Oct 2, 2023 | Financial Reports
Last week, consumers were treated to several indicators on inflation that not only paint a picture of the economy’s health but also give the Fed more information to work with as it continues to aim for a soft landing.
August Sees a Slight Upward Trend in Inflation
This week, the personal consumption expenditures price index, which excludes more volatile commodities like food and energy, increased 0.1 percent for the month. This is lower than the expected value of 0.2 percent, which indicates that the rising interest rates are starting to have an impact on the economy as the Fed continues to work to bring down inflation.
When compared to the previous 12 months, the price index was up 3.9 percent. This matched expectations and shows that inflation could finally be turning a corner. In addition, consumer spending rose 0.4 percent in August, which is down sharply from 0.9 percent in July. This is another indicator that higher interest rates are having an impact on consumers, who are finally pulling back on their spending.
As the month continues to progress, a lot of people will wait and see how the Fed’s decision to hold interest rates steady will impact the economy. Those looking for houses will probably be excited that interest rates were held steady, but it will be interesting to see how this decision impacts the fight against inflation.
Mortgage Rates Continue To Rise
This week, the 30-year fixed mortgage rate sits at around 7.59 percent on average, which remains one of the highest rates in decades. In August, the average rate was 7.18 percent, indicating that rates have gone up sharply. This is also up slightly from the previous week, where the average 30-year fixed rate was 7.51 percent.
In addition, 15-year fixed mortgage rates have gone up as well, with the national average sitting at around 6.82 percent. This is up from last week, when the average 15-year fixed was 6.51 percent. This is also up slightly from August, where the rates hovered around 5.84 percent.
Because the Federal Reserve decided to hold interest rates study, many home buyers are hoping that mortgage rates will stabilize for a couple of months. It remains to be seen if that will happen.
Consumer Sentiment Might Be Stabilizing
The consumer sentiment report from the University of Michigan is stabilizing, with numbers for September coming in at around 68.1. While this is a slight dip from August’s average numbers, the numbers for September are starting to rise.
Consumers might be starting to relax a little bit because inflationary numbers are starting to come down. For consumer sentiment to rise further, mortgage rates might have to come down without contributing to a spike in inflation or home prices.
This dip implies that despite the decreasing inflation rates, there remains a cloud of uncertainty amongst consumers. This could be attributed to potential interest rate hikes and a subtle slowing down of the job market. The prevailing mood is still optimistic, but the trend is shifting.
Looking To Next Week
Next week, the unemployment data is going to be released, as initial jobless numbers are going to come in. This is a key indicator because rising interest rates generally lead to more layoffs, which could jeopardize the Fed’s goal of a soft landing.
Oct 2, 2023 | Financial Reports
Last week, consumers were treated to several indicators on inflation that not only paint a picture of the economy’s health but also give the Fed more information to work with as it continues to aim for a soft landing.
August Sees a Slight Upward Trend in Inflation
This week, the personal consumption expenditures price index, which excludes more volatile commodities like food and energy, increased 0.1 percent for the month. This is lower than the expected value of 0.2 percent, which indicates that the rising interest rates are starting to have an impact on the economy as the Fed continues to work to bring down inflation.
When compared to the previous 12 months, the price index was up 3.9 percent. This matched expectations and shows that inflation could finally be turning a corner. In addition, consumer spending rose 0.4 percent in August, which is down sharply from 0.9 percent in July. This is another indicator that higher interest rates are having an impact on consumers, who are finally pulling back on their spending.
As the month continues to progress, a lot of people will wait and see how the Fed’s decision to hold interest rates steady will impact the economy. Those looking for houses will probably be excited that interest rates were held steady, but it will be interesting to see how this decision impacts the fight against inflation.
Mortgage Rates Continue To Rise
This week, the 30-year fixed mortgage rate sits at around 7.59 percent on average, which remains one of the highest rates in decades. In August, the average rate was 7.18 percent, indicating that rates have gone up sharply. This is also up slightly from the previous week, where the average 30-year fixed rate was 7.51 percent.
In addition, 15-year fixed mortgage rates have gone up as well, with the national average sitting at around 6.82 percent. This is up from last week, when the average 15-year fixed was 6.51 percent. This is also up slightly from August, where the rates hovered around 5.84 percent.
