Mike's Weekly Rate Commentary | Home Loan Mortgage

Today’s Mortgage Rates in Dec 2024

Mortgage Mike
December 3, 2024 | 15 Minute Read

Dec 03, 2024

Market Outlook: Locking vs. Floating 🔒📉

While mortgage rates have improved a bit since last week, until the 10-Year Treasury Note yield makes a decisive move beneath its 200 day moving average, the risk of floating is high.

Job Jamboree: Why Labor Reports Could Rock the Fed’s World 🛠️📊

Labor reports will be the focus of this week, with ADP set to release its estimates of new job creations in the month of November on Wednesday, and the more important reading from the Bureau of Labor Statistics (BLS) is set for release on Friday. These reports will be heavily weighted into the Federal Reserve’s decision on interest rates for their scheduled announcement on December 18th.

While a strong report from the BLS could sway Fed members away from cutting rates, a weak report could ensure that we do get a cut. Given that we are heading into the stronger retail season, we could easily see the actual report exceed current estimates of 195,000 new jobs creations.

The Treasury Tumble: What Last Week’s Rate Dip Means for You 💸📉

Despite fears of pending tariffs driving mortgage rates closer to 8%, rates did dip lower last week. This pushed the yields on the 10-Year Treasury Note below its 200 day moving average. This is a significant move, as a decisive break beneath this level would indicate a change of direction, meaning we could see lower rates in the days and weeks ahead.

 Once this barrier is broken, rates usually stay below their 200 day moving average for an extended period of time. However, since last week was a shortened holiday, with many traders on vacation on Friday, we can’t put much stock in this lower move holding. If we can see rates close beneath this critical level for a few days in a row, that would be a positive indicator that this move could be sustainable.

Wages vs. Inflation: A Ticking Time Bomb for Rates? ⏱️💵

Wage growth readings from the BLS will also play a role in the Fed’s decision on interest rates. We have seen hourly earnings grow well above the rate of inflation the past couple of years. The concern of the Fed is that wages have grown by 4.6% from October 2023 to October 2024, while inflation grew by just 2.6% during the same period. Higher wages are generally an early indicator of future inflation, which is why the Fed would like to see wage growth decrease in the months to come. Having the Fed hold rates higher for longer would help ensure wage pressure softens. However, that would be detrimental to mortgage rates in the near term.

Nov 25, 2024

Market Outlook: Locking vs. Floating 🔒📉

While mortgage rate pricing is improving today, we’ll maintain a locking bias unless we see mortgage bonds break decisively above their 200-day moving average. This remains a critical technical indicator to watch in the coming days.

If you have any questions about locking in your rate or timing your next mortgage move, feel free to reach out.

Markets React Positively to Treasury Secretary Nominee 💼✅

President Trump’s nomination of Scott Bessent for Treasury Secretary has received approval from financial markets. As the founder of Key Square Group, a global macro investment firm, Bessent brings substantial financial experience and credibility to the role. His history of supporting both Democratic and Republican politicians highlights his willingness to prioritize sound decisions over party lines, which has reassured investors. This announcement has already helped soften mortgage interest rates, with potential for rates to improve further in the near term.

Critical Inflation Data Ahead This Week 📈🔥

Although this is a short trading week, there’s important news that could shape the near-term direction for interest rates. On Wednesday, we’ll get the Personal Consumption Expenditures (PCE) report—the Fed’s preferred measure of inflation—for October.

Last month, Headline Inflation came in at a 2.1% annualized rate, but this month’s report is expected to show a rise to 2.3%. While inflation on a month-over-month basis remains at a manageable pace, the focus will be on the annualized figure, which could pressure rates higher if it comes in as anticipated.

Labor Supply, Wage Inflation, and Balance Concerns 🛠️📉

Addressing inflation often starts with increasing supply. When supply outpaces demand, prices are naturally pushed down. With unemployment at a low 4.1%, we’re nearing what’s considered “full employment.” Any reduction in the labor supply—whether through deportations or federal government job cuts—could spur wage inflation, as fewer workers would drive wages higher. Historically, rising wages increase demand for goods and services, which in turn pressures inflation.

