Company News

Cheers to 20 Years!

Celebrate with our 20-20-20 Special

• 20 Years of Excellence
• 20 Basis Points Savings
• Ends on the 20th of September

Starting  Tuesday, September 5th, until September 20th, we are offering an exclusive 20 basis points (BPS) discount on every FHA, VA, and USDA loan submitted to us. This is our way of saying thank you for two decades of unwavering trust in our services.

Additional September Purchase Special

In addition to our anniversary offer, we're excited to present a September Purchase Special. FHA and VA purchase loans will receive an additional 25 BPS off.

That's a total potential price improvement of 45 BPS when you combine both specials!

Thank you for 20 incredible years, and here's to many more ahead! We look forward to serving you and being a part of your homeownership journey.

Reach out to your account executive or relationship manager with questions.

Interest rates improved amidst a huge week of economic news last week. Let's look at what happened and take a peek into the week ahead.

Bad News Is Good News

Bonds and interest rates like bad economic news as it lowers the threat of more Federal Reserve rate hikes. Last week, we did see some worse-than-expected leading indicators on the health of the labor market and it sparked a rally in bonds, which resulted in a nice decline in rates.

Less Is More

The JOLTS report was released last Tuesday and showed the amount of help wanted signs shrunk to the lowest levels since March 2021. Why is this important? The Fed wants to see the hot labor market show signs of slowing and this could be that sign. Which means maybe the Fed can stop hiking rates.

If we think about the labor market and business...first, companies stop hiring, then they might cut hours or reshuffle employees, and then, if necessary, companies start reducing staff and cutting jobs.

Adding to the bond-friendly news in the report was seeing fewer people quitting. This is also good for rates and the Fed because it means available jobs are less plentiful and people will not be able to easily jump for more pay like they have in the past. If there is less pressure on businesses to pay people more to retain or attract employees, there's less upward pressure on inflation which is also good news.

Consumer Losing Confidence

In August, Consumer Confidence declined as those surveyed stated jobs were less available (which the Fed wants to see) and the current family financial conditions showed growing pessimism about their present financial situation. This sour tone on how consumers felt in August was good news for bonds and rates.

Core Inflation Remains Elevated

The Fed's favored gauge of inflation, the Core PCE index, was reported meeting economists' expectations but did edge higher from June to July. Like the CPI inflation recently reported, inflation may have bottomed in June/July and there is a fear it could reaccelerate this Fall.

Bottom line: Home loan rates made a nice improvement in the last week and a half. For rates to improve further, we likely need to see more economic data as we live in a world where bad news is good news. The downtick in rates was quickly felt in housing as a sharp uptick in activity and locking loans took place.

As summer nears the end, home loan rates took a pause on their recent uptick. Let's discuss what happened and look at the important week ahead.

Mortgage Rates At 21 Year Highs

The big news in mortgage and housing has been the recent and rapid rise in home loan rates. Early in the week, they reached 7.50%, to levels last seen in 2002.

What has been causing rates to climb in recent weeks?

1. The big increase started when the Treasury Department requested an additional $275B in late July to fund the government between August and October.
2. The increase in spending prompted Fitch Ratings to downgrade U.S. debt, citing "fiscal deterioration".
3. Fears of a recession have evaporated.
4. The Fed is close to finishing rate hikes, yet inflation remains high.
5. Oil has climbed which is elevating inflation fears.
6. Japan and China selling their holdings of Treasuries.

The good news? Last Wednesday, interest rates declined sharply, helping rates improve from these multi-year highs.

So, what created the pause in the rise in rates last week?

1. Bad news is good news. Global economies are slowing rapidly leading to a decline in global bond yields.
2. A sharp decline in oil, back under $80 a barrel, lowering inflation fears.
3. Anticipation of next week's action-packed economic report calendar. Markets are not placing any large bets.
4. Mortgage Bonds hit exactly at the October price lows and bounced higher. Look at the chart below.

