March 2019 was the best month for Michigan Mortgage Rates in a Decade! Rates dropped the sharpest they had in a single month since the mortgage meltdown which led to a recession in the late 2000’s.
This is great for anyone that is buying a home or looking to drop their mortgage rate. Many are wondering why rates dropped and will they go up or down.
Why did mortgage rates drop in Early 2019?
The slow economy in Europe is a factor resulting in lower mortgage rates. With the effect of Brexit causing uncertainties for business and long term investment plans, Europe’s economy has been suffering.
When major global economies are halted, investors demand more predictable investments like bonds and mortgage backed securities which create lower mortgage rates.
The Federal Reserve Decided to Leave the Federal Fund Target Range Unchanged
The Federal Reserve does not directly set mortgage rates however they do have a major effect on them. The Federal Funds Rate is the rate at which banks can borrow money from Federal Reserve Funds.
Banks use this rate to base interest rates on loans. If banks can borrow money cheaper, they can lend it out in the form of mortgages and other loans at lower interest rates.
The Federal Reserve released its policy statement showing that they do not expect to hike Federal Reserve Rates for the rest of the year due to the slower growth in the economy.
This caused Treasury Yields to Fall which helps mortgage rates. The Treasury Yields dropped to levels not seen for 10 years which could indicate a future recession.
Home Sales Decline and Housing Inventory Increased
The National Association of Realtors (NAR) reported that the seasonally adjusted rate for sales of existing homes dropped 4.9% in March 2019 from the previous month and were also down year over year 4.7%.
NAR also confirmed that home inventory increased from 3.5 to 3.8 months’ worth which indicates slowing home sales. Although sales appear to be slowing, this may be due to the 3.8% increase in median home sales prices.
Jobs Report Numbers Low
While the real estate market shows strength, job grown has dwindled. The headline nonfarm payrolls may have disappointed some with only 20,000 new jobs.
The average since taking the survey from 1939 is 125,000 new jobs created. This is the worst number in job growth since September 2017 when two major hurricanes hit.
US Trade Deficit Worst in 10 Years
Recent reports show that the U.S. trade deficit jumped to $59.8 billion. This is the largest it’s been in the last ten years. The uncertainty with Chinese trade tariffs have had a negative impact on US manufacturing and exports.
Will Mortgage Rates go Up or Down?
The million dollar question from all people considering a mortgage is, “Will Mortgage Rates go Up or Down?” If this were easily predictable then everyone would not be wondering this.
There are several factors pushing upward on mortgage rates for the long term. Progress in the US / China Trade Negotiations, Brexit decisions postponed, Oil Prices Rising, the US stock market hitting record highs; these all are negative forces on mortgage rates.
Mortgage Rate Lock Advice
No one can predict the future with certainty. My advice to my friends, family and clients is to review benefits of locking in a mortgage rate or refinancing right now.
- If it makes sense do it!
- Do not wait or you will be late!
- No one can predict Mortgage Rates!
With upward pressure on mortgage rates, it is a risky gamble to wait to see if they will go lower. If the numbers make sense and add benefit then take advantage of it immediately!