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Jason Obradovich - Chief Investment Officer

30 Year Fixed – 2.875% / 3.034% APR   15 Year Fixed – 2.250 /2.551% APR   FHA 30 Year Fixed – 2.375% / 3.228% APR   VA 30 Year Fixed – 2.375% / 2.842% APR

Rates are current as of 9:00AM PST on 12/3/2021 | 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

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.

Previous Market Update

Persistent Inflation Remains

 

Jason: Hello, everyone, and welcome back to the Mortgage Rundown. Today, we're talking about, well, you guessed it, inflation.

Before we get to inflation, let's talk about interest rates. If you look at the chart on your screen, you're going to see the 10-year Treasury starting to creep up to that 1.7 to 1.75% ceiling. Now, for breaks through there, it really easily could jump all the way up to 2% or even higher. And the reason being, you guessed it, inflation.

The first chart on your screen is PCE. That is the Fed's preferred inflation measurement, and it's up over 3.5%. So, is inflation transitory or not? I'll let you be the judge, but as you can see, it's not going down.

The next chart on your screen is CPI, the Consumer Price Index, and as you can see, it's up over 5 to 5.5%. That's not going down either, right? We're seeing consistent inflation.

The last chart on your screen is PPI: Producer Price Index. It's a little bit of a different inflation measurement than most people look at, but it's the price of goods before they actually go out to the sellers. Now that's climbing and climbing above 5% and it doesn't look like it's going to stop climbing, at least as of right now.

So, if you combine all these things together, we have interest rates moving slightly higher. We have persistent inflation and PPI now climbing up to a level that we don't know where it's going to stop. That's just going to put more and more pressure on rates.

Two weeks from today, we're going to have the FOMC meeting where they’re going to have to make some decisions about inflation and what they're going to do in terms of both their interest rates, but also in terms of their stimulus, whether it's, you know, Treasury buying or MBS purchases.

That’s it everyone from the Capital Markets’ Desk this week. Thank you all for watching and have a great day.

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