Mortgage Rates Higher Heading into the Holiday Weekend

Mortgage rates are moving higher today, but that is to be expected when there are few traders on the floor and they seem to direct the market one way or another.  It always seems like the day before Thanksgiving rates increase.  Thus far, the markets are still continuing to see much volatility as the markets want to settle, but other forces are still pushing it forward.

We did get our Weekly Mortgage Applications which dipped even further as the rates have continued to scare a few fence sitters more than to push them off the fence. October New Home Sales came in at 563K versus estimate of 593K. Neither of these reports have any influence on mortgage rates.

The big news this morning was that from Manufacturing in regards to the Durable Goods Orders, which came in much stronger than expected at 4.8% versus estimate of 1.5%. Durable Goods Ex-Transports was also stronger than expected at 1.0% versus estimate of .2%. Both numbers show strength in the economy and put further pressure on mortgage rates.  Consumer Sentiment came in slightly better than expected.

Initial Jobless Claims came in higher than the estimate, but with last week’s number still fresh in everyone’s mind, this has not proven to show any role in the movement of mortgage rates.

We will get the official Minutes from the last FOMC meeting. It is sure to show that the economy and labor market were continuing to improve and that the voting members effectively wanted to wait to see how the election went before acting. Really, this is really a non-event, as the bond market is now pricing in 100% chance of a rate hike in December and it does not seem anything now will change that opinion. 

October was a very good month for the US economy; housing starts up strongly, Oct existing home sales up 2.0%, retail sales better than expectations last week, today’s durables much stronger, prices of homes increasing, inflation expected to increase, weekly MBA mortgage applications increased last week +5.5% with purchase apps +19% while re-finances were down 3.0%, the increase in consumer sentiment (see above). The only weakness this morning was in Oct new home sales.

On the day of the election (11/8) the 10yr yield was 1.80%, this morning at 11:00AM it is at 2.36%, and our rates have seen an increase in the same time of the same amount. The election is believed to increase economic growth with a massive infrastructure spending plan expected close to $1 trillion, lower taxes across the board, wages expected to increase, inflation finally kicking in. Stocks making new all-time highs and the dollar running to the highest level this year. The 10yr yield the highest level since June 2013. It is too much In too short of time, a sea change from the belief Trump and the Republicans can turn the economy around with little difficulty.

I do not argue that stocks are too high – I argue that markets have become too emotional and too anticipatory now. The Trump presidency is not going to be as easy as markets presently believe - this is the two-month honeymoon as Trump makes his selections for key positions. Once he is sworn in expect new concerns with politics once again gets back on track.

With continued good news about the economy, we expect mortgage rates will continue to have a good deal of pressure throughout the rest of the day.

Have a Wonderful Thanksgiving!