Mortgage Rates Improve - But Not By Much

Mortgage rates finally caught a break today, moving somewhat lower after hitting the highest levels of the year yesterday afternoon. This morning it looked like we were giving back all that we had gained yesterday, but by my mid-morning report, it started to improve – ever so slightly and not by much.  The stock market was weaker - but not by much.

What happens next year is not even close to being known. Guessing has shot the interest rate and currency markets on a skyrocket ride like I have not seen in many years.  Yes - we know what Trump campaigned on. Yes - we know there will be fiscal stimulus from Washington.  And Yes - we know ObamaCare will be re-worked. Trump made it one of his key points he would do away with the ACA, already he has softened that. On fiscal spending that will increase growth, incomes and inflation.  We will get that but it will not have any measurable impact for at least a year. On inflation, estimates that I am hearing from the economists, up from 1.6% now to 2.1% in the next two years. On economic growth, next year, +2.4% and for 2018 the same. Not a barn burner as markets seem to believe now.  

OK - as we and many other say in the oft used adage - it is what it is, and we have to respect the Pizza. One week since the election results and the media, politicians and markets have it all figured out. Trump, the devil prior to last Tuesday, now St. George the dragon fighter. Amazing and way over the top in my view. Will the markets eventually prove correct? Maybe but presently the equity market is still over-valued based on earnings and forecasts - how much more will investors bet on the come. Markets always anticipatory but there is a limit, I have little idea what investors will continue to believe but this has gone way too far in such a short period on a technical basis.  

Tomorrow we get key housing data with October housing starts and permits.  October CPI will also be out along with the November Philadelphia Fed business index.   

No doubt interest rates will trend higher next year - the Fed and other central banks are finished with supporting the global economies but this straight up move in rates is difficult to justify.

In summary, the benchmark 10yr treasury note is still unable to set new lows from the recent trading.   I feel you have more to risk than to gain by floating right now.  So, I continue to favor locking if closing within 30 days.   Always remember, rates are quick to rise, but very slow to move lower.