Welcome back. I’m Josh Lewis, Certified Mortgage Consultant and Broker, Owner of BuyWise Mortgage here in Huntington Beach, California with your weekly mortgage market update.
Welcome back to the Weekly Mortgage Market Update, I’m Josh Lewis, certified mortgage consultant and broker owner of BuyWise Mortgage here in Huntington Beach, California. Hopefully you’ve been following us, you know the format.
We’re going to go over the 90 day trend in interest rates. We’re going to talk current national averages, how that compares to BuyWise Mortgage’s current interest rates. We’re going to look at what happened in the news to move interest rates in the last seven days. The technical charts, see what we can figure out here on the likely future direction of interest rates and leave you with a rate float lock recommendation for the coming seven days.
Let’s just jump right in here. As you can see, the rates over the last little bit here have been trending sideways, slightly up. When we get to the mortgage backed security chart you’ll see it really has been sideways, but there’s a lot of noise in this daily lock chart here. When you see, it looks like it’s trending up, but we’re still at the very slow downtrend, but really flat since the beginning of June.
What does that mean on interest rates? On the national averages, 4.073% on conforming loans, 4.150% FHA and 3.753% VA.
For us here at BuyWise, all of our loans zero points, zero lender fees, unless someone really wants to buy down the loan and wants to pay points. We do all of our loans with zero points, zero lender fees. And with that right now, we’re still at the savings to the national averages.
So 3.875% on a conventional loan is 4.84%, 3.50% and below, that’s the conforming limit. In high cost areas, LA, Orange County, San Diego, the Bay Area, we can go up to 7.26%, 5.25%, and that will have a slightly higher interest rate, looking at 4.125%.
Both for FHA and VA, we’re at 3.25% on the standard balance and 3.50% on the high balance, really, really good interest rates.
On the conventional loans we’re almost a quarter percent better, while having no lender fees in the national averages. And FHA is almost a full percent and the VA’s a little over a half percent. Once you look at our statewide averages on average loan amount, our average loan amount here is about $400,000. Certain areas those loans are even higher, certain areas a little bit lower, but a half percent in interest, 0.9% in interest is going to save you a ton of money over the life of the loan in addition to saving you at the closing table.
Let’s take a look what actually happened this week, what was moving the markets. We had decent economic news, wasn’t great, wasn’t bad. Strong durable goods order for June, weekly jobless claims were at a three month low. Second quarter GDP came out, was estimated at 2.1% versus 1.85%, not blockbuster, but not bad.
We had middle of the road housing reports. Again, not terrible, but not great either. The FHA House Price index was up 0.1% month over month and 5% year over year. NAR is existing home sales, so not new construction, but homes for sale on the market, up 1.7% in sales volume month over month and 2.2% year over year.
The home prices were up 4.3% year over year, which is the 88th month in a row. For over seven years home prices have been going up month after month. It’s one of the big reasons why we always say, “Whenever the time is right in your life to become a homeowner, becoming a homeowner will be the decision that leads to the greatest wealth building over your lifetime.” New home sales were up 7% month over month, 4.5% year over year. And that’s really what we’re looking at.
We also had second quarter numbers reporting for the stock market and most companies, while not reporting blockbuster numbers, beat their estimates. The stock market did well last week, we saw a little bit pulling out from the bonds.
We jump into that. This is the universal mortgage backed security, the 30 year mortgage security 3.5%, which most closely tracks where interest rates are at right now. And this highlighted band over here, that I’ve highlighted, that’s going back to the beginning of June. You can see from the top to the bottom we’ve only been 50 basis points difference, so that’s really from the best rates to the worst rates.
The best data lock, the worst data lock, it’s only been about an eighth of a percent interest over the last 45 days. Normally we pride ourselves on being able to save you a bunch of money by helping guide you to lock on the right time and not risk rates going up, or to float and benefit with rates going down. For the last 60 days, market has done a whole lot of going nowhere.
Ten year treasury, much of the same here. I didn’t really highlight that band, but you saw about two, three weeks ago, we had a little pop up in the 10 year treasury, which mortgage rates most closely follow. And we’ve gone down since that point, but we’re still just above the 25 day moving average. Until we can break convincingly below that, the 10 year’s not likely to improve, and mortgage rates also not likely to improve.
Where does that leave us? We do have an important piece of news that will be coming out Wednesday, the market has factored in a 90% chance of at least a quarter percent improvement in the federal funds rate on Wednesday. Lot of debate as to whether it’s necessary, whether it’s needed, the economy isn’t quite as robust as anyone had hoped, but it’s really not at a point where in the past we’ve seen Fed rate cuts.
But for whatever reason, it looks like they’re going to do it, markets firmly believe it. What we have to look at is buy the rumor, sell the fact, is the saying in all markets, bonds, stocks. And the market has bought the rumor, that on Wednesday we’re going to have a rate cut. When we get the fact of the actual rate cut, then the market starts looking forward based off of what the announcement is that the Fed makes, what are they likely to do moving forward.
Right now, not a whole lot of risk of worse rates, not a whole lot of hope of better rates, unless the Fed really surprises with either some bullish or bearish remarks when they make that Fed announcement on Wednesday. We’re probably just going to chug along here.
Longer term, do think that the risk of a recession in the next 12 to 24 months is fairly high. Recessions are deflationary, lead to lower interest rates. The long term trend still bodes well for us. In the interim, it’s real likely we’re going to see a lot more of the same.
Call it a yellow flag. Really just depending on your risk tolerance, if you like to take that interest rate risk out of the equation, just go ahead and lock it. There’s enough to stress about during a real estate purchase transaction or refinance transaction that you just don’t need the extra headaches of floating, unless you think there’s a good opportunity for getting rates better and we just don’t have that.
Check back in next week, hopefully we get some insights from the Fed. We’ll see how the market reacted Wednesday, Thursday, Friday, and we’ll have some good ideas for you.
All right. Have a great week and thank you for joining us.