Mortgage Rates Inactive

Mortgage rates have seen record-setting levels of inactivity over the past 90 days.  The Brexit vote in late June pushed rates to all-time lows and then the jobs report in early July pushed them back in the other direction.  But after one week of correction, rates found themselves right in line with the pre-Brexit lows, and they've been stone cold sideways ever since. 

As expected, very quiet against today and that will also be the case tomorrow ahead of Yellen’s speech on Friday.  Home sales were off today, and it was the same excuse – no inventory. No matter how it is cut, sales were very disappointing. We all know the well-publicized reason, no inventory. Tired of hearing that as if it is an excuse, the facts are that existing home sales have slowed - using the lack of inventory explains the headlines but the fact cannot be swept away, it is what it is regardless of the reason. Here is the question - if inventory levels were better would sales increase substantially? Most believe sales would be better, but there are always issues, on either side of the debate. Young people are not buying and that won’t change anytime soon. The US is a homeownership society based on history back to the end of WW II, prior to that for 20 years many families lived in a joint household.

This afternoon Treasury sold (borrowed) $34B of 5yr notes and it saw strong demand from indirect bidders.

Yellen will not tip her hand on Friday.  No blame, the models used by economists are essentially worthless in this environment. She will fall back on ‘data dependence’ abut a rate hike. Everyone is sick of this, just to it or admit the economy may not stand an increase. The probability of the Fed hiking rates at its September meeting is up to 24% from 21% on Tuesday, according to the CME website. The probability of one or more rate hikes by year-end is 54%, up from 51% on Tuesday - in other words, there is no consensus.

In summary, I keep talking about how boring the range mortgage rates have been trapped in for about a month, but we fail to realize how blessed we are that we are trapped in this range. Rates are only a .25% above all-time lows - locking in is an easy decision here. Many of us believe we are still yet to see the lowest of the lows, but timing is the question.