Let’s check in with Mortgage News Daily and Bankrate to see what they say about national mortgage Rates.
Rates Remain Over 7 Percent
Matthew Graham, writing for Mortgage News Daily says, Rates Remain Over 7% Despite Modest Improvement
The most important thing to know about mortgage rates so far this week is that they lived through last week. Living through last week means rates reacted to surprisingly strong economic data by jumping well into the 7% range for conventional 30yr fixed loans.
We’ve been here before–just a few months ago, but not for very long. Also, we haven’t been much higher than this during in more than 20 years. That said, many experts thought we might not be back here quite so soon–if at all during the same cycle.
The x factor is the steady supply of data that shows stubborn inflation and persistent economic growth. Rates will remain high until these things change. We’ll get a major update on the state of inflation this Wednesday morning with the release of June’s Consumer Price Index (CPI), but even then, it will take several months of cohesive messaging in the data to definitively turn the tide for rates.
According to MND, mortgage rates jumped back above 7.0 percent on June 29, and have been there ever since. The “modest improvement” refers to a decline from 7.22 percent on July 6.
Bankrate Tuesday July 11
For today, Tuesday, July 11, 2023, the current average 30-year fixed mortgage interest rate is 7.37%, up 20 basis points over the last seven days. If you’re looking to refinance, today’s national average interest rate for a 30-year fixed refinance is 7.44%, increasing 15 basis points from a week ago.
I am not sure how Bankrate computes national average. MND takes points into consideration to standardize rates.
Reflections on Housing
Jobs Data
Data had been on the hot side, especially ADP’s job forecast of 497,000 jobs. But that did not pan out with the BLS jobs report. For discussion, please see The BLS Jobs Report Falls Way Short of Stellar ADP Expectation
Consumer Credit
Yesterday, I noted Consumer Credit Is Much Weaker Than Expected, Non-Revolving Turns Negative
The Bloomberg Econoday consensus was for credit to rise by $20.0 billion. Instead, the rise was $7.3 billion.
In addition, the Fed revised May credit from $23.0 billion to $20.3 billion. And nonrevolving credit posted its first negative reading since April of 2020. The net change is the lowest since November 2020.
The Fed will be pleased with this report. Mortgage rates yawned at the news.
Tomorrow, the BLS releases the CPI report and on July 26, the FOMC meets. CME Fedwatch says there is a 92.4 percent chance of a quarter point hike.
Two Month Pause Until September
The Following meeting is not until September 20. The market thinks there is a 22.2 percent chance of a hike, and a 5.8 percent chance of a cut.
A lot can happen in two months and the Fed will appreciate this forced pause dictated by the meeting schedule.
Everyone thinks the FED is going to slash rates back towards zero when the next crisis hits. They’ve done that in the past and it hasn’t burned them yet. But, they’ve never had an inflation scare to worry about. And they weren’t facing a world that largely wants to move away from USD.
If the next financial crisis is because of a lack of USD demand, the won’t be able to lower rates. If anything, they’ll have to raise rates. I think had the FED not raised rates, the value of USD would have likely dropped quite a bit.
the fed doesn’t give a hoot except about re loading the bazooka, so if her owners, JPM and C………thenew york bankers need free money on next panic. all the other stuff is pure unadalterated rubbish to scam the middlebrows and their regional banks. FFS look at the history past century of the owners in NYC crushing the country bankers. i learned this as a kid.
By Sept we have a high probability of war escalating, which means there’s a high probability of increased inflation. Also, supply constraints are not dramatically better, so get used to more inflation and rate increases for another year.
I don’t think mortgage rates are the real problem right now despite how much they have risen. I’ve commented that I bought my first house when interest rates were 7% and that is far more normal than 3% interest rates, unless we have a black swan, I don’t think we’ll see below 4% rates for a decade or longer.
The real problem with real estate, and take this from someone that owns a few and rents out properties, are all the other ancillary costs: insurance, property taxes, HOA fees, maintenance, landscaping, security systems, etc.
Insurance – a multi-part expense: flood insurance, home insurance, liability insurance – all up.
Property taxes – only seem to go up and often based on home value so if home value goes up, property taxes go up.
HOA fees – these too always seem to go up.
Maintenance – need to keep those air filters replaced, HVAC system tuned, roof, exterior, fences, etc.
Security Alarm – monitoring prices have gone up albeit a bit slower than other expenses
Landscaping – lawn mowing, tree trimming, hedges, etc.
