Good Afternoon!
Hope you all had a wonderful weekend! My wife and I celebrated 12 years of marriage this weekend, and in true Colorado fashion, we went to the Broncos game on Sunday night. What a fun game to be at and experience. My parents took the kids for the day, so we were able to have some time together during the day to celebrate with each other!
This week’s rates:
30 year fixed, daily (Mortgage News Daily): 7.50%
10-year Treasury: about 5.26%
I’m not going to sugarcoat it. Last week was brutal for rates, and today was a continuation of that.
You’re probably seeing headlines that rates “just crossed 7%.” That number comes from Freddie Mac’s weekly survey, which averages the prior Thursday through Wednesday, so it’s always a step behind. On a daily basis, rates broke 7% back on September 10 and have been climbing ever since.
Why? The economy apparently just won’t slow down. The Fed raised rates, borrowing is expensive, and hiring, growth, and AI investment keep right on going along with nothing breaking. When the economy runs hot, bond investors worry inflation will stick around, so they want higher yields. Mortgage rates follow. The 10-year Treasury just hit levels we haven’t seen in almost 20 years.
One quick tip: If someone budgeted off the 7% they read about in a recent article, their payment is already off.
Now, the good news:
Sellers have won for 14 years here in Colorado. A lot of years of waived inspections, bidding wars, and paying over asking.
That tide is shifting back to buyers, and it’s shifting because of these rates. Higher rates are keeping a lot of people on the sidelines, which hands real leverage to the buyers who are ready. Pending sales nationally just hit their lowest point in almost three years.
And sellers are negotiating. About one in five listings has taken a price cut, and nearly half of recent deals included a seller concession. A luxury agent told me yesterday that $500,000 to $1 million off the price is becoming commonplace, along with massive seller credits. And it’s not just luxury. The median price range is producing opportunities we haven’t seen in a long time.
Every one of those price cuts and credits is a chance to build a better payment.
What To What For Next Week
The U.S. economic calendar builds toward Friday’s highly anticipated September jobs report, which could be another major market mover.
Bond markets remain on edge, with investors increasingly pricing in the possibility of additional Fed rate hikes following another round of hawkish commentary last week. Adding to the volatility is uncertainty surrounding how the Fed is evaluating the economy and communicating its next steps. Markets are not only trying to determine where rates are headed, but also how confident they should be in that path.
Tuesday: Labor & Housing
Tuesday brings another look at both the labor and housing markets. August JOLTS job openings are expected to ease slightly to 7.225 million from 7.271 million. Beyond the headline, quits and layoffs will be important indicators of whether the labor market is showing signs of renewed inflationary pressure.
We’ll also get July home-price data from the S&P/Case-Shiller and FHFA indexes. With mortgage rates surging and housing activity slowing, home-price trends are becoming increasingly important for both household wealth and the broader inflation outlook.
Wednesday: GDP, Consumer Spending & Inflation
Wednesday is the busiest day of the week. The final estimate of Q2 GDP is expected to remain at a +1.5% annualized pace, but the BEA’s annual revisions to GDP and personal income could be more meaningful. Those revisions have the potential to reshape the picture of economic growth, household income and savings.
August personal income is expected to rise +0.5%, while consumer spending is projected to jump +0.9%, up sharply from +0.2% in July.
We’ll also get the latest PCE inflation data. Core PCE is expected to rise +0.3% for the month and +3.3% year-over-year, leaving the annual pace essentially unchanged.
Another combination of sticky inflation and strong consumer spending would give the Fed additional justification to maintain its tightening bias, and could put further upward pressure on bond yields and mortgage rates.
ADP employment also arrives on Wednesday, with private payroll growth expected at +70,000 versus +38,000 previously, providing an early look at labor conditions ahead of Friday’s jobs report.
Thursday: Manufacturing
Thursday shifts attention to manufacturing with the September ISM Manufacturing Index. The headline is expected to improve slightly to 55.0 from 54.6, but the details may matter more.
Employment, new orders and prices paid will provide a better indication of whether manufacturing growth is accelerating and, importantly, whether inflationary pressures are building beneath the surface.
Friday: The Main Event — Jobs
Friday’s September employment report is the biggest event of the week. After August payrolls increased by +162,000, investors will be watching much more than the headline number. Wage growth, unemployment and revisions to previous months could all influence expectations for how restrictive Fed policy needs to be going forward.
Another unexpectedly strong jobs report could reinforce expectations for additional Fed hikes and send the 10-year Treasury yield even higher, potentially creating another leg higher in mortgage rates.
This is a big week for interest rates. Markets are already wrestling with the possibility that the Fed may need to tighten further, and Wednesday’s inflation and spending data followed by Friday’s jobs report could either reinforce or challenge that view.
For mortgage rates, the key question is whether the data finally show enough cooling to relieve pressure on bonds. If inflation remains sticky and the labor market stays strong, rates could remain under upward pressure. If the data show meaningful signs of slowing, bonds could finally get some relief..
Have a wonderful week ahead!
1 Year Look at the 10 YR Yield:
The Relationship Between the 10 Year Yield and Mortgage Spreads & 30 YR Fixed Mortgage Rates
Current Spread of 10 YR Treasury to 30 YR Fixed Rates increased to 2.05% We are still looking to get back to the long-term average of 1.50% – 1.80%.
Long-Term Mortgage Spread Chart (1970-Present):
This Week’s Economic Data & Reports:
- MON – Dallas Fed Business Index
- TUES – S&P House Price Index, Conference Board Consumer Confidence, JOLTS Job Openings, Fed Member Speeches
- WED – MBA Mortgage Applications, ADP Nonfarm Employment Change, PCE Inflation Index, Q2 GDP, Chicago PMI, Fed Member Speeches, Personal Spending and Personal Income
- THURS – Jobless Claims, Challenger Job Cuts, Manufacturing PMI, Fed Member Speeches
- FRI – Jobs Report & Unemployment Rate
People have asked where to track this stuff daily so here is the Bloomberg Website where you can see the reports/data:
https://www.bloomberg.com/markets/economic-calendar
Thanks for reading and have a great day!
