Why Are Mortgage Rates Going Up Again? | TheRuethTeam.com

Okay, so mortgage rates are ticking back up again. I mean it seems like just yesterday that we were celebrating a huge decline from eight percent all the way down to six percent and now the average 30-year fixed mortgage rate is hovering closer to 6.625. So in today's video I'm going to cover why mortgage rates are ticking back up and have they hit the ceiling and what will it take for them to start coming back down again. But before I dive in, if we haven't met, I'm Nicole Ruth, founder of the Ruth team and mortgage originator of over 22 years. If you find any value in this kind of content please give this video a thumbs up and subscribe to my channel because I get to post weekly videos on the housing market to make sure that you're equipped with the knowledge to have the best home buying experience possible. The headlines have been buzzing with all the news about mortgage rates down in the low sixes and we saw a swell of home buyer activity with mortgage purchase application data showing an increase for each of the last six consecutive weeks and we saw a pop of 12 percent in September alone of mortgage purchase applications. But now after enjoying this brief period of celebration rates are on their way back up again leaving many homebuyer sellers and real estate agents wondering what exactly is causing it. So let's dive into the driving factors behind this trend and maybe how long it'll last. One of the main reasons mortgage rates are now climbing is due to the strong jobs market report that came out on the first Friday of October for September's jobs data. This report came out with a much higher than the 140,000 jobs expected with 254,000 new jobs created during the month of September. More impactful than even that was the 72,000 more jobs that were added to the revised July and August reports. I mean this is not only high it's atypical as job revisions are typically to the downside. Three other reports last week showed unemployment dip back down again to 4.1 percent wages are climbing back up to four percent annual growth rate and job openings moved upward over eight thousand again. You know what you're thinking like I don't really do it doesn't feel like there are so many jobs available because we all know someone who can't find a job or they're working two or three jobs just to make ends meet. Well diving a little deeper into the report does show that employers with 50 employees or less are on the decline. In fact 1 to 25 employees has been declining for five straight months and 25 to 50 since the beginning of the year. Meanwhile government jobs jumped 785,000 in September alone. However you slice it this robust job growth indicates a healthy economy and a soft landing. But how does that then affect mortgage rates? A strong labor market influences the Federal Reserve's monetary policy. The Fed adjusts interest rates to manage economic growth and control inflation. Now remember just a few weeks ago the Fed cut rates by 0.5 percent because it appeared that job growth was slowing down. However with this new data showing stronger employment the Fed might reconsider the speed by which we see further rate cuts. Investors who were all in on another 75 bips and cuts by the end of the year are now speculating that the Fed may hold off on additional cuts or more true is probably that they'll opt for smaller ones. According to the CME Group's FedWatch tool there's a 91 percent chance of a quarter percent point rate cut at the next Fed meeting in November. This is down from expectations of a larger cut of another half a percent. There is even talks of a pause after the next one or two rate cuts. This shift in investor expectations causes yields on treasury bonds to rise and since mortgage rates are closely tied to the 10-year treasury yield they also go up. Now speaking of treasury yields the 10-year treasury yield which is the key benchmark for mortgage rates has climbed back above four percent. When investors see a strong economy they often demand higher yields on bonds due to concerns about potential inflation. Higher bond yields mean higher mortgage rates. So what about that inflation? I mean for a while inflation was a primary concern influencing interest rates. However with the headline personal consumption expenditures price index dropping to 2.2 percent in August and expected to hit the Fed's target of two percent in September the market's attention has shifted to employment data. Unless we see significant changes in inflation which we'll get more information on with the upcoming consumer price index report it's highly unlikely to have a major impact on mortgage rates in the immediate future. All right so what needs to happen for mortgage rates to start decreasing again? One is economic slowdown. If future economic data indicates a slowing economy like decreased job growth or lower consumer spending the Fed might consider more aggressive rate cuts or lower inflation expectations. Should inflation remain low or decrease investors might return to bonds lowering yields and mortgage rates. And then there's a global economic events developments such as trade agreements geopolitical instability or slowdown in global economies could impact investor behavior leading to lower mortgage rates or clear signals from the Federal Reserve. If the Fed communicates a willingness to cut rates more aggressively to support the economy this could influence investor expectations and bring mortgage rates down. And lastly a narrowing of the mortgage spread. As a measure of financial risk the spread between the 10-year treasury and the 30-year mortgage rate slowly returns to its normal 1.65 to 1.85 percent range rates will continue to drop. This spread hit a high of 3.1 percent and is now sitting at 2.4 percent. I understand all of this data can feel overwhelming so I want to land the plane by letting you know what it means to you as a potential home buyer or seller this year. Timing the market can be a stressful venture. While mortgage rates undoubtedly are important due to their impact on affordability what I'm leaning into with all of our clients is what are their goals they have for homeownership. I mean every person's individual financial situation and vision for their future is different. Family dynamics, work demands, lifestyle choices, generational wealth goals and risk tolerances also impact the home buying and selling decision making process. Buyers know that 2025 will provide opportunities to capture slowly declining mortgage rates giving many buyers today the ability to refinance. Having said that there are no guarantees so working closely with a lender who understands your goals guardrails and expectations is an absolute must especially in a market where active listings are on a continuous climb across the country. This is your season to find your vision because your perfect home is actually probably on the market now. It just needs your creativity and your real estate agents top-notch negotiation skills. Sellers you've got to know that HGTV ready homes priced slightly under market are going fast and with multiple bids buyers want everything done if they're faced with higher prices and higher mortgage rates and if your home just isn't that know that you'll need a little bit of flexibility to help with the buyer's affordability to sell your home faster. Remember if you are also a buyer in this market you will have the same advantages your prospective buyers have. Bottom line while it looks like the current increasing rate streak may be running out of gas 2024 will continue to have a volatile rate environment so staying informed is not only educational it can help me navigate the changing housing market more efficiently. If you want even more housing market insights check out this video I have linked on the screen now and I'll see you next time