Last week’s market and mortgage rate movement has many experts scratching their heads, and here’s why. First, we saw the core rate of consumer inflation (CPI) come in much higher than expected at 3.8 percent. Normally, higher inflation sends mortgage rates higher, but according to the latest survey of mortgage rates, they improved slightly, hence the head scratching. However, theories among traders are that this inflation is not “real” but transitory because of the pandemic and that before long markets and prices will normalize. We’ll have to wait and see…
Of course, lower rates is a good thing for the housing market, and you, and me, so take the opportunity while you have it to possibly refinance out of Mortgage Insurance or pay off any high interest debt you may be carrying that has an interest rate tied to the CPI (like many credit cards with variable interest rates). Call or text me at 818.307.6072 or simply reply to this and let’s set up a time to talk over your scenario.
As for this week…
There’s lots of housing data and more inflation data coming out. Interestingly, and likely because of the massive amounts of bonds the Fed is buying, the yield percentage on the 10-year Treasury remains low, which is also helping mortgage rates improve. We’re watching the 1.37 percent yield level on the 10-year Treasury and if the yield drops to that level we could see additional improvement in mortgage rates.
As could be expected, wholesale inflation rates came in hotter than predictions. The PPI (Producer Price Index) reported an actual 6.6 percent inflation rate, much hotter than the 6.2 percent last month…and that acceleration was much greater than expected. We’ll have to wait and see how this affects mortgage rates this week.
Following the great stimulus distortions of March and April, retail sales looks to have settled down in May especially for autos. The consensus is a 0.5 percent fall overall with the actual being much worse at 1.3 percent. Excluding auto sales, however, sales fell -0.7 percent.
Housing’s leading indicator, the report on Housing Starts and Building Permits comes out Wednesday. An increase to 1.630 million annual rate is expected for May starts versus April’s 1.569 million rate; permits are seen at 1.738 million a slight drop versus 1.760 million. Permits and especially starts were lower than expected in April.
Not usually a big deal, the Fed’s Meeting Minutes come out on Wednesday and all of my sources are telling me there’s lots of interest in what these minutes say, especially about the Fed’s plans around continuing to buy bonds to bolster the economy. When this type of ‘stimulus’ slows down, bond prices and thus mortgage interest rates tend to rise.
I’ll be keeping an eye on all of it for you! In the meantime, reach out while the rates are still looking so fantastic!