Market on the Hump - 3/18/15
I've been slacking - sorry folks. Haven't done a Monday forecast or Friday wrap up in a while, and I'll try to be better!
Here's something new - adding to the mix of what's been a pretty volatile market over the past year, I figured a mid-week update would be a good idea to keep you in the loop as we go. So here we go with my first "market on the hump" post (I considered calling it your weekly humpdate - get it...update...on hump day..see what I did there?....let me know which you like more).
First to recap (since I've been slacking)
The last few months have shown us lower rates followed by a recent spike that took many into "going to wait to refinance" mode. Looking at the long term historical trends, rates are still beyond fantastic. Like...really, really, really good. Short term, though, we're currently a little above historic lows. Traders, like most of us, are confused as heck when it comes to predictions and what the market is doing. Unemployment rates are falling but wages are stagnant and underemployment is still rampant. Housing has it's good months and bad months, retail sales are in the toilet, oil has plummeted (for this, I am thankful..roadtrip anyone?), and the dollar has soared - good for those with international wanderlust, bad for overseas companies reliant on American goods (and therefore, bad for American exports).
Just as the economy seemed to be doing well enough to scare everyone into "are rates going up!?" mode a few weeks ago, we've once again been hit with some poor economic reports, a pretty bleak outlook on our economy from the Fed, and the prospect that although there is still a target for an increased Fed rate later this year, the increase will probably be smaller than previously thought.
So what's up this week?
Well, the past 2 weeks (this week included, so far) we've been slapped back to reality that the economy, both domestic and international, is not well. Overseas, there are still debt issues, and economies throughout the Eurozone are looking, as the French would say, "ne good pas".
Domestically, they're trying to convince us that falling oil prices are a bad thing (seeing nearly $5/gallon here in CA less than a year back is going to make that a tough sell on me), while the stock market keeps pushing up - although, with it's foundation resting largely on Monopoly money, this scares me a bit - and housing numbers have not been spectacular. A lack of inventory continues to plague many markets, and even with low rates, the industry has been consistent, but not running too far in the green.
Thanks to poor economic performance, a less than exuberant Fed outlook, inflation still being completely absent (outside of the grocery stores, amIright?), and a skyrocketing dollar, rates have come all the way back down to a level just above historic lows. Just today, mortgage backed securities had their best day in recent memory following the Fed announcement that "things ain't great" (the exact words used in Fed testimony may have varied slightly).
On this hump day, rates are great. Going into the end of the week, we'll pay attention to see if traders have buyers remorse and decide that today's news made them too excited (in which case we'd see some selling and rates coming back up just a bit by week's end), or if this is just a trend reversal from a few week's ago when things were a little less certain.
Long term, my outlook is that rates still have room to go down. With that, my advice is to lock current rates. Why? Because on the way down, there will be some spikes, and the mortgage process moves too quickly to compensate for those spikes within the 30 day window your loan is likely to close in. Lock in, and be happy - you caught us near the bottom.
Happy hump day folks!