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Jason Obradovich - Chief Investment Officer

30 Year Fixed – 2.625% / 2.811% APR   15 Year Fixed – 2.250 /2.461% APR   FHA 30 Year Fixed – 2.250% / 3.015% APR   VA 30 Year Fixed – 2.250% / 2.632% APR

Rates are current as of 9:00AM PST on 05/6/2021 | 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

Mortgage Rundown: The Inflation Game

Alexis: Hey, everybody! Welcome back to the Mortgage Rundown. I'm Alexis Quinney here with Jason Obradovich, CIO of New American Funding. How have you been, Jason? It's been a while since we've talked.

Jason: It has been. Doing well. Thank you very much. How are you?

Alexis: I’ve been good. So, since we last talked in 2021, rates have been going up and up and up, and you know, they've kind of started to level off recently. So, I wanted to kind of get your thoughts on where the market is heading in the rest of 2021?

Jason: It's a good question. Obviously, 2020 was one of those years where rates went down. They were at levels we had never seen before. Sooner or later, there was going to be the other side of it where rates start moving up, and they moved up really quickly. You know, in the beginning of 2021 rates shot up, people were getting 3.5%, or sorry, 2.5% on their mortgage, sometimes even 2.25%. And now we're talking about 3.25%, maybe 3% or slightly below that, if you're lucky. And so, we have seen rates go up. They have started to come down a little bit. And to be quite honest, I think it's very temporary. You know, we have a lot, kind of in terms of what's going to happen down the road with, you know, the Federal Reserve and the Biden administration. Those are the things that are likely to come out of that are rates are going to move a little bit higher. You know, where they go at the end of the year? You know, that's anyone's guess. But I would say if I was a betting man, you know, I don't really see rates much lower than they are now unless we're talking, you know, 6+ months down the road.

Alexis: All right, so I know the Fed meeting happened. Can you give us a summary of what was announced? Is there anything that we should be aware of?

Jason: Sure, you know, it's a was a really quiet meeting. The Fed's going to keep doing what they are doing. They're going to continue to support the economy. They're going to continue to keep the overnight rate near zero or close to zero as they can for the foreseeable future, probably through the end of 2022, maybe into 2023. You know, there is some short-term inflation going on. I think we all can feel it, especially if you're in real estate, you're just seeing prices, and even items, you know, imported items, wood, a lot of things, prices are going up. But, you know, from the Fed's perspective, that is very temporary, that the long-term inflation or the long-term outlook for inflation is going to be somewhat muted. And so, they still have to use the interest rate policy to keep the economy growing. So, don't really…we don't want people to look in the short term of what's happening this second. We really want to look 6 to 18 months out and what we expect inflation to be. And so, from that perspective, you know, what the Fed's going to be there. They're going to keep the overnight rate low, and that's going to go on for the foreseeable future.

Alexis: So, a little bit earlier, you mentioned the Biden administration, and I know there's talks happening, changing the tax codes, and maybe another potential stimulus. So, what can you tell us about that? What do we need to look out for?

Jason: Yeah, you know, it's taking longer than I think most people thought in terms of the stimulus plan, because where to direct the funds, how much funds? You know, where is it really going to help the economy versus just feels like a free for all, this big money grab. And I think there's been a lot of back and forth, I think more than what people anticipated. So, nothing's happened yet. Whatever they plan on doing, it's going to be in the trillions. I mean, that's a lot of money to pump in the economy. It's really hard to even give scale when you talk in the trillions. But I would expect, you know, the market's reaction when it does get passed is you'll see stocks continue to move up if it's a big, bold plan. If it's a weak plan or the dollar amounts are too low, the market's expecting something different, you might actually see stocks go the other way. But let's just presume that it’s a big, bold plan. A lot of money is put to work. It actually helps the economy grow. It's going to impact short-term inflation, not necessarily long term, but short-term inflation. And that might end up pushing mortgage rates up a little bit. And so, I think that's the expectation. You know, what happens a year or six months down the road after the plan rolls out, and what economy really is there at the point where we just can't keep shoving all this money in? You know, that's a whole different equation. But if you're really looking in the short term, it's likely going to help the economy, it's likely going to help stocks and it might hurt mortgage rates a little bit.

Alexis: All right. Good to know. Well, that's really all I have for you today. If there's anything else you want to talk about…but that's all I have.

Jason: You know, it should be a pretty short update this week. You know, we didn't have a lot going on. I really think when we have a stimulus plan or even a tax code plan. I know I didn't talk about the tax code plan, but really not much has happened. There's been a lot of infighting between Democrats and Republicans, especially the Democrats that are in states like California, New York, and New Jersey that are really focused on this Salt deduction. And so, a lot really has to kind of wash out. So, from a tax perspective, there really isn't much of an update. But like the stimulus plan, when something actually happens, I think we'll see more of a market reaction. We'll see more market movement, and we'll have a better idea of the direction of the market. Right now, you know, the market's very directionless. It doesn't know what's going to happen. So, it's all based on instinct. I think there's going to be a stimulus plan. I think there's going to be tax code changes. I think eventually the Fed's going to lower rates. We don't necessarily know. And so, the market's trading on that. I know that's a long answer to your question, if that was it. But really, that's something that I hope everyone takes away from this, is that we're in we're in the waiting room, waiting for something to happen.

Alexis: All right. Well, yeah, I mean, as you said, the waiting room. It feels like we've been in the waiting room, but we'll continue to wait.

Jason: Absolutely.

