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Mortgage Rate Update 2/22/2021

Hello and good morning, everybody. Sean Zalmanoff here with this week’s mortgage rate updates. Snow and President’s Day knocked us out last week, but we are back with a whole lot of news this week for you.

We have a big week on the economic calendar, some treasury auctions that depending on the demand could really affect mortgage rates. A few weeks ago, we had a 20 year treasury auction that really hammered rates. They have not been moving in a direction that we want to since then. Again, you got to take all this with a grain of salt. If you look back on the history of mortgage rates, we’re still that far off of an all-time low. So, we’re still, mortgage rates are great. Question is, will they come back or not? I’ve told you before, rates will go up quicker than they go down.

It’s just the way that it works. I can’t tell you exactly why except the sell offs in bonds happen at a greater speed typically than the buying of bonds happen. Another thing that we’ve talked about before, inflation is the arch enemy of bonds. It’s the archenemy of mortgage-backed securities, which all the stimulus that’s being talked about right now is concerned that that could overheat the economy. Now, the people, chairman Powell, Janet Yellen, their take is, is that it would be better to overheat than to underheat the economy, that they feel that they can taper and cool it down should it need to be. You know what? The only person that knows that is the genie in the lamp or somebody holding a crystal ball right now because it’s impossible to tell. We have never been in times like this. I wanted to show you a chart real quick.

As we talk about rates moving up quicker than they go down. Here, you are looking at the last 90 days of mortgage-backed security trading. There’re a couple things on here. Again, as we talk about green is good, red is bad. The higher the price of the mortgage back security, the cheaper the rate. There is that inverse relationship that we talk about on here. You can see we were trending down. Then we had a couple of days, I believe this was the 20-year auction that caused the sell off. Then another one proceeded. And then we’ve since moved down a little bit further here to today. You can see we’re trading right below resistance level. It’d be very nice if we could push above that. I also want to pay attention to this blue line here.

This is the 200-day moving average. In anything that you chart, the 200-day moving average is very significant. I’m going to just draw this out for a year timeframe. Of course, it doesn’t want to. We’re going to draw it out for a six-month timeframe. You can see that for the last six months, that the mortgage-backed securities have been trading significantly, or even when they did touch below, it bounced right back above that 200-day moving average. Typically, when stocks or bonds, in this case, move above or below, it takes quite a long time for them to go back above. Unless you just have this little blip happened in the middle of January where it dropped below, and then went right back above. You can also see these layers of resistance that we have to break through.

They’re also called Fibonacci levels, something else you want to Google, if you want to, to see what we’re up against. Again, overall, rates are still fantastic. It’s a great time to buy a house. I mean, there’s an old adage of the best day to plant a tree was 20 years ago. The second-best day is today. Gosh, I’m really feeling that in our housing market as well, too. Supply is so tight on the market. We just don’t see that pressure easing at all. You have commodity prices, lumber. They’re expecting this year that lumber could go up another 30%. If you’re looking at composite decking right now, the synthetic stuff or lumber, I think that the cost of lumber and the cost of synthetic decking is roughly the same right now, which it’s usually substantially more expensive for the composite stuff.

All of that said that these are going to continue to drive prices up, it’s going to drive up new construction. If the price of new construction gets pulled up, that’s going to pull up the price of existing homes as well, too. If you were thinking about buying, now is a great time. If you need to make some improvements in your house, you need to tap into some equity, now’s a great time. We can help you with the construction loan. We can help you just pull cash out if you need to. As always, if you need anything, we’re here for you. Let our team take care of you. If you just happen to need a referral to an electrician or something done in your house, we’re always here for you for that, too. Reach out to us. We appreciate you. Again, I’m Sean Zalmanoff. Have an awesome day. Thank you all.

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