Oil

Oil prices moved lower on lower demand fears and a stronger U.S. Dollar. This is an important story because if Oil moves above $84, there is a real threat of $90+ oil and quickly. Seeing Oil retrace back to $78 is good news for inflation and interest rates.

Fed Rate Hike Chances

Right now, the chance of a Fed rate hike in September is just 15%. But, the chance of a Fed rate hike in November is 40%. Whether the Fed hikes now or in November, the markets are looking forward and sensing the Fed is finished hiking and moving to a position of "how long" they can keep rates high until inflation falls back down to 2%. This uncertain story will remain with us for the foreseeable future but it is worth a reminder that mortgage rates are not controlled by Fed rate hikes as evidenced by the lists above.

Housing, A Tale Of Two Markets

The spike in home loan rates has put a damper on the housing market, but it is affecting existing and new home sales differently. The spike in rates clearly makes it a challenge for someone with a far lower mortgage rate to list their home for sale. This has created an inventory problem as well as keeping prices high.

But in a housing bright spot, builders are having their way as demand for housing remains robust, material costs have normalized, and builders can get creative with programs to get homebuyers into properties.

Bottom line: Home loan rates paused their rise and next week we may find out if the retreat in rates is sustainable. Housing remains in a long-term bull market and upon any meaningful decline in rates, we should expect housing to also step off the pause button, with activity quickly resuming.

This past week, the minutes from the July Fed Meeting were released. The news didn't help home loan rates, which ticked up to the peaks of last year. Let's look at what happened and talk about the headline risk in the week ahead.

"Uncertainty of the U.S. economic outlook remains elevated"... FOMC minutes from the July Fed Meeting.

The Fed Minutes kicked off with this statement, which sums up the last 18 months. It remains unclear if inflation will continue to come down, if the Fed will continue to hike rates and if the economy can avoid a recession. And for all of these reasons, interest rates have been volatile with no clear signs of stability.

"Most participants (Fed Members) saw continued significant upside inflation risks "

This line was like kryptonite to Superman as bond/interest rates hate inflation. The fact that we are still enduring significant upside risk was enough for bonds to sell off and push rates higher.

"Participants still saw below-trend growth, softer labor market as necessary to restoring economic balance."

Here the Fed is reminding the markets that they want to keep rates higher for longer until unemployment rises further, and the economy potentially slows further. Looking into the months ahead we should expect continued slower economic growth and price highs but continuing to come down slowly. For this reason, we should expect home loan rates to also retreat lower and slowly.

The good news? After all this uncertainty and tough talk on inflation, the markets are currently pricing the probability of a Fed rate hike in September at just 11%. However, more data will come in which could change things. But as of now, the Fed is not going to hike rates.

Bottom line: Rates have ticked higher on the heels of our recent debt downgrade and uncertainty around inflation and no recession. Maybe next week things change...read on.

This past week home loan rates remain elevated despite consumer inflation being reported slightly lower than expected. Let's discuss what happened and look at the week ahead.

Inflation Hits 3.2%

Last Thursday, the Bureau of Labor Statistics reported the Consumer Price Index (CPI) for July at 3.2% year-over-year which was slightly lower than the 3.3% expected. What was also positive is the back-to-back 0.2% increase on a month-to-month basis. This is the slowest pace of inflation in two years.

The upcoming CPI report is one of the five reports the Fed said to watch before the next Fed Meeting in September as they decide whether to hike rates again. So, seeing this inflation reading come in slightly light may add to the notion of a Fed pause in September, especially when coupled with the recent soft Jobs Report.

There is concern inflation is going to increase in the months ahead. Why? Oil was sharply higher with the bulk of the rise in late July, where those numbers were not reflected in the CPI reading. Additionally, higher oil prices seep into food prices, which would also be on the rise.

Currently, inflation is running at a low pace and while most expect prices to come down further, oil and energy prices could be a wild card as we move into the Fall.

Moody's Downgrades Some Banks

Rating agency Moody's downgraded the credit ratings of 10 banks last Monday, citing higher funding costs, slower loan growth and profit pressures. This is an important story to follow for mortgage and housing as it could lead to tighter credit standards for banks looking to be more conservative on lending and loan growth.