Because the Federal Reserve decided to hold interest rates study, many home buyers are hoping that mortgage rates will stabilize for a couple of months. It remains to be seen if that will happen.
Consumer Sentiment Might Be Stabilizing
The consumer sentiment report from the University of Michigan is stabilizing, with numbers for September coming in at around 68.1. While this is a slight dip from August’s average numbers, the numbers for September are starting to rise.
Consumers might be starting to relax a little bit because inflationary numbers are starting to come down. For consumer sentiment to rise further, mortgage rates might have to come down without contributing to a spike in inflation or home prices.
This dip implies that despite the decreasing inflation rates, there remains a cloud of uncertainty amongst consumers. This could be attributed to potential interest rate hikes and a subtle slowing down of the job market. The prevailing mood is still optimistic, but the trend is shifting.
Looking To Next Week
Next week, the unemployment data is going to be released, as initial jobless numbers are going to come in. This is a key indicator because rising interest rates generally lead to more layoffs, which could jeopardize the Fed’s goal of a soft landing.
Sep 25, 2023 | Financial Reports
Last week’s economic reports included readings on U.S. housing markets, housing starts and building permits, and the scheduled post-meeting statement from the Federal Open Market Committee of the Federal Reserve. Data on sales of previously owned homes were released along with weekly reports on mortgage rates and jobless claims.
National Association of Home Builders: Rising Mortgage Rates Shake Builder Confidence
Homebuilders lost confidence in U.S. housing market conditions in September. September’s index reading was 45 as compared to the expected reading of 49.5 and August’s reading of 50. The combination of rising mortgage rates and high home prices presented obstacles to first-time and moderate-income buyers, while homeowners delayed listing homes for sale while awaiting lower mortgage rates. Low inventories of previously owned homes for sale drove would-be buyers to consider purchasing new homes.
Home builders offered price cuts averaging 25 percent to buyers in August; the price cuts were deeper in September with cuts averaging 32 percent. The NAHB said 59 percent of home builders offered buyer incentives other than price cuts.
Building Permits Rise as Housing Starts Fall in August
The Commerce Department reported 1.54 million building permits issued in August as compared to 1.44 million permits issued in July. The August reading exceeded analysts’ expectations of 1.45 million building permits issued in August. Housing starts fell to 1.28 million starts in August as compared to July’s reading of 1.44 million starts and the expected reading of 1.43 million housing starts in August.
Sales of previously owned homes fell to 4.04 million sales in August as compared to July’s reading of 4.07 million sales and the expected reading of 4.10 million sales.
Fed Leaves Key Interest Rate Range Unchanged
The Federal Open Market Committee of the Federal Reserve announced its decision to leave the federal funds rate range unchanged at 5.25 to 5.50 percent, but policymakers hinted at another rate hike before the end of 2023. FOMC members review a variety of domestic and global financial and economic data to inform their decision-making process.
Mortgage Rates Rise, Jobless Claims Fall
Freddie Mac reported fixed mortgage rates above 7 percent last week. The average rate for 30-year fixed-rate mortgages was one basis point higher at 7.19 percent. The average rate for 15-year mortgages rose by three basis points to 6.54 percent.
First-time jobless claims fell to 201,000 claims last week as compared to the previous week’s reading of 221,000 new claims and the expected reading of 225,000 claims filed.
What’s Ahead
This week’s scheduled economic reporting includes readings on new home sales, S&P Case-Shiller home price indices, the Federal Reserve Chair’s speech, and reports on inflation. Weekly readings on mortgage rates and jobless claims will also be released.
Sep 11, 2023 | Financial Reports
Last week’s scheduled economic reporting was limited due to the U.S. Labor Day holiday on Monday. The Federal Reserve released its Beige Book report and weekly readings on mortgage rates and jobless claims were also published.
Federal Reserve Releases Beige Book Report
The Beige Book report is a summary of information supplied to Federal Reserve policymakers by their business and professional contacts. Highlights of September’s Beige Book report included:
- Accelerated leisure spending by consumers boosted economic growth during July and August.
- Non-essential retail sales slowed, but the economy was boosted by a final stage of post-COVID-19 pent-up demand.
