Mortgage Interest rates decline slightly-Week ending 8/16/19

Mortgage interest rates for buying a home on the Palos Verdes Peninsula decreased slightly this week ending 8/16/19. The following are excerpts from the newsletter on interest rates published by HSH Associates :

” The spillover from slowing major economies and the uncertainty injected into the global outlook from the U.S.-China trade and tariff war spooked the markets anew this week, and at one point, a “classic” sign of an impending recession saw a stampede out of stocks and into sovereign bonds, driving yields down further, and in some cases to record lows.The near market panic might have been worse except for a clear, simple fact: The U.S. economy continues to do very well, and in fact, may actually be on a steady-to-improving bent in the third quarter. Couple better data with what appears to be firming price pressures, and the Federal Reserve may find itself backed into a corner just a little bit, as while the financial markets are strongly betting on more cuts by the Fed, the incoming data don’t strongly suggest a need for them.

As noted above, yields on U.S. Treasuries (and German bunds, and Japanese Government Bonds) all were driven materially lower this week, most especially when the yield on the 2-year Treasury fell briefly below that of the 10-year, an “inversion” that is considered a classic sign that economic misfortunes are coming before long. The inversion has since reversed, but just barely, as better data helped calm markets a bit. Still, the 10-year Treasury ended the week down about 15 basis points or so and in the mid 1.5% range.That said, the investors packing money into government bonds aren’t the same ones who buy U.S. mortgages, and the effect on mortgage rates was nearly nonexistent, with only what looks to be a mild downdraft as the week cam to a close.

With the recent new dip in mortgage rates resulting in the lowest 30-year FRMs in about 3 years, it’s unsurprising that consumer have noticed. The Mortgage Bankers Association of American noted a 21.7% increase in mortgage applications in the week ending August 9, driven there of course by a 36.9% increase in homeowners seeking refinances, but joined for the first time in five weeks by an increase in borrowers looking for purchase-money mortgages (+1.9%). For the most part, sales of both new and existing homes have been running at merely moderate levels, and lower mortgage rates only offset affordability headwinds to a degree, so we wouldn’t expect a big surge in home buying anytime soon.

Mortgage rates followed Treasury yields down just a little as the week came to a close. Like this week, the economy calendar is back-loaded toward the end of the week, and so it’s hard to know how restive markets may be in the first couple of days. We will get the minutes of the Fed’s last meeting on Wednesday, and that may shed some light or clarity on the central bank’s thinking with regard to the global and local risks, and we’ll see if home sales are continued on a moderate pace as the spring home buying season gave way to summer markets. At the moment, it looks as though we’ll see a mild decline in rates of perhaps a couple of basis points in the average 30-year FRM reported by Freddie Mac next Thursday morning, if the tenuous calm in markets can hold.”

The following are interest rate quotes from John :Alvin of American California Financial Services, Inc. :