I’ve been warning that rates were going up for a couple of months. It doesn’t matter that the Federal Reserve conveyed that they are going to keep the Fed Funds Rate at 0% through 2023. Let’s review some of the reasons why the financial markets are forcing rates higher…
- The economy is looking robust, and the reopening is escalating. Especially since there are now several COVID vaccines being pushed through the population.
- Over 6 trillion stimulus dollars are being pushed through the economy. That’s potentially inflationary. (To put it in perspective, did you know 1 trillion of one dollar billings stacked would be 67,700 miles high…?)
- There are several areas of commodity inflation and supply chain issues. Chips are in short supply driving up auto and electronic pricing, and lumber/building supply shortage is driving up the price of new housing $25,000 a unit.
As you can see in the chart of the 10 year note, the rates jumped from .9% the beginning of January, to 1.75% on March 19. The move was substantial over a short timeframe. The rates are now showing signs of stabilizing after bouncing off the 1.75% Fibonacci. Hopefully, the rates will digest, or back off from this level.
On the upside, mortgage rates are up, but not at the same percentage as the gov’t note rates. There is a lot of competition between (wholesale) lenders presently. The massive volume of refinances has eased, and there’s a lot of money trying to find a home. Not all lenders are created equal. Lenders are in and out of various loan programs, and they don’t all have the same underwriting guidelines. I have to shop every borrower’s scenario to find the best lender blend of rate and execution.
The Federal Reserve stands on the position that any inflation is transitory, and will drop after the built-up COVID shutdown demand has subsided. If that’s the case, rates may come back down. Don’t expect rates at the same level that we saw at the worst of the pandemic. My expectation, mortgage rates will still stay in the 3-4% range over the next couple of years.
If you are in the Los Angeles area, have any questions or real estate sales or financing needs, feel free in contacting me
Ron Henderson GRI, SRES, SFR, RECS, CIAS
President/Broker
Multi Real Estate Services, Inc.
Gov’t Affairs Chair – California Association of Mortgage Professionals (2017-2018)
Chairman – OutWest Marketing Meeting (Real Estate Education)
BRE #00905793 NMLS #310358
www.mres.com
ronh@mres.com
Specialist in the Art of Real Estate Sales and Finance
Real Estate market, mortgage rates, Los Angeles, San Fernando Valley, Conejo Valley, Simi Valley, Woodland Hills, West Hills, Calabasas, Chatsworth
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