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Last Week in Review: Optimism Hurts Rates
This past week home loan rates ticked up, yet remain just above 3-year lows.
Here are 3 reasons why:

1. Solid corporate earnings and future positive guidance from many public companies were a pleasant surprise for many who were bracing for a far more disappointing outlook. As a result, Stocks moved higher last week at the expense of Bonds and home loan rates.
2. U.S./China trade deal optimism continues. It's been slightly over a week since the U.S. and China came to a "handshake" trade agreement, and all signs are pointing to the deal being papered and signed in the coming weeks. This once uncertain event has become quite positive, and was another reason for Bonds to move lower and rates higher.
3. A "Brexit" deal, where the U.K. will leave the European Union, has been drafted. The deal still has to pass a Parliamentary vote and carries some hurdles. But much like the U.S./China story, Brexit has gone from hopeless to a pretty good chance of a fix in a short amount of time. Once again, this is another uncertain event removed, and the renewed optimism helped Stocks and hurts home loan rates.

In positive housing news, new construction of single-family homes rose for the fourth consecutive month. This along with low home loan rates for the foreseeable future should help housing and the U.S. economy.
Bottom line: the present opportunity to refinance or purchase a home may never be matched. We are seeing unemployment at 50+ year lows, yet home loan rates at three-year lows -- the best of both worlds. A strong economy AND low rates, truly a Goldilocks situation.

Last Week in Review: Fed Rate Cut Coming -- But Don't Wait

U.S. Bond yields and home loan rates ticked modestly higher this week as the world watches the U.S. and China have their first serious talk since July. There is a growing sentiment that the U.S. and China will agree to some short-term measures like a postponement of tariffs, while the two sides work on a more comprehensive agreement.
A short-term agreement or small win with U.S. and China would be good news, and home loan rates hate good news, hence a reason for the modest uptick in rates.
Also pressuring rates higher is the notion the Fed will once again cut rates on October 30. Yes, a Fed rate cut is putting pressure on home loan rates. A Fed rate cut is designed to help the U.S. economy avoid a recession, while increasing inflation. Both of which are bad news for long-term Bonds like mortgage backed securities, which price home loan rates.
For folks considering a new mortgage, it is important to note that home loan rates literally stopped improving once the Fed started cutting rates back on July 31st -- look at the chart below.
So, don't wait until October 30 and think rates will be .25% lower because the Fed will be cutting the short-term Fed Funds Rate. Home loan rates could be lower by month's end, but the driver will more likely be the outcome of the U.S./China talks and not what the Fed is doing.
Bottom line: home loan rates remain right near three-year lows as the financial markets watch the outcomes of the U.S. and China talks. Good news will limit how much home loan rates can improve. The opposite is also true.

Last Week in Review: Slowing but Growing

Recession fears were back in full swing this past week, thanks to the weakest manufacturing report since June 2009, which was the last month of the Great Recession.
Manufacturing makes up 12% of our economy, while consumer spending makes up nearly 70%. So even though the consumer remains strong, markets were spooked that this is the first sign of cracks within the U.S. economy.
Trade uncertainty, increased tariffs, and softening demand were reasons cited by respondents for the soft reading.
Stocks hate bad news, uncertainty, and recession talk, so the initial reaction was a significant Stock selloff. Typically, when Stocks struggle, Bonds and home loan rates benefit, but the improvements were modest at best.
Here are three reasons rates have seemed to stall -- think of a "wait and see" attitude.

1. Markets are looking for confirmation of a slowdown in other parts of economy, besides manufacturing.
2. The Fed is going to cut rates, likely two times before year-end to help the economy grow.
3. U.S./China trade talks carry potential positive headline risk.

How the economy performs in the months ahead and responds to pending Fed rate cuts will likely determine which path home loan rates will follow. But the biggest story and wild card heading into October will be the U.S./China trade talks. Positive developments can change everything in a minute and home loan rates could suffer. And the opposite is also true.
Bottom line: For those looking to take out a mortgage, it's tough to see a better situation for the consumer. The economy remains strong and rates are at three-year lows. In order for rates to get much better, the economy would likely have to perform worse, potentially much worse...which could happen, but let's not wish for it.

Last Week in Review: Bullard Wants More
This past week was a classic example of how good news means bad news for Bonds and home loan rates.
A little trade deal with Japan, solid housing numbers, and hopeful news on the U.S./China trade dispute was enough to erase the previous week's modest improvement in rates.
And on top of it all, Fed President James Bullard was out saying the Fed has to cut rates further, despite the U.S. economy doing well. At the moment there is over a 70% chance the Fed will cut the overnight Fed Funds Rate by .25% by years end.
What homebuyers and those looking to refinance must understand is that Fed rate cuts do not equal lower home loan rates. Fed rate cuts are designed to keep the U.S. economic expansion alive while promoting inflation, and if the Fed is successful in that endeavor, there is a limit to how low home loan rates can go.
On the other hand, if the Fed is unsuccessful and our economy slows further, and our inflation rate cools further, then we will see lower home loan rates in the future. Think bad news is good for home loan rates.
Bottom line: home loan rates have essentially moved sideways to slightly higher in the past few weeks, but still remain just above three-year lows making it a great opportunity to refinance or purchase a home.

