Mortgage Rates Generally Quiet Today

Mortgage rates hardly moved as it was generally quiet today.  Stock indexes were basically flat and the 10yr increased to 2.06% - but still better than it was a few weeks ago for driving down rates – but not yet!

Hurricane Irma has had little impact on financial markets. Harvey and now Irma that will cause billions in damages and put over 100K temporarily homeless, millions without power. The United States has experienced only three Category 5 storms since 1851 and Irma is far larger than the last one to hit the United States in 1992, Hurricane Andrew. Harvey and now Irma will slow economic growth temporarily and weekly jobless claims will sky rocket higher. The longer outlook; re-building, will boost growth and likely increase inflation on building materials and all other home improvement necessities. Home prices likely will increase particularly new homes where workers and materials will be scarce.  FEMA’s disaster assistance fund could have run out of money Friday without action. President Donald Trump is expected to sign the measure Friday. The measure also extends the life of the National Flood Insurance Program through Dec. 5. It had been set to expire Sept. 30.

Natural disasters accumulating as we see in Mexico, which had the most powerful earthquake in over 100 years - 8.2.  And there is another hurricane brewing in the Atlantic. North Korea remains a major concern. New York Fed President William Dudley and his Kansas City’s Esther George were the latest U.S. central bankers to speak out about the FOMC meeting coming on the 19^th - both hawkish, both worrying about the lack of inflation. The hurricanes according to Dudley may alter the timing of rate hikes. I believe the Fed will not increase rates again this year, no inflation and the hurricanes will fall off the markets’ radar for many months.  Traders are pricing in a 25% chance of a rate hike this year, down from more than 50% in early July. And tax cuts increasingly being pushed farther back in investors’ minds. Meanwhile there has been no concentrated selling of stock indexes.

How much lower can interest rates decline? Being long (floating) at these low levels adds to risk even though the technicals most of us review is bullish, and have been since mid-July. Pushing on the string with unusual fundamentals and now the uncertainty about how markets will eventually react to the devastation in Fla, Texas, and Louisiana and possibly Georgia and South Carolina.

To my friends in Texas and Florida, be safe!