CHINA DOES IT AGAIN
We’re lucky that mortgage rates aren’t rising on pace with China’s economic influence.
In fact, rates aren’t rising at all, because last week the People’s Bank of China devalued its’ currency twice in two days. This makes Chinese exports cheaper in the U.S. and Europe, while raising the cost of U.S. and European exports. It also caused the yield on the U.S. 10-year note to plunge. Amid these events, we firmly believe that the devalued yuan is keeping 15 and 30 year loans at rates under 4 percent.
In fact, rates aren’t rising at all, because last week the People’s Bank of China devalued its’ currency twice in two days. This makes Chinese exports cheaper in the U.S. and Europe, while raising the cost of U.S. and European exports. It also caused the yield on the U.S. 10-year note to plunge. Amid these events, we firmly believe that the devalued yuan is keeping 15 and 30 year loans at rates under 4 percent.
We pointed out in last week’s article that two weeks ago, experts thought there was a 33% chance that the Fed would raise rates. Last week it was a 50% chance. Now, we don’t see the Fed raising rates until December.
In short, mortgage rates have been given a reprieve. Whether refinance or purchase, now is the time to act. Sub-4% on the 30-year loan looks like a gift. We say that because the long-term impetus is still for rates to rise, so no one knows how long today's rates will last. Always keep in mind that sentiment can change in a heartbeat, and it frequently does.
In short, mortgage rates have been given a reprieve. Whether refinance or purchase, now is the time to act. Sub-4% on the 30-year loan looks like a gift. We say that because the long-term impetus is still for rates to rise, so no one knows how long today's rates will last. Always keep in mind that sentiment can change in a heartbeat, and it frequently does.
SOMETIMES GOOD IS GOOD ENOUGH
Last Friday’s employment numbers weren’t spectacular, but they were solid. Payrolls increased by 215,000, which kept the unemployment rate at 5.3%. Wage rates showed some life, up 0.2%. The increase lifts the average hourly wage to just below $25.
We've been saying that as long as new payrolls come in at 200,000 or-better each month, the housing market would remain in good shape, and not surprisingly, home sales and new-home construction have improved with sustained job growth. Home prices have also kept pace, which has been something of a surprise. We thought by this time, the rate of price appreciation would have slowed significantly.
Thanks to continued low mortgage rates and solid monthly job growth, more home buyers will enter the market. As things stand, we see no reason not to expect strong home sales and rising origination activity into at least early 2016.
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