August 23rd, 2024 4:31 PM by T. Fanning
Hey there! Hope everything’s going great!
Federal Reserve Chair Jay Powell said the central bank is expecting to cut its key interest rate due to slower economic growth and cooling inflation. At the Fed's annual summit in Jackson Hole, Wyoming, Powell noted that inflation and job market overheating have significantly declined, and supply constraints have normalized. Rates experienced a nice rebound this week, ultimately ending the week lower.
Next week offers key economic reports and events that could influence mortgage rates, starting with Monday's Durable Goods Orders for July.
We offer Conventional, FHA, VA, USDA, Jumbo and regular construction financing. Some of our niches include: Chenoa Fund loans (100% FHA financing); Conventional 0% down; Conventional, FHA and VA 1x Close Construction-Perm; 1.50% Down FHA Advantage Program; CHFA Financing; HomeStyle renovation program; and a Jumbo, 5% down program. We can also do non-traditional programs! To see a detailed list of programs, visit our website: www.homeloanmortgageco.com/mortgageprograms
Last Updated: 8/23/24
Friday's bond market has opened in positive territory after Fed Chairman Powell's comments this morning. Stocks are reacting positively to the same factors, pushing the Dow higher by 416 points and the Nasdaq up by 300 points. The bond market is currently up 15/32 (3.79%), which should improve this morning's mortgage rates by approximately .250 of a discount point.
Today's sole economic release was July's New Home Sales report at 10:00 AM ET. It showed the new home portion of the housing sector was much stronger than thought last month. The report indicated sales of newly constructed homes jumped 10.6%, well above forecasts and their best month since May of last year. As a sign of stronger economic activity, the data is bad news for bonds and mortgage rates. However, this report does not carry a high level of importance in the markets because it covers such a small portion of all home sales. That has prevented much of an impact on this morning's bond trading.
Chairman Powell's Jackson Hole speech this morning didn't really give us any new information, but did reassure the markets that the Fed is prepared to start lower key short-term rates for the first time since June 2020. In fact, he literally said “The time has come for (monetary) policy to adjust”, which means lowering key rates. His comments referred to future cuts also that would be dependent on economic data. He didn't give any indication if the first move would be a quarter or half point, which was really the only question still being debated.
In short, hearing directly from his mouth that the Fed will be lowering key rates at the September 17-18 FOMC meeting has fueled rallies in both stocks and bonds. Stocks are reacting positively because lower rates should help fuel economic activity, boosting corporate profits. Bond traders like that the Fed is comfortable inflation is not going to flare again and continue its downward trend. Inflation is the number one nemesis of the bond market since it erodes the value of a long-term bond's future fixed interest payments. To account for that risk, traders have to sell them at a discount, pushing yields and mortgage rates higher. Easing inflation should allow bond yields and mortgage rates to continue to move lower in the coming weeks.
Next week brings us the release of a handful of relevant economic reports, along with a few other events that may influence mortgage rates. There is at least one item scheduled each day that we will be watching, including Monday's Durable Goods Orders report for July. Look for details on all of next week's activities in Sunday evening's weekly preview.
If I were considering financing/refinancing a home, I would....
Lock if my closing were taking place within 7 days... Float if my closing were taking place between 8 and 20 days... Float if my closing were taking place between 21 and 60 days... Float if my closing were taking place over 60 days from now...
This is only my opinion of what I would do if I was financing a home. It is only an opinion and cannot be guaranteed to be in the best interest of all/any other borrowers.*
*https://www.homeloanmortgageco.com/DailyRateLockAdvisory
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