Last week, October ended with one-month highs in mortgage rates. As we go into November, rates are inching up even further. Much of this activity can be attributed to the recent Fed Announcement, which promised to tighten policy. This serves to push up US Treasuries, which influences the mortgage-backed securities that directly influence mortgage rates.
The good news is that, as this represents the market correcting itself in anticipation of the Fed’s policy rate hike, we can likely expect it not to be affected any further by the time the hike goes into effect. In the meantime, though, the market will be under all the more pressure. The more it looks like the planned hike will happen in December, the more we can expect rates to move upward. This week in particular has a high potential for volatility, with the upcoming jobs report on Friday morning marking the time of highest risk. Unless you can afford to take risks, you would be well-advised to lock into current rates by Thursday.
According to Freddie Mac, about half of the country’s large metropolitan areas have returned to a historic stable range. This is according to their Multi-Indicator Market Index, or MiMi. Using proprietary data along with local market data, including home purchase applications, payment-to-income ratios, proportions of on-time mortgage payments, and local employment rates, MiMi rates cities based on their own individual stable ranges.
At present, a full forty-seven of the United States’ one hundred biggest metros fall within the stable range. Cities throughout the west coast have been particularly strong, with Seattle, Portland, and all of California’s big cities ranking as “in range”. Washington State itself is among the most improved states, with an improvement of 10.41%.
The national MiMi value currently stands at 81.2. Such a number is indicative of an overall housing market that is on the outer range of stable. This represents an improvement of 37% over the all-time low experienced in October of 2010. However, it still has a way to go to reach the high of 121.7.
Friday closed with the highest mortgage rates for the month so far. Fortunately, these rates still represent an improvement over most of September. These rates remained steady through Monday, as is normal for a three-day weekend. What to expect as we move forward, though, remains very much in question.
The stocks and bonds markets are both at a significant crossroads, both with the potential to either move back into the range seen in June and July or continue a long trend of downward-moving yields and stock prices. There may be some risk for rates to quickly move higher, if we can take the Fed at their word and ignore the weak trends in global economic growth. The Fed seems convinced that the economy will allow for a rate hike by the end of 2015, but many critics are saying otherwise.
All things considered, it may be too optimistic to expect rates to dip any lower than they currently are; anyone looking to float should expect to play the long-term game, and be prepared to pay more if you turn out to be wrong.
October opened with some wild activity in the mortgage market. With the introduction of European quantitative easing, investors have been moving money to take advantage of European rates, and domestic rates have been feeling the benefits. On Friday, the average conventional thirty-year, fixed-rate mortgage quote plummeted. Almost all lenders opened the day offering the lowest levels we have seen in over five months. Unfortunately, the afternoon saw a substantial reversal in the bond markets that most affect mortgage rates, increasing the chance of rates shooting upward again.
One of the big factors at play currently is the recent September jobs report, which came in slightly weaker than was expected. This weak activity promises to call a Fed rate hike into question, and deter any general economic growth. It is difficult for long-term rates to go up significantly without a positive growth outlook.
In the near-term, we can still expect some volatility in mortgage rates. Anybody not prepared to deal with this volatility would be well-advised to lock into the current five-month lows.