This story is yet another reason for the Fed to stop hiking rates. Tighter lending conditions are akin to Fed rate hikes and hiking rates further would only make the banking issues described above worse.

Rising Oil Prices

Oil prices are $84 and one month ago, they were just $68. This is inflationary and should the rise continue, it could be a problem. Last summer we found out how painful high energy prices are. Let's hope we do not go back to those levels.

Fed Rate Hikes Futures

After the past couple of weeks with a soft jobs report, soft inflation reading and the downgrade to US debt, the markets are now pricing the probability of a Fed rate hike at just 9.5%. Moreover, now the markets are also pricing in 5 rate cuts in 2024, with the Fed Funds rate coming back down to 4.00%. For this to happen, we will need inflation to come down further and we may have to experience a recession in early 2024. This story will change over time, and we will be tracking it.

Bottom line: It would be ideal to see the 10-year Note yield move nicely back beneath 4.00%, where it is right now. If that comes to pass, we should see a resumption in the decline in mortgage rates. The opposite is true.

This past week home loan rates ticked higher in a week filled with some negative surprises. Let's discuss what happened and look at the week ahead.

Another $1T Please

Earlier in the week, the Treasury Department surprised the financial markets when they stated they need $1T to fund the government from August to October. The problem? It was $275B more than what was expected just a few months ago when the Treasury last released their funding expectation needs.

How does the Treasury Department raise the $1T? By selling Treasury Bills, Notes and Bonds in auctions. The bond market hated the announcement and pushed rates higher in anticipation of even more bonds that must get sopped up at weekly Treasury auctions.

U.S. Debt Downgraded

The bond market was not the only thing that didn't like the Treasury Department's call for more money. Fitch Ratings downgraded US Debt one notch from AAA to AA+. They cited "fiscal deterioration" over the next three years as the driver behind the decision.

Our debt was downgraded back in August 2011, for many of the same reasons which were rising debt, political division, etc. But this time things are slightly different. Back in 2011, we had just $6T in government debt and today, we have over $32T in debt.

We do have some history on our side. Back in 2011, after the debt was downgraded, interest rates did improve in the months ahead. For the interest-rate sensitive housing sector, this would be a welcome development.

Japan Seeing Higher Rates

The Bank of Japan (BOJ) has started to loosen their Yield Curve Control (YCC) policy by allowing their 10-yr government bond to float from a cap of .50% to 1.00%. This is a big change from a government that had pinned rates at 0.0% for years. As the Japanese interest rates crept higher upon the announcement, it placed upward pressure on our rates as well.

4.09%

Last Thursday, the 10-yr Note was right at an important level of 4.09%, which has been serving as yield resistance, preventing rates from moving higher since November. If the 10-yr moves above this level, we could easily see home loan rates move another leg higher still.

Bottom line: The financial markets were unnerved by the double whammy of surprises with the Treasury's request for more money and the subsequent debt downgrade. Time will tell whether rates can reverse from key levels like it had since November or will we see yet another leg higher in rates.

Last week in Review: Fed Hikes Rates, Home Loan Rates Remain Steady

This past week home loan rates were unchanged, despite the Fed raising rates to the highest levels in 22 years. Let's discuss what happened and look at the week ahead.

Another Rate Hike

On Wednesday, the Federal Reserve raised the Fed Funds Rate to a range of 5.25 to 5.50% and this move was widely expected. Fed Chair Powell also shared that if the data comes in strong over the next two months, they will raise rates again in September. The opposite is true.

What data was the Fed talking about? Mr. Powell was specific and said there will be two jobs and CPI (inflation) reports, and one employment cost index which garners most of their attention before the Fed meets again in September when they decide what to do with interest rates.

One of the main reasons interest rates remain high and the Fed has continued to raise rates is the underlying resilience of the economy. Many economists, market watchers and central bankers were calling for a recession by the middle of this year. In fact, one reputable publication back in November said there was a 100% chance of a recession in 2023. Fortunately, or unfortunately, depending on how you're looking at it, the economy is currently growing near 2% and unemployment is at 3.6%, which are not conditions that lead to an economic recession.