- Prices for consumer goods fell faster than in many other sectors.
- Auto sales rose due to better inventories available to consumers but increased sales were not connected with rising consumer demand for vehicles.
- Rising business costs reduced profit margins.
The Beige Book report is published eight times a year before scheduled meetings of the Federal Reserve’s Federal Open Market Committee.
Mortgage Rates, Jobless Claims Fall
Freddie Mac reported lower mortgage rates last week; rates for 30-year fixed-rate mortgages averaged 7.12 percent and were six basis points lower than in the previous week. Rates for 15-year fixed-rate mortgages were three basis points lower and averaged 6.52 percent.
Initial jobless claims were lower with 216,000 first-time claims filed as compared to the prior week’s reading of 229,000 initial jobless claims filed. Analysts expected a reading of 230,000 new jobless claims filed.
What’s Ahead
This week’s scheduled economic reports include readings on inflation, U.S. retail sales, and the preliminary monthly report on consumer sentiment. Weekly readings on mortgage rates and initial jobless claims will also be released.
Sep 1, 2023 | Real Estate
A floating interest rate, also known as a variable interest rate or an adjustable rate, is an interest rate that can change over time. Unlike a fixed interest rate, which remains constant for the entire duration of a loan or investment, a floating interest rate fluctuates periodically based on certain factors or benchmarks.
The advantage of a floating interest rate is that it can offer flexibility. When interest rates are low, borrowers can benefit from reduced interest payments. However, if interest rates rise, the cost of borrowing will also increase.
How Does A Floating Rate Work?
A floating interest rate works by adjusting periodically based on a predetermined formula or benchmark. Here’s a general overview of how a floating rate typically operates:
Selection of a Benchmark: When entering into a loan or investment agreement with a floating rate, a benchmark or reference rate is chosen. Common benchmarks include the prime rate, LIBOR, or a government bond yield. The benchmark serves as a starting point for calculating the interest rate.
Margin or Spread: In addition to the benchmark, a margin or spread is set. The margin remains constant throughout the loan or investment term and is added to the benchmark to determine the final interest rate. For example, if the chosen benchmark is 3% and the margin is 2%, the floating interest rate would be 5%.
Periodic Rate Adjustments: The frequency of rate adjustments is specified in the loan or investment agreement. The interest rate may be adjusted annually, quarterly, monthly, or even daily, depending on the terms. At each adjustment period, the interest rate is recalculated based on the current value of the benchmark.
The Pros And Cons Of Using A Floating Rate Mortgage Loan
Using a floating rate mortgage loan, also known as an adjustable-rate mortgage (ARM), has both advantages and disadvantages. Here are some of the pros and cons to consider:
Pros:
Initial Lower Interest Rate: One of the main advantages of a floating rate mortgage is that it often starts with a lower interest rate compared to a fixed-rate mortgage.
Potential for Future Savings: If interest rates decrease over time, borrowers with a floating rate mortgage can benefit from lower monthly payments.
Flexibility: Floating rate mortgages often provide more flexibility than fixed-rate mortgages. Depending on the terms of the loan, borrowers may have the option to refinance or sell the property without incurring significant prepayment penalties.
Cons:
Uncertainty and Rate Fluctuations: The main disadvantage of a floating rate mortgage is the uncertainty associated with rate fluctuations. The interest rate is subject to periodic adjustments based on market conditions, which means the monthly payment can change over time.
Potential for Higher Costs: If interest rates increase significantly during the loan term, borrowers may end up paying more in interest over the long run compared to a fixed-rate mortgage.
Limited Predictability: Unlike a fixed-rate mortgage, where the monthly payment remains constant throughout the loan term, a floating rate mortgage introduces uncertainty.
Refinancing Risk: If interest rates rise substantially, it may become more challenging to refinance the mortgage or obtain a new loan with favorable terms.
It’s essential for borrowers to carefully evaluate their financial situation, risk tolerance, and future plans before opting for a floating rate mortgage. Assessing the potential impact of rate fluctuations and considering long-term financial goals can help borrowers make an informed decision.
Consulting with a financial advisor or mortgage professional is recommended to fully understand the implications of a floating rate mortgage and determine if it aligns with your needs.
