What to expect in Q4 for Markets and Mortgage Rates

Well, here we are…in October! We’ve turned the page to a new season and a new quarter. Now that the peak home buying season has cooled, like the crisp, fall air, I thought it would be a good time to share with you some of my thoughts on what’s happening in the markets and what we’re expecting for housing and mortgage rates for the final quarter of 2018.

First, I want to start off by pointing out that Fall is a fantastic time of year to buy a home. Studies show that during Q4 – October to December – each year, the housing inventory rises, so you’ll likely have more inventory to choose from.

“But I’ve heard rates are rising,” you say?

Yes, rates have been steadily rising due to a recent Fed rate hike, a robust economy, and a stock market heading to new highs. But that’s not the whole story! Rates are still  well below all-time averages and thankfully they have not been wildly volatile. That being said, here is what I’m seeing for the trends in rates and the housing market during this last quarter of 2018.

Fed rate hikes

As I already mentioned, the Fed raised a key interest rate last week, and there’s pretty much a 100% chance they will raise again in December. Mortgage rates have been reacting favorably to these recent increases because it signals that inflation will be held in check – inflation is the arch-enemy of bonds and urges mortgage rates higher.

Fed reducing MBS purchases to lowest level

This year the Fed began reducing its purchases of mortgage backed securities. At the beginning of every quarter it has decreased the purchases and we’ve seen mortgage rates rise as a result…not by anything drastic but they have moved higher. October marks the next decrease in those purchases so we expect rates could trend higher as a result.

Robust economy

Our economy continues improve with the latest report on gross domestic product (GDP) sitting at an amazing 4.2 percent for the year! Compare that to 2.2% in 2017 and you’ll see it’s quite an achievement. With a robust economy comes higher rates, so considering that average rates for a 30-year fixed rate mortgage are only 0.89% higher than this time last year, it’s a bonus for home buyers.

Some correction in housing

Housing reports of late have been showing a minor correction for the housing market, with sales of existing homes missing estimates and pending home sales falling 1.8% in the latest reports. As you know, the housing market was running hot all summer so I actually see this as some good news for buyers that have been forced to the sidelines because of tight inventory.

What all this means for home buyers is that Q4, between now and December, is a fantastic time to be in the market for a home. We’re seeing mortgage applications continue to rise and buyers that had been forced to the sidelines during the summer are having more luck now. So, if that’s you…feel free to reach out and let’s come up with a plan for your home purchase!

Until then!