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Jason Obradovich - Chief Investment Officer

30 Year Fixed – 3.375% / 3.533% APR   15 Year Fixed – 2.625 /2.919% APR   FHA 30 Year Fixed – 2.990% / 3.857% APR   VA 30 Year Fixed – 2.990% / 3.467% APR

Rates are current as of 9:00AM PST on 1/21/2022 | View Disclosures

Housing Market News & Updates

Translating the complexity of the markets into a concise and easy to digest format. Watch videos, read blogs, and view key data on short and medium term trends impacting interest rates, so you can make the right decision for your situation.

Latest Market Update

Inflation Is No Longer Transitory

Hello everyone, and welcome back to the mortgage rundown. Today, we're going to talk about what's happening with interest rates. If you don't know by now, yesterday was the FOMC meeting where they decided not to change interest rates, but they did decide to double the pace of asset purchases.

This was an unexpected move and somewhat an expected move by the Federal Reserve, given the fact that they haven't acknowledged that inflation is not transitory until this meeting. In fact, in this meeting, they did acknowledge that inflation is no longer transitory; that inflation this year will be north of 5% and even next year will be north of 2%. If they continue the pace of asset tapering like they are now, they'll be done purchasing assets by March of next year.

The Fed also said that they're not going to raise interest rates until asset purchases have been completed. And last but not least, the Fed does expect to raise interest rates three times next year.

Now, if you're watching all the Fed moves and then looking at the Treasury market, it might be somewhat confusing. Now, if you look at the chart on your screen, the 10-year Treasury is actually down since the beginning of summer, even though for most of us, we actually think of rates as moving higher. But look at the next chart on your screen, the two-year Treasury is up substantially since the beginning of summer and mortgage rates have moved up higher as well.

So, a lot of people try to correlate movements in the 10-year with mortgage rates. But really, what you want to look at is the two-year or the five-year. So, I've added another graph on your screen, which is the five-year Treasury and mortgage rates. And you can see they've pretty much moved in lockstep since the beginning of summer. And that's something you going to want to keep an eye on. That’s it everyone from the capital markets desk this week. Thank you all for watching. Have a great day. Have a great holiday season and happy new year. And we'll talk to you next year in 2022.Take care.

 

 

Previous Market Update

Transitory Inflation

Hello, everyone, and welcome back to the mortgage rundown. Today, we're talking about what's happening with interest rates.

By now, you know that the FOMC met last week and actually elected to start tapering the asset purchase program. In summary, the Fed has been buying $120 billion of Treasury and mortgage-backed securities each month, and now they're going to reduce that amount by $15 billion each month, at least in November and in December.

So, what does that mean and why did they do that? Well, the problem they have right now is actually inflation. And so, what they need to do is actually slow down the economy and very, very carefully raise interest rates. And they do that by reducing the amount that they buy of both Treasury and mortgage-backed securities.

What the Fed was really worried about was Taper 2.0. Taper 2.0 is a reference to May of 2013, when Ben Bernanke came out and unfortunately said he's going to start the tapering program back then, and it caused a worldwide and market panic. By all accounts, the FOMC did a phenomenal job in conveying tapering 2.0, his next round, where they're actually reducing the purchase of mortgage-backed securities and Treasuries. There has not been a major market reaction to the tapering announcement. In fact, what we actually saw was interest rates went up a little on the day of the announcement, went down the next few days and now is moving back up.

What the Fed needs to deal with now is inflation. Yesterday was CPI, and it came in much higher than expected. And so now the Fed is going to have to deal with the fact that inflation is still very sticky, that it does not look like it’s temporary and that the tapering may not have done enough. It certainly hasn't necessarily caused any major reactions to the market. But now the market's going to be staring at an inflation.

In the coming weeks ahead, we really need to keep an eye on inflation. What other data points are going to come out to indicate whether or not inflation is going to be persistent? Now, if I'm a betting person, I will tell you that demand is very strong. If you look outside your window, or especially if you're near the ocean, you will see a line of cargo ships unable to unload their cargo. The demand is there. The problem is supply is not there. The supply lines are broken and they are not keeping up with demand, and that's going to keep putting more pressure on inflation, which is going to put more pressure on interest rates and the Fed.

Okay, that's it for this week from the capital markets desk. Thank you all for watching and have a great day.

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