The positive economic readings of the last week – like robust retail sales, low unemployment, and healthy GDP (gross domestic product) – caused rates to tick up slightly, according to the latest survey of average rates by Freddie Mac. However, rates remain in a narrow range, not bouncing around too much.
According to Sam Khater, Freddie Mac’s Chief Economist. “Given this stabilization in rates, potential homebuyers with affordability concerns have jumped off the fence back into the market. Despite persistent inventory challenges, we anticipate a busier spring homebuying season than 2023, with home prices continuing to increase at a steady pace.”
With all the good news for the economy, of course, there’s the bad news side as well. Strong economic growth, healthy job market, etc., also likely means the Fed cutting rates is moving even further into the future, which may also hamstring how much mortgage rates can improve.
The nation’s debt remains an issue for seeing mortgage rates improve. Here’s how. The Fed sold a large supply of bonds in the market last week. As we know from basic economics, a large supply in the market drives prices lower, so purchase demand increases. In the bond market, this translates to the government having to promise higher rates to get buyers to buy. The ripple effect of these higher interest rates the government has to pay causes mortgage rates to only be able to go down to a certain level.
The 10-year Treasury bond yield rose to 4.15 percent at one point. Last week, you’ll recall, we were watching 4.0 as a ceiling we didn’t want it to break through. So although there’s pressure that supports higher interest rates, they’re hanging tough for now, at the same level they were last month…although they could change at any moment. 😉
As for this week…
It’s a doozie! We have a Fed Meeting in session as we speak that will be very important. There’s also the monthly Jobs Report out on Friday. Hold on to your hats!
So far, we got a look at the latest Case-Shiller Home Price Index, where forecasters expected the adjusted monthly rate to rise 0.4 percent in November, and it came in much lower at 0.1 percent. This marked a continued slowdown from October’s as-expected 0.6 percent increase and September’s 0.7 percent. Despite the slower monthly rate, the annual rate was expected to rise nearly a full percentage point to 5.8 percent, but that, too, missed the mark, coming in at 5.4 percent.
As for the highly anticipated Jobs Report, a 170,000 rise is the call for new job growth in January versus 216,000 in December, which was above expectations. Average hourly earnings in January are expected to rise 0.3 percent on the month for a year-over-year rate of 4.1 percent, steady with the prior month. January’s unemployment rate is expected to rise to 3.8 percent from December’s 3.7 percent, which was lower than expected.
It’s going to be an interesting rest of the week and I’ll be keeping an eye on all of it for you!