The key question is whether the cuts in federal employees will offset the labor supply reductions enough to maintain a healthy balance. For now, markets are watching closely to see how these dynamics unfold.

Nov 18, 2024

Mortgage bonds are at a critical floor of support. A break lower would likely lead to a more dramatic increase in mortgages. Given this risk, we will maintain a locking bias until we see bond prices stabilize.

🚀Mortgage Rates: The Fed Plays It Cool

Mortgage rates ended the week higher following remarks last Thursday from the Federal Reserve Chairman, Jerome Powell, stating that the Fed doesn’t need to be “in a hurry” to cut interest rates given the current strength of the US economy and with inflation still running above the Fed’s target rate of 2%. Although many still anticipate another 1/4% cut in December, the odds of this happening did fall to just 34.7%, according to CME Group’s FedWatch Tool. This is a sharp drop from where odds were a couple weeks ago and could spell more trouble for the mortgage industry ahead.

⛽Oil Prices: Below $68… but Don’t Celebrate Yet

With gas prices being one of the hot topics in the recent Presidential election, and oil prices now below $68 a barrel, it will be hard to see oil companies willing to start new wells if the price were to get much below current levels. It is estimated that the breakeven going rate for oil to justify new drilling needs to be near $62 on the low end. This is expected to yield a target profit of $15 a barrel. It will take time to see what happens, but a significant drop in gas prices without the US falling into a recession could be more challenging than hoped for.

🛍️Retail Sales: The Great Spending Divide

Last week’s Retail Sales report for the month of October showed that consumer spending continues to run hot. We are in a mixed economy where about half of the country owns a home that was purchased prior to 2022 and has a low-rate fixed mortgage. This segment has been protected from the strongest driver of consumer inflation, housing costs. This group has also experienced record level income growth, which equates to excess disposable income to spend due to having low fixed housing costs. This has led much of the strength we have experienced in both retail sales and consumer spending.

Nov 14, 2024

Rates remain extremely volatile. We will maintain a locking bias.

The Election Hangover: Will Rates Calm Down Soon? 💸

With the results of the election now behind us, there is more certainty as to what the path ahead looks like. Interest rates moved higher over the past couple of months as odds started to favor a Trump victory. With much of that now priced into current rates, we hopefully will soon see the markets stabilize, which could allow interest rates to come back down a little. I’m hopeful that the move higher was over exaggerated, which would present the opportunity to have some relief in the weeks to come.

$25,000 Tax Credit is Off the Table—But Buyers Aren’t! 🏡

With the chances of a $25,000 first time homebuyer tax credit no longer at play, we can expect to see some potential homebuyers who were sitting on the sidelines make the next move towards homeownership. This could provide some hope for a small surge of buyers during the season where the home buying market is always slow. It is also the season where we see a reduction in the pace of home price appreciation, which could be a great benefit for those who are searching for a good deal.

Fed Fight: Independence or Influence? 🤔

The Federal Reserve has again been thrust into the spotlight, as President Trump pushes for the President to have more influence over the Fed policies.

Current Fed Chairman, Jerome Powell, has pushed back on this idea, saying that he will not leave office even if he is asked by the Trump administration to step down. Powell firmly believes in the Fed maintaining its independence from government control. However, the movement to put an end to the central bank has even attracted support from Trump ally Elon Musk. Given the Fed’s stated purpose of serving a dual mandate of balancing maximum employment while maintaining acceptable rates of inflation, many believe the Fed’s true purpose is to ensure that the US dollar remains the world’s currency. With such crucial stakes at play, the outcome is certain to have impact on our financial futures.

Nov 04, 2024

Mortgage rates continue to remain highly volatile. Until we have a better understanding of who will win tomorrow’s election, and how the market will respond to the chosen candidate, we can anticipate the volatility to continue. Locking remains the prudent strategy.

