My Loan Officer
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Jason Obradovich - Chief Investment Officer

30 Year Fixed – 2.875% / 2.984% APR   15 Year Fixed – 2.125 /2.371% APR   FHA 30 Year Fixed – 2.250% / 3.057% APR   VA 30 Year Fixed – 2.250% / 2.672% APR

Rates are current as of 9:00AM PST on 10/15/2021 | View Disclosures

Housing Market News & Updates

Translating the complexity of the markets into a concise and easy to digest format. Watch videos, read blogs, and view key data on short and medium term trends impacting interest rates, so you can make the right decision for your situation.

Latest Market Update

How Long Does Transitory Last?

Jason: Hello, everyone, and welcome back to the Mortgage Rundown. Today we're talking about what's happening in the capital markets.

You may have noticed over the last couple of weeks and possibly last couple of months, mortgage rates are moving up just a little bit. So why is that happening? First and foremost, the elephant in the room right now is inflation. So, the first chart on your screen is CPI. This is not necessarily the FOMC’s preferred inflation measurement, but as you can tell, inflation has moved higher and higher and higher, and now is sitting well above what their normal range has been.

The second chart on your screen is PCE—that's personal consumption expenditures. That is the FOMC preferred inflation measurement. Same thing as CPI…we're seeing it well above the two percent targeted rate, and it's still sitting very high. Now the Fed is telling us that this is transitory, that this is going to go away. Supply and demand economics are eventually going to be right size, with supply coming up and demand being stabilized, and inflation will come back down.

The problem really is the psychology of inflation in the terms of the minds of the consumer, price of goods and services go up and up and up. Inflation is here to stay. And so, what that ends up doing is consumers start expecting higher prices, which then means producers start increasing prices. They start to start to add in margin. And that's where this argument is between the FOMC that says it's transitory, that'll go away—and really, the real world that says it doesn't feel like it's going to go away; It feels more permanent.

Let's add one more dimension to that. Let's talk about the spending plan. The spending plan at some point, whether it be one and a half trillion all the way up to three and a half trillion, at some point is going to be put into effect, right? There's going to be some passage of legislation at some point. We don't necessarily know when. But it looks like it's going to happen pretty soon. Now if you do that, you're going to add more and more demand. There's more cash being put in the system and so now there's more demand. That could push prices even higher.

From my perspective, what I would expect is once that spending plan is passed, then a combination from the FOMC really has to come in. They have to reduce their purchases of mortgage-backed securities. They have to reduce their purchases of long-term treasuries, and they have to just let the economy take off on its own with this spending plan. I would say the second legislation is passed, expect to see rates move higher.

Now, if for some reason the spending plan doesn't go through and the economy starts stalling, you could see a whipsaw the other way. We could see the fact that the Fed will have to increase a combination or leave it in, and rates could just go right back down. But really, I would say 70+ percent chance rates are going to move higher after the spending plan is passed.

That's that everyone from the capital markets this week. Thank you all for watching and have a great day.

 

Previous Market Update

Inflation Uptick or Delta Downturn in Rates

Jason: Hello, everyone, and welcome back to the Mortgage Rundown. Today we're going to talk about what's happening in the capital markets. No one really knows which way rates are going. Some are of the opinion that inflation is too high, the job market is strong, the economy is roaring back, and accommodation needs to be removed and rates need to move back up.

And then you have the other side saying the economy is very frail. This Delta variant or just the Coronavirus itself is still creating a lot of risks and a lot of challenges. And perhaps maybe interest rates seem to stay low.

If you look at the graph on your screen, you'll see the unemployment rate for the last couple of years. And as you can see, right before the pandemic, the unemployment rate was near its all-time low.

If you also notice to the far right that the unemployment rate continues to drop. In fact, it's almost near some of the lowest points it’s reached in history.

Here's another point on the job market. The graph on your screen is the total job openings. And as you can see, total job openings are at historic highs, meaning there are more jobs out there than there are people that are unemployed. So, there's another boost to this whole notion that the job market is actually very strong, even though the unemployment rate isn't right where it was prior to the pandemic.

The next part is on inflation, the price of goods and services is going up and up and up. And so that's somewhat of a challenge because the Fed on one hand is saying inflation is temporary. Right? This is something where prices will eventually work their way back down. And a lot of things that we're seeing are really supply disruptions, not necessarily permanent price increases.

I think for a lot of us, though, it does not feel like it's temporary. This feels like it's something that's going to be more sustainable. And so, that's where there's a little bit of gray area between, I think, what people feel on the street versus what the Fed is telling us when they stand in front of the cameras.

And so, what the Fed is trying to do is acknowledge what's going on, whether it be within the job market or whether it be with inflation in the economy coming back together and not scaring the market with taper talk.

In the last week with the Jackson Hole Symposium, the Fed did come out and say, ‘we are expecting to talk about tapering this year.’ And so, I think that is the most lighthearted way they can say, ‘look, this is coming, but we don't want to scare the market.’

So, we do have a Federal Reserve meeting on September 22. I think, you know, to be honest, I think they're going to talk about taper a little bit, but I think they're really going to punt saying, ‘look, the Fed meeting in the last Fed meeting of 2021 is when they're actually going to talk about or even decide on tapering.’ And they really want to slow play this whole thing. They don't want to create any short-term volatility in the market.

 

I hope that makes sense to all of you. Thank you all for watching and have a great day.

 

 

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