Last Week in Review: Three Things the Fed Said

This past week the Federal Reserve cut the Fed Funds Rate for the second time this year, lowering the rate to 2.00%. Remember that the Fed Funds Rate is a short-term, overnight rate that has little effect on home loan rates. Home loan rates respond to the trading activity in Mortgage Bonds, which are influenced by the economic outlook and inflation expectations.
Not all Fed members were on board with the .25% rate cut. A few preferred not to cut rates while another wanted a bigger .50% cut.
Along with the Fed rate cut, here are three important takeaways from Fed Chair Powell's press conference and the Monetary Policy Statement:

1. There is no recession in sight. One of the fears in recent months and cause for home loan rates to decline this summer was the fear of a recession. Powell debunked the recession myth, which is the reason why they suggested the possibility of no more rate cuts in 2019...the U.S. economy is doing fine.
2. The consumer is also alive and well. The main reason the U.S. economy won't slip into recession is because the U.S. consumer has never been more willing and able to spend money. Consumer spending makes up nearly two-thirds of U.S. economic growth (Gross Domestic Product), so a recession will not occur while the consumer remains confident.
3. Exports have slowed. This was a negative point from the Fed statement. There are a couple reasons -- one being the uncertainty surrounding the U.S./China trade dispute. But there is another reason they have slowed, and it is because our exports are too expensive for other countries, because our U.S. dollar has strengthened against other global currencies. This is why the Fed will likely cut rates again, despite suggesting otherwise, to soften the U.S. dollar and make our exports cheaper to other countries.

After the Fed came and went, home loan rates actually ticked up slightly. Why? The U.S. economy is not slipping into a recession and the Fed will take measures, like cutting the overnight Fed Funds Rate, to prevent it from doing so. Think good news is bad news for home loan rates.
Bottom line: If you have a family member, friend, or client considering a refinance or home purchase, there may never be a better opportunity to lock in a home loan rate, while they hover near three-year lows.

Last Week in Review: Stocks and Mortgage Rates Rise

This past week home loan rates ticked up sharply from the previous week leaving many wondering -- have rates bottomed?
For would-be homebuyers, real estate agents, and folks working in the housing industry, here are three things affecting home loan rates today and stories to follow in coming weeks and months. Which way these things go will determine the next directional move for home loan rates:

1. U.S./China Trade Dispute: In recent weeks both sides have played "nice" with tariffs being delayed by the U.S. and China opening markets. How this story goes, so will global economies, financial markets, and home loan rates. At the moment, there is no bigger story to track.
2. Tug of War: The push/pull action between slowing global economies and world central banks is at play. With economies slowing, central banks are cutting rates and introducing new financial stimulus to keep the economic expansion growing. If central banks are successful and economic growth reaccelerates, home loan rates will suffer further. The opposite is also true.
3. The "Technical Picture": It has turned against home loan rates for now. Back on August 5, Mortgage Bonds hit a 2019 price high and have been unable to break above that price, and subsequently slipped lower creating a tough "ceiling of resistance" that Bonds will have to pierce in order for home loan rates to further improve.

Bottom line: The recent uptick in rates could simply be a blip on the radar and we may see home loan rates hit all-time lows in the months ahead. As mentioned, the bullets above will determine what happens next. With rates remaining near three-year lows, would-be buyers and folks looking to refinance should capture the opportunity while at hand because there could be a high cost and risk to waiting for rates to go even lower.

Last Week in Review: Too Much of a Good Thing for Rates

Bonds and home loan rates hate good news. So, the influx of positive news abroad coupled with strong jobs data here in the U.S. pressured Mortgage Bonds lower and home loan rates higher.
The main event, which helped Stocks and hurt home loan rates, included fresh progress on the U.S./China trade front as both parties are set to meet once again in October. To be clear here, a U.S./China trade deal would be incredible for the entire global economy as it would spark more trade talks and deals around the world. If a deal is had, home loan rates will suffer -- the opposite is also true.
Bonds and home loan rates also hate uncertainty. So, when some uncertainty was lifted, as Brexit now appears to be on hold for the time being, this also helped Stocks at the expense of home loan rates. Finally, seeing uncertainty removed in Hong Kong as protests simmer down was yet another hurdle for U.S. Bonds to contend with.
The Goldilocks economy in the U.S. continues. August jobs growth remains strong, the consumer continues to spend, and there is no recession in sight. All this good news and we still have home loan rates hovering near three-year lows.
Bottom line: the ability to borrow money this cheap to either refinance or purchase a home will not last forever, so take advantage. If the Fed and global banks are successful in keeping economic expansion alive, today's rates will be in the rearview mirror.