October Job Report: Not Exactly a Showstopper📊

Friday’s Bureau of Labor Statistics (BLS) report showed that there were only 12,000 new jobs created in the month of October, which is far below the 113,000 the market anticipated. The primary reason for the low report was due to the impact of recent hurricanes as well as large labor strikes that significantly cut the active payrolls for October. Adding to the weakness were 112,000 negative revisions to the combined August and September payroll reports, which has become a common practice for the BLS to do. The problem with this is that interest rates move higher on the initial reports, only to later learn that reality was far below what we have been told.

Jobless Rate Sticks at 4.1% – Fed Still Nervous😬

One of the key concerns with the labor market is the current low unemployment rate of 4.1%. The Fed has been clear that it would like to see this number tick in the 4.5% or higher range to help ensure we don’t have excessive wage growth that would push inflation higher. Unfortunately, this month’s BLS report showed that we are still at the 4.1% mark, which shows a labor market that is too strong for the Fed to feel comfortable.

In addition, wage growth was reported at .4% for the month of October, which would equate to an annualized pace of 4.8%. Again, this shows a level of strength in the labor market that exceeds the Fed’s comfort zone.

New Homes Still Holding Strong – But For How Long?🏠

While New Home Sales remain strong, they now represent 28% of total sales, which is down from the highs of 34.4% levels we saw in early 2022. However, we continue to remain well above historical averages of roughly 10%. This reflects the reluctance of existing homeowners who are locked in at low mortgage rates to sell their homes and purchase at today’s market rates. This will likely be the case until rates fall to a level where existing homeowners who are eager to move are able to get a rate that is more inline with what they consider acceptable.

Oct 28, 2024

There remains no end in sight to this savage increase in mortgage rates. Until we see the market stabilize, will maintain a locking bias.

It’s About to Get Real for Rates🎢

After mortgage rates have suffered a devastating 1% increase since the Fed cut rates nearly 5 weeks ago, the next 10 days are crucial to where mortgage rates will be in the weeks and months to come.

To begin with, Thursday brings the release of the September reading of the Fed’s favorite gauge of consumer inflation, the Personal Consumption Expenditures (PCE) rate, where the Headline rate of inflation is expected to show a mere 2.1% averaged rate over the prior 12 months.

Friday, the Bureau of Labor Statistics is set to release their estimates of job creations in the month of October. After a banner month of 254,000 reported in September, there is hope that October will come in at around 123,000.

Then, of course, we have the Presidential Election the following Tuesday, followed by the Federal Reserve’s announcement of any changes to the Fed Funds Rate that Thursday. All I can say is buckle up; the bumpy ride is not over.

Stocks Soaring 🚀 But Will They Crash?

Amidst the turmoil of the bond market, the US stock market continues to hit fresh all-time highs. Last week, fund investors helped drive this gain by adding $18 billion to their portfolios. This makes one wonder what they know that others don’t see. But, as the saying goes, “What can’t continue must end.” The unbelievable post-Covid run in the stock market at some point needs to come to a rest. When it does, that could help improve mortgage interest rates as investors seek a safe place to park their money.

Will the Fed Actually Cut Rates?🤔

While the Fed has projected another .5% of rate cuts in the final 2 months of 2024, markets are lowering their expectations based on the strength of recent economic data. As a result, many experts now believe the Fed will chose to hold rates are current levels when they meet next week. This recalibration is partially to blame for the rapid rise in mortgage rates the past five weeks. If we see a slow down in economic activity in the following 11 days, we could see mortgage rates improve as odds of a rate cut increase.   

Oct 21, 2024

After some improvement early last week, mortgage rates took a sharp turn higher. We’re currently at a critical juncture in the market. If rates don’t bounce back soon, we could see a more substantial rise in the short term. While the odds currently favor an improvement, the risk of floating remains high. Proceed with caution, and feel free to reach out if you need more guidance.

