This past week home loan rates ticked up, yet remain just above 3-year lows.

Here are 3 reasons why:

  1. Solid corporate earnings and future positive guidance from many public companies were a pleasant surprise for many who were bracing for a far more disappointing outlook. As a result, stocks moved higher last week at the expense of bonds and home loan rates.
  2. U.S./China trade deal optimism continues. It’s been slightly over a week since the U.S. and China came to a “handshake” trade agreement, and all signs are pointing to the deal being papered and signed in the coming weeks. This once uncertain event has become quite positive, and was another reason for bonds to move lower and rates higher.
  3. A “Brexit” deal, where the U.K. will leave the European Union, has been drafted. The deal still has to pass a Parliamentary vote and carries some hurdles. But much like the U.S./China story, Brexit has gone from hopeless to a pretty good chance of a fix in a short amount of time. Once again, this is another uncertain event removed, and the renewed optimism helped stocks and hurts home loan rates.

In positive housing news, new construction of single-family homes rose for the fourth consecutive month. This along with low home loan rates for the foreseeable future should help housing and the U.S. economy.

Bottom line: the present opportunity to refinance or purchase a home may never be matched. We are seeing unemployment at 50+ year lows, yet home loan rates at three-year lows – the best of both worlds. A strong economy AND low rates, truly a Goldilocks situation.

After several weeks of heightened volatility along with geopolitical, tariff, trade, and Brexit issues, the upcoming week may cool down a bit. A limited economic calendar and the quiet period for Fed speak ahead of the October 31 FOMC meeting could quiet things down in the upcoming week.

Earnings season will ramp up with a slew of big names reporting in the upcoming week. So far, the early season numbers have been on the positive side and if the strength continues it could pressure bond prices lower, rates higher, and vice versa.

The U.S. markets will also continue to take direction from the U.S.-China trade headlines with an eye on quarterly earnings.

Reports to watch:

  • Existing Home Sales will be released on Monday, Weekly Initial Jobless Claims and Durable Orders on Thursday, and Consumer Sentiment on Friday.

Source: Vantage

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