Last Week in Review: Fed vs. Recession
Home loan rates finished this past week essentially where they began, near 3-year lows.
With all the chatter of a global recession and elevated fears that the U.S. will slip into a recession thanks to the recent inverted yield curve, why haven't rates improved further? Is the Bond market telling us something? Quite possibly.
There is a force around the globe whose sole purpose is to promote job growth, manage inflation, and promote economic stability to avoid a recession...and they are the central banks of different countries. They have woken up around the world and have already started to enforce measures to promote economic growth. The European Union has already cut rates and is prepared to introduce more economic stimulus. And our Federal Reserve, the Fed, is set to cut rates multiple times over the next few months.
These central bank rate cuts and additional stimulus serve as the opposite end of the tug of war, helping to pull economies from the brink of recession. And only time will tell if our Fed and other central banks around the globe are successful.
It could be this very reason why interest rates, including home loan rates, have not declined further. If the Fed is going to cut rates to help promote economic growth and elevate inflation, it is actually bad for long-term Bonds like Mortgage Bonds. There is also a saying "Don't Fight the Fed." If the Fed is doing things counter to promote low long-term rates, they could win the tug of war and limit how low home loan rates will go.
Bottom line: the U.S. economy continues to shine, the labor market is strong, consumer and business sentiment are near record highs, while home loan rates remain near three-year lows. The current economic environment is more like Goldilocks, rather than one that is slipping into a recession.

The Carrington Mortgage Services, LLC - Wholesale Lending Division Lock Desk will be closed on Monday, September 2, 2019 for Labor Day, which is a Federal Holiday. Normal lock hours will resume on Tuesday, September 3, 2019.
Additionally, the Lock Desk will close early on Friday, August 30, 2019 at 11:00 A.M. PST due to the early close of the financial markets.
Locks that expire on the holiday will automatically roll to the next business day. In addition, there are some important disclosure considerations associated with the holiday:

• Monday, September 2, 2019 cannot be included in the rescission period for refinance transactions.
• Monday, September 2, 2019 cannot be included in the seven (7) business day waiting period between the date the initial Loan Estimate (LE) was provided to the borrower and the consummation of the loan
• When re-disclosure of the LE is required, Monday, September 2, 2019 cannot be included in the four (4) business day waiting period between the date the revised LE was provided to the borrower and the consummation of the loan.
• When re-disclosure of the CD is required, Monday, September 2, 2019 cannot be included in the three (3) business day waiting period between the date the revised CD was provided to the borrower and the consummation of the loan.

Issues related to locks should be sent via email to lockdesk@carringtonms.com.
Thank you.

Last Week in Review: Yield Curve Inversion Discussion

This past week we watched Bond yields/interest rates decline around the globe on rising fears of a global recession.
It's worth noting that home loan rates did not partake in the declining interest rate party this week as the Treasury market, not the Mortgage Backed Security market, received the majority of investment dollars.
A recession is defined as two consecutive quarters of negative growth, so when Germany reported its economy shrank or contracted, financial markets were spooked and investors fled into the safe haven of the U.S. dollar and U.S. denominated assets like Treasuries.
The flood of capital into the U.S. caused our 10-year Note yield to drop sharply and beneath that of the 2-year Note yield, causing a yield curve inversion for the first time since 2007... right before the global financial crisis.
History has shown that each time the 10-year yield moved beneath the 2-year yield in the last 50 years, a U.S. recession followed sometime in the next 22 months.
So, is the U.S. headed for a recession? Maybe, and the chances increase everyday as the U.S. economy is in the midst of the longest economic expansion (without a recession) in our nation's history.
Could the yield curve inversion be a false signal this time around? Also, a maybe.
With term premium or the added yield investors demand to park their money in long-term Bonds declining for over 30 years, it's more likely to see yield curve inversions today. And with global yields collectively at 120-year lows and negative around much of the globe, money is literally pouring into our Treasury market as our anemic 1.59% 10-year yield is relatively attractive.
The chance of a recession in 2020 has climbed to about 30%. It will be interesting to see what happens with a couple of Fed rate cuts before 2019 ends.
A U.S./China trade deal, while not likely soon, would go a long way to help lift uncertainties and help many global economies possibly avoid recession.
Bottom line: the risk of recession has risen, but we are not seeing a recession in the cards at the moment. Being the cleanest shirt in the laundry, the U.S. is attracting investment dollars in droves and helping cause an inversion. Home loan rates have not declined further as the gains in the Bond market have been limited to the Treasury market. So if you are in the market to either buy a home or refinance, today is a great day to do so.