Continued tariff tensions and weak retail sales data riled investors. The weakness signs in the world’s two largest economies: USA and China spurred inflows into haven assets like U.S. government paper. Uncertainty is causing an extra demand of U.S. bonds, dropping the Treasury rates and the Mortgage rates as well.
In the mortgage demand side, the same uncertainty in the economy that is causing interest rates to fall may also be causing some buyers to pull back. Mortgage application volume dropped 0.6% last week from the previous week, according to the Mortgage Bankers Association’s seasonally adjusted index. Volume was 10% higher than a year ago when interest rates were higher.
Mortgage applications to purchase a home fell 1% for the week but were nearly 7% higher annually. Home buying this spring has underperformed expectations, as prices remain high and the supply of lower-end homes remains painfully constrained.
In the housing supply side, Builders meeting at a conference in Southern California this week expressed concern about affordability, especially given higher costs for labor, land and now new tariffs on some Chinese products that go into housing.
“It’s worth watching if ongoing global trade disputes lead to increased anxiety about the economy, which could cause some potential homebuyers to put off their home search until the uncertainty is resolved,” said Joel Kan, an MBA economist.
Uncertainty may continue in the next two days. Rates would officially be at the lowest levels in well over a year, and the going rate on a conventional 30yr fixed loan would be just under 4% in the most ideal scenarios.
Tips
• Folks closing within 30 days who are happy with their pricing should lock, of course, and take risk off the table
• If you’re in the market for a mortgage, it may make sense to lock if you see a rate you like. Just make sure you shop around first.
Sources:
• Rates Close In On Lowest Levels in Over a Year
http://www.mortgagenewsdaily.com/consumer_rates/910414.aspx
• Mortgage applications slightly lower despite three weeks of falling rates
https://www.cnbc.com/2019/05/15/mortgage-applications-slightly-lower-despite-falling-rates.html
• Here’s how trade uncertainty could send the 10-year Treasury yield plunging below 2.40%
• 2-year Treasury yield retreats to 15-month low amid geopolitical jitters and soft data