There’s no way to sugarcoat or put an optimistic spin on the news these days, and the news of mortgage rates is no different. Mortgage rates continue to rise, and we continue to see economic headwinds that don’t give any indication this trend will reverse anytime soon.
Listen, I’ve been in the mortgage business for about 20 years, and I’ve seen lots of ups and downs. And what I can say is that we know this rate environment is a season; the only constant is change, and there are a couple of main indicators that I’m watching that could give us an indication that mortgage rates may improve. I’ll discuss those below, but before I get to that…
Remember, even though rates are not ideal, there are homes being sold and bought, and there are loan programs and down payment assistance programs to help home buyers that are feeling the pinch of decreased home affordability. Please reach out to me or let your friends and family know they can reach out to me for advice. I’m happy to help!
Now, the main indicators that I’m watching that could signal a change in the direction of mortgage rates.
1. The Federal Reserve Policy – As we know, the Fed has been raising its key Fed Funds Rate – making money more expensive – to try and curb inflation. Also, to fight inflation and slow demand, the Fed slowed down its purchases of Treasuries and refinanced mortgage bonds. Because the Fed essentially stepped out of the market as a buyer, it’s put pressure on long-term mortgage rates to increase so other investors will buy. If the Fed decides to reverse course and step back into the market as a buyer, it’s possible rates would improve.
2. The nation’s debt load – Our government continues to operate in a deficit. As a result, it has to take on more debt to fund its operations in the form of selling Treasury bonds to investors. As the nation’s debt increases, the buying appetite for these bonds has been weaker, so the government has to pay a higher interest rate to attract investors. This also raises the interest rates of other debt products, like home mortgages.
As for the economic news I’m watching this week…
The highest impact reports will be the report on New Home Sales, the latest GDP (gross domestic product) numbers, and the Fed’s favorite inflation indicator, the PCE Index.
New Home Sales fell sharply from 739,000 in July to a 675,000 annual rate in August with forecasters for September calling for a slight rebound to 685,000 despite the steep surge in interest rates.
Third-quarter GDP, supported by consumer spending, is expected to accelerate sharply to 4.2 percent annualized growth versus second-quarter growth of 2.1 percent.
Inflation readings for September are expected at monthly increases of 0.3 percent both overall and for the core (versus August’s increases of 0.4 and 0.1 percent). Annual rates are expected at 3.4 percent overall and 3.7 percent for the core (versus August’s 3.5 and 3.9 percent). Although slight, we’re hoping to continue to see inflation improve.
