we will maintain our locking bias.
📈 Biden, Trump, and Your Mortgage: The Debate That Raised Rates
Mortgage rates have jumped 3/8% higher since Friday morning, heavily driven by the self-admitted dismal debate performance by President Joe Biden. According to Bloomberg, PredictIt, odds of a Trump victory jumped up near 60%, while Biden’s odds of a victory fell below 30%. Right or wrong, financial traders are betting that a Trump presidency will slow economic growth and spur inflation with Trump’s plans to deport undocumented immigrants and ramp up threats of increased tariffs against China. Therefore, many financial institutions are putting in place defensive positions to hedge against a bump in inflation. This has put upward pressure on longer maturing bonds, which directly influence mortgage rates. While this would likely add pressure to the Fed to reduce short term interest rates, longer term maturities are expected to climb. Translation, we may see even higher for longer than what was currently priced into the markets.
🧊 Inflation Takes a Chill Pill, But Rates Still Stuck
Friday’s Personal Consumption Expenditure (PCE) report showed that consumer inflation in the month of May was very tame, which had it not been for political concerns, would have driven mortgage rates down lower. The headline number showed a 0% growth in consumer inflation in May, while the Core rate (which strips out volatile food and energy prices, rose by .1%. This brings the Core annualized rate down to 2.6% from the previous report of 2.8%. We are now within .6% of the Fed’s target rate of consumer inflation, which certainly supports the Fed dropping the Fed Funds rate by September.
📊 Jobs Week: Will the Labor Market Shake Up Rate Cut Hopes?
This is jobs week, where on Friday we will receive the Bureau of Labor Statistics (BLS) report of how non-farm payrolls may have been added in the month of June. It is imperative that this number does not show a rapidly growing labor market. Now that we are seeing inflation getting close to the Fed’s target rate, we now need to see a weakening labor market to jumpstart the Fed’s plan to cut interest rates. A strong report will push back any hopes of a July cut for sure, but a weak report would put a July cut as a low probability, but still possible chance of a rate cut.
June 26, 2024
We are hopeful that rates will improve following Friday’s important PCE release. However, the risk of floating remains high, as bond prices would need to break through important floors for this to happen. The safe play remains to lock until we have confirmation of rates breaking beneath the current floor.
Inflation Report Showdown: Will Mortgage Rates Budge? 🧐📉
Mortgage rates have been stable the past weeks, as investors await news that will provide more clear direction on either inflation or the labor market. They could receive what they are looking for on Friday, when the Fed’s favorite gauge of consumer inflation is released showing results for May.
Expectations for the Personal Consumption’s Expenditures (PCE) report is for consumer prices, after removing volatile food and energy prices, to show only a .1% gain, which would be very good news for mortgage rates. On an annualized basis, this would reduce the pace of inflation from 2.8% down to 2.6%. While still a way away from the Fed’s target rate of 2%, this would be the lowest growth rate reported since March of 2021.
Home Prices Keep Climbing: The Fed’s No-Win Situation 🏠💸
Despite high mortgage rates and extremely depressed levels of sales, home prices in the US continue to climb. According to the Case Shiller Home Price Index, home values grew by .3% in the month of April, once again setting new all-time high levels. While the Fed works to curb demand with higher rates, its efforts have massively decreased supply, leading to the equivalent to supply chain shortage inflation in the housing market.
At this point, the fear is that lower mortgage rates would release pent up demand, which could further fuel appreciation with an increased pool of buyers. This is no win situation for the Fed, which is now backed into a corner without a clear path to prevent further housing-based inflation rallies.
Deficit Drama: Uncle Sam’s $2 Trillion Oopsie 💰😱
It was recently announced by the Congressional Budget Office that estimate of federal deficit spending for 2024 has increased from $1.6 trillion up to $2 trillion. Oopsies. Just a 25% miss…. The increase can be largely attributed to recent student loan forgiveness plans, as well as war funding Ukraine and Israel, in addition to social security and rising health care expenses.
The downside to this is that the Federal government now needs to sell more treasuries to fund the deficit, which will apply massive upward pressure on treasury rates to attract enough interest from private investors. Since mortgage rates and treasury rates have a symbiotic relationship, higher treasury rates equate to higher mortgage rates. Just when expectations of lower rates bring excitement to the real estate and mortgage communities, bam! We get hit with another gut punch.