If you’re worried about trading in a 3% for a 7% mortgage, you’re worried about the wrong thing.
Empty nesters have already paid off the mortgage so when they downsize they pay cash so interest rates are not that important to them.
Security is the big issue now. If you are ok now where you live you will tend to stay there since a new house in an area you do not know is very risky.
While absolutely true, this should only be an issue for first time buyers.
Anyone who owns a home now is already paying these things so if they move and buy another home, they already know what to expect and presumably are already able to meet those costs in their current place (if not, they need to downsize or rent but either one of those will decrease their costs).
One thing for sure, if you are remotely competent, as a home owner you should be learning to do as many repairs and maintenance things that you can to keep costs down. Or make friends with someone who does those things and can help. An amazing amount of money can be saved that way that’s much harder to do when you rent multiple properties (unless you live near those rentals and have tons of time to do those repairs).
“Anyone who owns a home now is already paying these things so if they move and buy another home, they already know what to expect…”
Can you tell me how much your insurance will be next year? Aren’t you in Florida? There may not even be insurance there if a couple of more hurricanes devastate the state. What will your property taxes be next year?
Too many people are losing homes to taxes and poor forecasting of costs.
One of my homes may get tax relief that I wasn’t expecting which is great but it usually goes the other way and I have no way of knowing what politicians or corporations will do to some of these costs.
https://www.texastribune.org/2023/07/10/texas-legislature-property-tax-cuts-deal/
Property taxes are capped here similar to how they are in California. So I know pretty much what they will be.
Insurance on the other hand is a ‘who knows’. Every year I have to get a new insurance company because my old one either leaves the state or won’t renew coverage etc even though we haven’t had a hurricane in my area in almost 20 years. Prices vary wildly too, from 7K to 20K depending on insurance companies. So yeah I have no idea.
I have no idea what percentage of people are losing homes to due rising property taxes and insurance only and not something else. I bet it’s WAY less that you think, on the order of 1% type thing or else it would be filling the news stories as a national emergency.
If I lived in Florida and had no mortgage, I would seriously consider not having property insurance. Instead spend the money on hurricane proofing it. A 1 time expense instead of an annual expense.
KidHorn – It seems comments are limited to X number of replies.
Once you are mortgage free, you can opt out of hurricane coverage. At that point the cost drops off the table. Last year I was quoted 2500 bucks for the year if I wanted no hurricane insurance. Unfortunately, I still owe a small amount on my mortgage so the bank won’t let me opt out.
Many people do exactly as you say. Spending 20-30K for impact windows and other hurricane strength things pays for itself in a couple years time.
correct. been a landlord of dozens of units all over this country. for decades. i smell a disaster coming over the next few years. stagflation is a killer. i know men dead now that walked away from apartment buildings in 70s due to the bad times.
great charts and such. but why the devil does the FED care. or will be pleased. i don’t. think you understand what the fed is in business for. all the malarkey they spout is pablum for the middlebrow analysts and investors. the fed is privately owned where it matters. the NYFED where the market operations happen. the bankers in nyc own them. they will buy up more and more banks and more cheap stuff with free printed money for decades to come, as they have for the past century. as far as rates go,, the line about house prices of middlebrow owners and no buyers, that is dead on. the residential r/e market seems to be trading like penny stocks, no volume. and usually craters when the sellers forced to sell due to death, moves, school………….GREAT STUFF MISH. please don’t take my comments the wrong way. we. all learn in this world wide poker game we call investing and trading and war………..
I note Moses’ thoughts … but I don’t think it means prices are actually lower than are being reported. I think it is causing less supply and thus actually causing prices to drop less. This may be semantics, but it means those that are selling are getting higher prices than the otherwise would. The biggest thing IMHO keeping people from selling is that they then have to buy. Trading in that 3.2% mortgage for a 7.2% mortgage means even that traditional “downsizing” of empty nesters will upsize the mortgage payment. We’ve seen lots of folks keeping their homes and renting them, and other folks delaying moves until something changes. For those renting … I hope they keep the tax lays in mind wrt capital gains (ie: have to have lived there 2 of the last 5 years to avoid cap gains taxes … and any depreciation taken while renting will still be charged back as capital gains.
“The biggest thing IMHO keeping people from selling is that they then have to buy. Trading in that 3.2% mortgage for a 7.2% mortgage means even that traditional “downsizing” of empty nesters will upsize the mortgage payment.”
I keep seeing this type of comment repeated not just here but everywhere else and it’s just plain wrong thinking.