Looking forward...watching the economic data will be important to determine whether the Fed increases rates further.  At the very least we should be prepared for the Fed to hold the Fed Funds Rate at current levels for quite a bit longer.

How much longer? The Federal Reserve wants to see inflation come down to 2%. The Fed's favorite gauge of inflation is currently running at 4.6% so, there is a lot of wood to chop for inflation to get near the Fed's target. In fact, the Fed's forecast calls for core inflation to reach its goal in the year 2025. So, when we hear higher for longer, that's what we mean.

For reference: In the last rate hiking cycle back in 2018, the Fed cut rates 7 months after the last hike. Meanwhile, during that same time, home loan rates steadily improved.

Bottom line: The Federal Reserve may very well be done hiking rates. However, long-term rates may likely edge lower slowly. Why? The economy is slowing. Slowly, unemployment is rising, slowly, and inflation is rising slowly.

Last week in Review:  The Calm Before Storm?

This past week interest rates were essentially unchanged from the previous week, and it was a relatively "quiet" week. Let's discuss what happened and look at the week ahead.

The Blackout Period

As we approach the next Federal Reserve meeting, there is a blackout period, where no Federal Reserve members hold any speeches or make comments on monetary policy. The speeches by Federal Reserve members can often move the financial markets and interest rates, often in a volatile fashion. So, the absence of Fed speakers this past week was a welcome break from the added volatility.

The blackout period will end Thursday, the day after the next Fed meeting. With a rate hike widely expected, there will be plenty to comment on once this quiet period ends.

Global Inflation Easing

Interest rates and financial markets are influenced by economic conditions around the globe. This past week several countries, including the UK, and the Eurozone reported a larger-than-expected decline in inflation. As inflation eases around the globe, it lowers expectations of further central bank rate hikes and lowers rates. The opposite is true, so seeing inflation recede, especially in Europe, was a welcome sign and it added to some of the relief in rates here at home.

To Hike or Not to Hike

This Wednesday at 2:00 pm ET, the Federal Reserve will release its monetary policy statement and interest rate decision. The markets are now fully pricing in a .25% rate hike to the Fed Funds Rate. Remember, the Fed rate hike affects short-term loans like credit cards, automobiles, and home equity lines of credit.

Despite some of the softening inflation news here at home, the markets are getting a sense that this rate hike next Wednesday will be the last. It is too early to tell if that is the case. Next Friday's release of the Core Personal Consumption Expenditure (PCE), the Fed's favorite inflation gauge, may very well determine if this is the last rate hike. Should the reading come in lower than expected, the Fed may indeed take a break from hiking rates. Once again, the opposite is true.

3.70%

Over the past couple of weeks, interest rates have improved, with the 10-year yield moving from 4.09% down to 3.75%. For rates to improve further, the 10-year needs to move beneath 3.70%, a layer of yield support. Yield support prevents interest rates from improving. What will determine if the 10-year can move beneath 3.7%? Next week's huge dose of news which will be the Fed meeting, GDP and the inflation reading.

Bottom line: As stated above, this week is a big one for interest rates, and the financial markets overall. The Fed, which has already hiked interest rates 500 basis points over the last 18 months, may finally come to an end. The Fed meeting typically generates multiple market responses. The first of which happens upon the release of the actual statement at 2:00 pm ET on Wednesday. The next takes place at the press conference where Fed Chair Powell will answer questions that can lead to some off-script or contradictory remarks, and the final reaction will be Thursday when markets get to sleep on what they all heard.

Last week in Review: Markets Pleased As Inflation Eased

Last week interest rates improved significantly as the markets responded to the softest inflation reading in over two years. Let's discuss what happened and look at the week ahead.

