“It’s a tug of war, we expected more.” (Paul McCartney) Home loan rates bounced around this week due to volatility in the U.S. Bond market, but went into the weekend still near three-month lows.

There are push/pull items that continue to limit how low and high rates can go. Here is what home shoppers should know:

Factors currently limiting how low rates can go:

  1. Tight U.S. labor market
  2. Rising wages, fastest pace in a decade
  3. Soaring business and consumer confidence
  4. Solid economic growth
  5. Tough technical barriers

Factors currently limiting how high rates can go:

  1. Slowing economic conditions around the globe
  2. Low global bond yields — German 10-year bund yield is 0.28% and the U.S. 10-year note yield is 2.90%. If yields stay low in other parts of globe, there is a limit as to how high long-term rates can go.
  3. Disinflation or slowdown in the rate of inflation around globe, including the U.S
  4. A split Congress that likely ensures no real fiscal stimulus in the near future
  5. Pace of Fed rate hikes are slowing due to all of the above

Bottom line, we are in a very unique economy where we have strong growth, a tight labor market, low inflation and low rates — all making a great backdrop to buy a home.

Next week it’s all about the Fed! The scheduled two-day Federal Open Market Committee meeting will kick off on Tuesday and ends Wednesday with the release of the monetary policy statement at 2:00 p.m. ET.

The financial markets have placed an 80% probability that the Fed will increase the short-term Fed Funds Rate by 0.25% to 2.75%. With the rate hike expected, what the statement reveals regarding the path of future interest rate moves may be the market moving event.

Come Friday, the Fed’s favorite inflation gauge, the annual Core PCE, will be released. With future rate hikes being mostly determined by the rate of inflation — this is an important number to track.

Reports to watch:

  • The Empire Manufacturing Index will be delivered on Monday followed by the Philadelphia Fed Index on Thursday.
  • Housing Starts and Building Permits will be released on Tuesday followed by Existing Home Sales on Wednesday.
  • The final reading on third-quarter Gross Domestic Product will be released on Friday along with Core PCE.

Related Articles

This past week had little economic data for the financial markets to react to. As a result, home loan rates have inched higher though they remain near multi-year lows. It is normal to see quiet sideways trading action in the summer months, especially with the U.S./China trade war punting into…
Read More of the post Summer Sideways Trend Continues

This past week, Fed Chair Jerome Powell reaffirmed the Federal Reserve's dovish position as he testified on Capitol Hill, thereby paving the way for the first Fed rate cut in 10 years later this month. Mr. Powell used the word "uncertainties" five times in his prepared speech to describe potential…
Read More of the post A Slow News Week Ahead

“It's like watching paint dry.” That was this past week as financial markets around the globe traded in a bit of a calm, sideways pattern ahead of arguably the most important economic event of 2019 — the US/China trade talks at the G20 meeting. Depending on when you read this…
Read More of the post Calm Before the G20 Storm

What a difference a month makes. In May, stocks fell sharply, and interest rates declined each week. June has been a different story. The Fed has signaled rate cuts are likely coming. Stocks have been rallying higher, and the decline in interest rates has stalled. The Fed can't control home…
Read More of the post Rate Decline Stalls