Alexis: All right. Well, that's all I have for you today. Thank you so much for taking the time. Yeah. Have a great day.

Jason: Yeah. Thank you, everyone. Have a great day.

Alexis: Bye.

Previous Market Update

Short-Term Rates Vs. Long-Term Rates


Alexis: Hey, everybody. Welcome back to the Mortgage Rundown. I'm Alexis Quinney, here with Jason Obradovich, CIO of New American Funding. How have you been, Jason?

Jason: You know, doing pretty well. Things been busy, but great. How about yourself?

Alexis: Pretty good. Pretty good. So, a few questions for you. The Federal Reserve met last week and made a lot of announcements, so I wanted to get some clarity from you. Will mortgage rates increase in 2021?

Jason: Boy, you just start with the toughest question. The Federal Reserve did meet last week. They talked about rates. Obviously, for all of us and the mortgage banking universe have seen mortgage rates have gone up a lot over the last couple of months. But the Fed said, ‘Look, we're still on hold. We're not planning on raising rates for a couple of years. A few of them came out and said, “Well, maybe the end of 2023 as opposed to definitely not in 2023.” And so, I think the market had a little bit of reaction to that. The market did have some reaction to the fact that the Fed said, ‘Look, inflation is higher in the short term, but we don't expect it to keep climbing.’ So, this whole idea of why rates are going up right now because of this anticipation of higher inflation is not going to happen. They said, ‘Look, the long-term trend for the last 25 years has been inflation has not been an issue. That's the problem of the 80s and 70s, not in the 2020s.’

Alexis: Yeah, makes sense. OK, so what about the next few years, what can we expect to see there?

Jason: That's where it gets a little bit tougher. Right? Because the feds saying, ‘Look, we're not raising rates this year. Mortgage rates have gone up. We're not going to raise it for a couple of years. We'll keep watching the economy. There are some structural issues where the economy is not going to fully recover for quite a while from the damage of the pandemic. Certainly, in certain industries, it's done really well for the pandemic and other areas structurally. And it takes a long time for some of those other structural things to work themselves out. So, the Fed’s saying, ‘Look, we're not raising rates. Nobody needs to panic. We're going to be here to support the economy and we'll just play it by ear. But don't expect anything for a few years.’

Alexis: OK, and I don't mean to backtrack here, I guess it's just a little confusing because rates are currently going up, but it sounds like you're saying they're not going to go up. So, what does that really mean?

Jason: Yes. So there always is some confusion. Right? People hear ‘Hey, the Fed's raising rates. The Fed's not raising rates? Rates are going up.’ It's like now when the Fed is talking about raising rates, they're talking about short-term rates, that overnight rate, the one-day rate. When we talk about mortgage rates, we're talking about 10-, 20- or 30-year rates that are very, very different things. And so, what happened, starting in the middle of January is people start worrying about inflation. Do you want to own a 10-year Treasury bond for 10 years that yields less than 1% when inflation might be 2.5, 3%? You're actually losing money by holding a bond that earns less interest than inflation. And so, the Fed’s saying, ‘Look, we're not going to touch short-term rates.’ The long-term rates that they don't control, you know, a lot of that's the market dynamics. Right? A lot of the traders, hedge funds, people that own treasuries, people that are now shorting Treasuries because they don't want to own some of these. That is what's really impacting mortgage rates. And so, I'm going to put a graph on your screen where you can actually see the difference between short-term rates and long-term rates. And generally, there's always a spread between them. And you might be one hundred basis points, which is 1%. But if you look recently, the gap between short-term rates and long-term rates is as high as it's ever been in, I think, three or four years. So, this inflation expectation is that gap. So that's why when I say the Fed hasn't touched rates, they're near zero, but mortgage rates are going up, it's because of that gap.

Alexis: Got it. All right. It's a little confusing, but it makes sense. You just got to know when you explain it in terms like that.

Jason: So, yeah, it's hard to explain. I think just to someone who's not familiar with the market, what a yield curve is. And the yield curve, when if you hear that term, it's ‘Hey, look, there are short-term rates, there are medium-term rates and there are long-term rates, and they all move interdependent of each other.’ So, the Fed only touches that overnight rate, but that really does have a downstream impact on some of the longer-term rates. The Fed, when they decided to buy mortgage-backed securities, was buying long-term rates, or trying to buy those rates to get them to go lower. And you might see, you know, we don't know, we might see in the next year. The Fed says, ‘Look, to help the economy, we don't want mortgage rates this high. We need to lower long-term rates because that's really what's affecting the economy.’ Yeah, the short-term rates are low, but a lot of us who have money in our savings account don't like earning 0% interest on those deposits. So, the Fed has to try to balance both. And so, I think that's where they use some of these other tools other than just changing the short-term rate is buying long- term treasuries and buying mortgage-backed securities, help those long-term rates lower.

Alexis: All right. Got it. OK, those are my questions for today. I'm excited for our next episode to see where these rates really end up. But that's all I have for you today.

Jason: OK, great. Yeah, we will just have to see over the next month or so as the economy starts to open up, as the pandemic starts to get a little bit farther behind us, hopefully, to see really what's happening between short- and long-term rates. Maybe we'll see a little bit of a dip, maybe things will stay where they're at. Just a point of identification is that rates today, the 10-year Treasury, is exactly where it was right before the pandemic started. So, we kind of went down and kind of back up. And so, let's just see where we go from here.

Alexis: All right. Well, sounds good. I will talk to you in a few weeks.

Jason: OK, have a great day.

Alexis: You too. Thank you.

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