I hope you all had a wonderful, restful Thanksgiving holiday! I’m back with an important market update, and for those of you hoping for better financing options, this is a positive one.
We’re seeing some really encouraging movement in the bond and mortgage markets thanks to some clarity from the Federal Reserve.
The Big News: Rate Cut Signals are Getting Louder
The biggest headline this week comes from a key Fed official, who suggested there is “room for a further adjustment” to the federal funds rate. This simple statement sent a clear message to the market: a rate cut is very likely at the December 10th meeting.
• The Odds Jumped: Market odds for a rate cut in December have soared from around 39 percent to nearly 85 percent!
• Good News for Mortgages: This increased probability of a Fed cut is welcome news because it has immediately pushed long-term rates, including mortgage rates, down to near the best levels of 2025.
• The Caveat: I want to give you a word of caution: the last five times the Fed cut rates, long-term rates actually crept higher shortly afterward. We’ll see if this time is different, but don’t assume rates will just keep falling after December 10th. If you’ve been sitting on the fence, it’s a great time to talk, and we can strategize together.
Where We Stand: As of November 26th, the 30-year Fixed-Rate Mortgage (FRM) averaged down .03 percent from the week prior. The 15-year FRM improved .03 percent as well.
Two Key Indicators to Watch
Two major external factors are currently lining up to support lower rates:
1. Oil Prices are Falling: Oil has hit around $57 per barrel due to subdued global demand and rising supply. Why do we care about oil? Because oil and 30-year mortgage rates often correlate nicely. Lower oil prices generally mean lower long-term rates, which helps with housing affordability.
2. The 10-Year Treasury is Under Pressure: The 10-year Treasury note, which heavily influences mortgage rates, is currently attempting to break and hold below 4.0 percent. It hasn’t traded consistently below this level since the summer of 2023. If it can hold below 4.0 percent, that would be a very strong signal for sustained lower rates ahead.
Homebuyer Activity Shows Resilience
Despite the economic headwinds earlier this year, homebuyer activity continues to show resilience. We’ve seen pending home sales hit their highest level since last November. This tells me that people are adapting to the current rate environment and are stepping in when they see stability and modest improvements in rates.
Looking Ahead: This Week’s Data
This week, we get the September Core PCE reading, which is the Federal Reserve’s preferred measure of consumer inflation. The key item to watch here is whether the housing component comes in soft again. A soft housing print would further reassure the Fed that shelter inflation is easing, reinforcing the outlook for lower rates.
We also have the November ADP Employment Report coming out this week. While the government shutdown means we’re missing some other employment data, this private payroll report will offer an important glimpse into the labor market health.
Let’s Talk Strategy
For my clients and partners: with rates nearing the best levels of the year, this is an excellent time to prepare. Whether you’re refinancing or purchasing, understanding your options right now is critical.
Please reach out to me if you’d like to discuss how these latest shifts affect your specific financial goals.