I can easily make the case that it’s a great time to sell your house for a premium price, take that cash and put it in T-bills earning 5% or maybe 6% in a few months and rent a house for the next 12 months until housing cools and corrects.
If you can sell your home for 300k that’s $16,500 in interest ($1375/month) at 5.5% interest. So who are all these people that don’t want to trade in a 3.2% for a 7.2%? Are they people that can’t do 3rd grade math?
Does every person that sells a house MUST immediately buy a new house at 7.2%?
In most cities in the US it is far cheaper to rent than buy right now, that’s the right thing to do if you need to move.
The rental stock is not the same quality as the purchasable stock or what you can with something you purchase, so it’s not an apples to apples comparison. You pay a premium for a better quality of life, and ultimately you get a tax advantaged, appreciating asset that is a hedge against inflation. Prices are already going back up in places that saw significant declines like suburban Bay Area and Seattle metros.
“Prices are already going back up in places that saw significant declines like suburban Bay Area and Seattle metros.”
So you’re saying mortgage rates are irrelevant….I agree, why even be worried about them then?
Because when rates start dropping buyers a bat signal for everyone on the sidelines to buy will be sent indicating that refinancing to lower rates is coming and that housing prices will significantly increase.
It would cost me $20k to move. So not moving 2x is a high priority. And moving is a huge PITA.
That $1375/month income is taxable, and offset a bit by the $2300/month paid out for rent.
Which you can save by renting a tent below the overpass down by the river.
Empty nesters have already paid off the mortgage so when they downsize they pay cash so interest rates are not that important to them.
Empty nesters love interest at 4% or more on their savings.
This is the first time in years this retirement income is significant.
My hope is up. More on that tomorrow, of course. Thankfully, tomorrow will represent the last month for YoY declines, but of course what matters is the MoM change.
We are nowhere near a recession. The following treasury data URL clearly shows the 2023 budget deficit through May @ $1.1T.
https://fiscaldata.treasury.gov/americas-finance-guide/national-deficit/
And it’s been widely reported that the treasury has issued $864B in new debt in June alone. Very much looking forward to seeing this number hit $2T along with continued falling tax revenues. Perfect storm comes to mind.
Again, as I predicted 8 months ago, housing would stablize this spring which is what it’s now doing. Certainly, with higher for longer FFR, housing will most likely head back to a seasonal downturn by Aug / Sept.
I’m hopeful Q3 GDP pops up towards 2.5% or a bit higher, new housing construction remains on the upswing and core PCE CPI stays in the 4-4.5% range through 2023. October. And from that, I sincerely hope we find ourselves staring down the barrel of a 6% FFR before January 2024 arrives.
Translation: 8% 30YFRM sounds awesome! The structurally high inflation that’s now firmly entrenched doesn’t get solved outside of a rise up to 6-7% in unemployment. Housing has to fall at least 20% with 30YFRM staying above 4.5% then quickly returning to 6%+.
Critical Concern: Does Congress trot out rent & mortgage relief or do they left the foreclosure process do its job? I’m very skeptical of the later.
I think we can look for post-COVID bubbles that are popping for disinflation. For example, travel to Europe has been off the charts for two years due to pent up demand. That’s changing for 2024. Construction bubble on home office remodels is over too. Dining out is down in real terms, maybe up in nominal terms. Tenant mobility should start cooling rent increases (but refinancing could be an upward rent pressure). Businesses have been flush for two years and I expect big improvements in capacity and productivity to come on line starting next year.
And there’s a question is cash. Do household and business cash levels stay high? Have job hoppers maxed out the supply-demand arbitrage in wages? I think the credit market noted by Mish says household savings are running out of steam.
On the other side, energy costs are destined to rise fast because of global demand, lack of investment and the green initiatives. Nothing that will be done about that. Government is spending more. Business has money to invest in new projects and onshoring will create more jobs.
The next recession will cause housing to spike because there is a ton of pent up demand. People know rates will come down, so they want to buy once they see that it’s coming. Most people do not lose their job in a recession, so an unemployment increase doesn’t matter with respect to housing prices. There simply are not enough single family homes in desirable areas.
I can’t disagree with your logic. And, it will only be made worse by the fact that Congress will trot out rent & mortgage relief when a recession FINALLY arrives. IMO, I don’t think a recession is in the cards this year or next. Whether we like it or not, people have come to terms with inflation that’s 2.5x higher than the Fed’s core PCE target of 2%.
Mish,
Thx much for the breakdown of NFP.