Retail Sales Show Resilient Consumer Spending 🛍️💪

Last week’s Retail Sales report revealed a 0.4% increase from the previous month, signaling that consumers continue to spend. Despite reports of struggling American families, economic indicators from September suggest otherwise. The month showed strong metrics in spending, earnings, and labor growth. With incomes now rising faster than inflation—which is near the Fed’s 2% target—many Americans appear to be doing well, at least on paper.

Rent and Housing Affordability Trends 🏠📉

Data from Core Logic indicates that rents are growing at a moderate pace of 2.4%, which is manageable. Meanwhile, incomes have increased at a faster rate, making rental housing more affordable for non-homeowners. For those who already own homes, many have locked in mortgage rates at 4% or lower, significantly lowering their house payment-to-income ratio. This translates to more disposable income for activities like vacations, dining out, and other leisure pursuits. Although high home prices and elevated mortgage rates make it tough for first-time and move-up buyers, a large portion of homeowners have minimal concerns about housing costs.

Impact of Recent Fed Rate Cut on Mortgage Rates 📉🔍

What has happened to mortgage rates since the Fed’s first rate cut in nearly five years? The short answer is that the rate cut had already been priced into mortgage rates before it even happened. Since then, strong economic data has raised doubts about whether the Fed will continue cutting rates as planned. The labor market is a key area of concern—unless the unemployment rate moves higher, we may see a floor for national mortgage rates around 5.75%, with City Creek rates potentially dropping to 5.375%. While rising unemployment isn’t ideal, it could provide relief for the mortgage and real estate sectors by bringing rates lower.

Oct 16, 2024

Since the Fed cut rates on September 18th, mortgage interest rates have increased by ½%. A look at the charts shows that the 10-Year Treasury yield is just beneath a strong ceiling of overhead resistance. We will suggest a carefully floating stance while we give the market time to see if this ceiling holds. If it does in fact break, we will switch back to a locking bias. Therefore, if you choose to float, do so only by keeping an eye on this critical level and have your loan in a position to be able to lock.

Oil Prices Are Sliding – What’s That Mean for You?⛽️

Oil prices have fallen once again to below $70 a barrel. This move lower was fueled by news that Iran has agreed to limit their retaliation plan to military targets. This is good news for mortgage interest rates, as higher oil prices are a precursor to higher levels of inflation. Since oil is one of the primary costs of producing and delivering goods, retailers and business owners generally pass the higher costs associated with rising gas prices on to the consumer.

On the downside, lower oil prices reduce job creations and investment into increased production of oil, as it becomes less economically viable for oil companies to create profits with prices this low.

Goldman Says: Recession? What Recession? 🚫📉

According to Goldman Sachs, odds of the US economy falling into a recession in the next 12 months are now at just a 15% probability. This is down from their earlier projection of 20% and supports the theory that the Federal Reserve has pulled off the nearly impossible task of accomplishing a soft landing. 

A “soft landing” for the Fed would be defined as bringing inflation down near their 2% target while maintaining strength in the labor market, and without the US economy falling into a recession. This gives the Fed the freedom to cut rates as a stable pace as it continues to monitor the balance of maintaining high employment and modest inflation at the same time.

CPI is Cool, but Not That Cool – Here’s What’s Up with Inflation 🏡📉

Last Thursday’s Consumer Price Index (CPI) report showed that headline number increased by .18% in the month of September and is now at 2.4% as an annualized rate. When removing volatile food and energy prices, the monthly gain was .31% and is now running at a 12-month clip of 3.3%. Since this has greater weighting on housing than the Fed’s favorite gauge of inflation, the Personal Consumption Expenditures (PCE) report, the CPI rate is running higher than the PCE.

When you look at just a six-month run rate, the CPI is at 1.6%, which is well below the Fed’s target rate of 2%. This gives the Fed the green light to continue to cut rates, as it appears that inflation is now under control.