Consumer Prices Are Falling

The Consumer Price Index (CPI) for June was reported on Wednesday and showed that consumer prices are falling, which is wonderful for the interest rate sensitive housing sector. The headline CPI for June, which includes food and energy, came in at 3% year-over-year; the slowest rate since March 2021. It was just last year we were reporting CPI readings of over 9%, so this was a welcome sign for all Americans.

Note: This sizable decline is mainly because oil prices were $70 in June...almost half of what they were last June. It also highlights how important it is to keep oil prices low.

Adding to the good vibes within the report Core CPI, which excludes food and energy, also declined further than market expectations. All this good news on inflation sparked the party in the bond market. The 10-yr Note yield dropped from multi-month highs of 4.09% to 3.83% very quickly.

Fed Members Changing Their Tune

In response to the surprisingly low inflation reading, some Fed members are already suggesting that inflation is approaching "normal levels", while others say we are nearing the end of rate hikes. This is a very different tone that was being shared a couple of weeks ago when Fed members were pounding the table for more hikes and higher rates for longer.

After the dust settled from the report, the markets are pricing in just one more rate hike at the end of July. As we've seen before, this story can and will likely change in the future.

Not Out Of The Woods

This past week's low inflation number was terrific to see, but we are not out of the woods with inflation just yet. In fact, in the next couple of months, we are very likely to see CPI move higher. Why? Because last July and August we had very low monthly inflation readings, which will likely be replaced with higher inflation readings this year, causing inflation to possibly tick higher.

In future months, we will also have to watch the price of oil. If it starts to edge higher from the recent lows, it will elevate inflation much like it did last Summer. We do have production cuts from OPEC and Saudi Arabia next month which may influence prices.

4.09%

Yield resistance is a level which halts or prevents rates from moving higher. Since early November, that level has been 4.09%. If the 10-yr yield moves above 4.09%, it will likely place additional upward pressure on Treasuries and thus mortgage rates. The good news? This past week, the 10-yr yield hit 4.09% a couple of times before edging lower.

Bottom line: Inflation is trending in the right direction which is lower and as this continues, we should expect rates to continue to move lower as well.

Last week in Review: Good Economic News is Bad News for Rates

Last week, interest rates spiked on good economic news as fears of a recession fade. Let's discuss the big news of the week and gear up for important events in the week ahead.

The June Fed Meeting Minutes Out

"Some participants indicated they favored or could have supported raising the Target Rate by 25 basis points" FOMC Minutes June 2023 Meeting.

Last Wednesday, the Minutes from the June Fed Meeting were released. Seeing that the Fed paused hiking at that Meeting, markets were looking to see what Fed officials felt about the pause. The quote above highlights the sentiment by some at the Fed that rate hikes must continue. Why? This quote below:

"Those favoring an increase noted very tight labor market, stronger-than-anticipated economic momentum, little evidence of inflation being on a path to return to 2% over time."

Recession Fears Ease

The last revision to 1st Quarter GDP showed a shocking upward revision to 2.00% from a previously reported 1.3%. The important takeaway is this has dramatically removed the fear of recession in the near-term at least for now. This has also elevated the chance of a Fed rate hike at the end of July to nearly 100%.

Going forward, the economic data will be important to track to see if the economy remains as strong as it was in the first Quarter. Part of the bump in consumer spending was in response to a 8.7% increase in social security benefits, which are adjusted for higher inflation.

ADP Highlights Tight Labor Market

The ADP Report, which shows private (non-government) job creation for June came in at a shockingly high 497,000; more than double the 220,000 expected. This report, on the heels of the GDP reading and Minutes, was enough to push interest rates to the highest levels of the year.

Bank of England Seeing Higher Rates

And if all the good news above was not enough to pressure rates higher, we also watch expectations for higher rates in England pressure our rates as well.

Markets are now pricing the Bank of England to raise rates from the current 5.00% to 6.50% early next year. As rates go higher abroad, rates here in the US edge higher as well.

Bottom line: The "higher for longer" narrative from the Fed is now being supported by some of the data this week which has led to a spike in rates. In the coming weeks, we shall see if long-term rates are comfortable being elevated, or if they will come back down from these levels much like they did back in November.