Home loan rates continue to hover near three-year lows. There are some on Wall Street who say rates are going to push even lower at some point — and they may be right. But what if they’re wrong? What if rates have bottomed for the foreseeable future?
Yes, locking a home loan right here would be wise.
Here are three reasons why rates may have bottomed — at least for now:
- Solid economic numbers continue to be reported. We are seeing a historically strong labor market, rising wages, high consumer and business confidence, and an overall boost in housing. Bonds hate good news and there is simply too much good news to go around at the moment.
- Signs of improvement around the globe. One of the main tailwinds to our low rates is the relative underperformance of countries around the globe. It appears that many parts of the world are doing a bit better thanks to central bank monetary stimulus. If this trend continues, it’s tough to see much better rates anytime soon.
- The trading action in the Treasury market. This may be signaling that further rate improvement from here may be tough to achieve. In recent weeks, in the face of heightened fear and uncertainty surrounding the coronavirus (which usually lowers rates), the 10-year Note yield was unable to move beneath 1.50%, which is also close to a historically low yield seen just a few times in the last decade. If the 10-year Note can’t improve in the face of very uncertain news, a near-term bottom might be in place.
So, what would push rates to even lower levels? It would likely take some very bad news like an escalation of the coronavirus outbreak — or possibly something even worse.
Bottom line: the U.S. economy is performing very well. Rates are near historic lows and the markets are telling us this may be about as good as things get — for now. So, if you, your family, friends, or clients are considering a home loan, now is a terrific time to lock in at incredible rates.
Forecast for the Week
The upcoming week is holiday-shortened, with the financial markets and most banks closed on Monday in observance of Presidents Day.
The week’s economic calendar is highlighted by housing data, which as mentioned, has gotten a boost by the strong labor market.
The markets will continue to be impacted by the coronavirus, which is a fast-moving story as it turns both positive and negative at a moment’s notice. Earnings season is winding down with 72% of S&P 500 companies reporting better than expected earnings in the latest quarter.
The minutes from the January Fed meeting will be released on Wednesday, but little impact is expected after Fed Chair Powell said last week that the U.S. economy “is in a good place.”
Reports to watch:
- Housing data dominates the economic calendar with the NAHB Housing Market Index on Tuesday, Housing Starts and Building Permits on Wednesday, and Existing Home Sales on Friday.
- The Producer Price Index will be delivered on Wednesday, and the Philadelphia Manufacturing Index and Weekly Claims on Thursday.