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Today’s Mortgage Rates in April 2024
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.
March 12, 2024
Unless we see consumer inflation soften and the labor market weaken, we can expect mortgage rates to be higher than most anticipated we would see throughout 2024. We will maintain a locking bias.
BLS Blunders: Jobs Surge, But at What Cost?
Friday’s Bureau of Labor Statistics (BLS) report showed that there were 275,000 new jobs created in the month of February. Before you celebrate the continuation of a seemingly explosive labor market, we need to consider the massive downward revisions of the prior two months. It seems that the BLS overstated the prior two months’ numbers by 167,000! When pressed for an explanation as to how this could happen, a member of the reporting team cited a “staffing shortage.”
Well, just give that a minute to set in. It’s also worth noting that mortgage rates likely increased by nearly ¼% from this mistake alone. Causing many borrowers to take higher rates based on false data. I’m not much of a conspiracy theorist, but the mistakes of the BLS the past couple of years has made me seriously question if there is more behind the story.
Inflation Inches Up, Fed Feels the Heat 🔥
This morning, we received an update on the pace of consumer inflation, with the Consumer Price Index reporting a .4% increase in the month of February, taking the annualized rate from 3.1% up to 3.2%. A move higher is certainly not good news for The Federal Reserve, or anyone who was hoping to see improvements to mortgage interest rates. When removing volatile food and energy prices, the Core rate also increased by .4%, moving the annualized rate from 3.9% down to 3.8%. We remain far from the Fed’s target of 2% Core inflation, which means that hopes of a rate cut in May are quickly evaporating.
The Curious Case of the Unemployment Rate 🤔
One interesting component of the BLS report is that unemployment rate, which is derived from a completely different metric than the job creation count. While labor market growth is derived from phone surveys of businesses collecting payroll information, the unemployment rate is computed by phone surveys to working class Americans. The phone survey painted a much weaker picture of the strength of the US labor market, which is why we saw the unemployment rate rise from 3.7% up to 3.9%.
March 05, 2024
Given the strength of the US economy, we suggest a locking bias.
Labor Market Limbo: How February’s Numbers Could Impact Your Rates🛠️
This week we will get reports on the strength of the US labor market for the month of February. Tomorrow morning, ADP will come out with their estimates, with the Bureau of Labor Statistics (BLS) set to announce theirs on Friday. Estimates for the BLS report are set at 200,000, which is a significant reduction from January’s report that showed that the labor market grew by 353,000.
Given the seasonal adjustments that helped create January’s blockbuster report, this could help the month of February report a much lower number. Since the Fed is set on slowing the labor market, a lower number could help support lower mortgage rates in the near term.
Debt Drama: Why Our National Debt Is Keeping Us Up at Night💸
Interest payments on our rapidly escalating national debt have now exceeded all the costs of Medicare plus our national defense combined. With nearly $1 trillion being added to our national debt every 100 days, we are clearly on an unsustainable path. Higher interest rates are not helping the overall problem, with the US Treasury now having to borrow money at multi-decade high rates just to keep our government floating.
While the excessive spending is helping our economy hold strong, it is providing a false sense of security. If we ever get our spending back to a reasonable level, we will see economic reports show more weakness than they are currently reporting. There will eventually be a day or reckoning, where our government is forced to cut spending, which would certainly help slow the pace of inflation.
Powell’s Prognostication: What to Expect from the Fed Chairman’s Congress Report🔮
Tomorrow morning, Fed Chairman, Jerome Powell, will provide a semi-annual Monetary Policy Report to Congress. Given the recent strength in economic reports so far in 2024, markets will be listening for any clues as to both when the Fed will begin to cut rates and how many cuts they anticipate in 2024.
Hopefully, Powell attributes the recent strength to seasonal adjustments that generally show stronger than normal economic activity. However, I expect him to be clear that they will be waiting for lower inflation and job growth numbers before they begin the cutting process. Regardless, his words will likely cause interest rates to move in one direction or the other.
Feb 23, 2024
After hitting a critical level, mortgage bonds are showing signs of improving. We suggest carefully floating to give an opportunity to see if this improvement continues.
Homebuyer’s Heartbreak: The Unfolding Drama of 7% Rates🎭🏡
With mortgage interest rates now averaging above 7% nationwide, applications for both purchase and refinance loans have plummeted. This is terrible news for the spring homebuying season, where many buyers were hoping for a little rate relief to help push them into the decision to become homeowners.
The reason for the sudden jump in mortgage rates comes down to higher-than-expected consumer inflation rates combined with a white-hot US economy that has not yet relented under the pressure of higher interest rates. This news has lowered the probability that we will see the Fed cut rates anytime soon and reduces the number of cuts the market is expecting out of the Fed in 2024.
Jobless Claims Drama: A Plot Twist in Rate Expectations🕵️♀️💼
This morning’s Initial Jobless Claims data didn’t do much to help mortgage rates, with only 201,000 new claims reported last week. This is savagely unhealthy and shows that employers are holding on to their workers, or that workers are quicky finding replacement jobs after getting laid off. With additional rate hikes unlikely, the Fed is searching for ways to help slow the labor market with the tools remaining under their belt.
For one thing, it doesn’t help that the US Federal Government continues to spend money and create debt at record levels. This is counterproductive to bringing down inflation and is a big risk for mortgage rates in 2024.
Home Sales: The Silver Lining Amidst Rate Storms🌪️🏠
Existing home sales for January were released this morning, showing encouraging signs of existing homeowners becoming more willing to part ways with their low mortgage rates for the opportunity to move to a more suitable home. However, we remain near a 4,000,000 annualized pace of sales, which puts us at low levels not seen since 1995. We know that as time goes on, we will see consumers adopt to higher rates. As we transition into a more normalized number, we will see improvement in the number of buyer transactions taking place.
Feb 13, 2024
Given the prevailing market dynamics, maintaining a locking bias remains prudent. With little benefit in floating amidst ongoing volatility, let’s stay vigilant and responsive to emerging developments.
S&P 500 Rally: Unprecedented Momentum 📈📊🔥
The S&P 500’s relentless ascent to record highs over the past four months, breaching the psychological 5000 mark, defies conventional expectations amidst interest rates’ 5% surge. This perplexing phenomenon, coupled with near-record low unemployment rates and historic wage levels, presents a fascinating case study for economists. For those of us in the mortgage and real estate sectors, the journey has been rife with challenges. Here’s to brighter prospects ahead.
CPI Surprise and Fed’s Conundrum 🛒💰💹
January’s Consumer Price Index (CPI) report delivered an unexpected blow, with both the headline and core inflation rates exceeding market projections. A month-over-month increase of 0.3% in the headline rate, coupled with a significant 0.4% uptick in the core rate, spells trouble for mortgage rates. As inflation stubbornly outpaces the Fed’s 2% target, their attempts to rein in price growth and consumer demand have yet to yield desired outcomes, complicating the path forward for rate cuts.
Small Business Uncertainty Amidst Strong Indicators 🏢🤔📉
The latest National Federation of Small Business survey for January reveals waning confidence among employers, signaling a potential economic slowdown on the horizon. However, this sentiment contrasts sharply with recent labor market reports and robust economic indicators highlighting strong consumer demand and labor shortages. A shift towards small business owners’ anticipated slowdown is crucial to stabilizing mortgage rates.