Bulls & Blogs

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By G. Steven Bray

Mortgage rates remained on the range again last week, but that may be about to change, at least temporarily. Fed governors spooked markets a couple weeks ago by suggesting that a Jun rate hike was in the cards, but it didn’t take long for an anxious calm to resume.

The Fed meets Jun 14th and 15th, and a rate hike is possible, but I don’t think it’s likely. The Fed has been watching and reacting this year to economic events overseas, and we’ve got a big one coming up. Great Britain votes on 6/23 whether it will remain in the European Union. The “remain” side is winning in polls, but by a slim margin. Some economists are predicting economic turmoil if the “leave” side wins. I suspect the chances of that will keep the Fed on hold in Jun.

However, that doesn’t mean markets will take a nap until then. This week is a jobs report week. Remember that last month’s report was disappointing, and markets have that baked into their current mood. Given the anxiousness, I think a strong report could result is a quick rate spike.

But remember the Fed doesn’t control mortgage rates directly. In fact, it controls very short-term rates. So, even if we see a spike, I think it will be short-lived unless we see additional stronger economic data. So far this year, housing is about the only area of strength.

For more information, please contact me at (512) 261-1542 or steve@LoneStarLending.com.

By G. Steven Bray

Mortgage rates are at 3-year lows, so should you be locking your rate, or are rates going even lower? The answer is not as straight-forward as it would seem.

Rates have been riding a range all year. Currently, we’re at the lower end of that range, which suggests that locking your rate makes sense. However, unless you’re closing soon, it may make no difference. It’s certainly possible rates will bounce towards the other end of the range soon, but I think it’s also likely they’ll revisit their current lows.

This is what I’m watching. Bond markets seem to be mostly ignoring economic data. The jobs report last Fri was disappointingly low, and markets yawned. This week’s big report is retail sales on Fri. I doubt markets will care. Markets seem convinced the Fed is backtracking on its move to raise interest rates, and one justification for that would be a weakening economy. Thus, it doesn’t matter what the reports say. The Fed hitting the pause button must signify weakness. That suggests that rates probably won’t leave the range anytime soon.

The only economic data that I think still bears watching is inflation. Core price and wage inflation are still very low. However, should the slope increase for a couple of months, I think it would catch the Fed’s attention.

For more information, please contact me at (512) 261-1542 or steve@LoneStarLending.com.

By G. Steven Bray

Mortgage rates continue to hang out in their recent range, which is close to their all-time low. Day-to-day, week-to-week they move up a little, then down a little, but there seems to be no motivation to break the range.

Chances are good that won’t change soon. Our current low interest rates are a reflection of expectations for mediocre economic growth and very low inflation. Economic data over the last week reinforced those expectations.

But it’s the inflation expectations that really caught my eye. During the first quarter of the year, I grew concerned that two of the Fed’s favorite inflation measures, the personal consumption expenditures (PCE) index and wage growth were showing sign of life. Last week, both measures were below forecast, which should ease markets’ collective mind.

The big event this week is the jobs report on Fri; however, I’m not sure markets will really care unless it badly misses or beats expectations. At this point, I think it’s going to take a big, unexpected event to move rates out of their current comfort zone.