How many hikes can the Fed get in this year? The Fed estimate is two more. Mortgage rates rose on the news.
Mortgage News Daily reports Mortgage Rates Higher Following Fed Forecasts.
Mortgage rates moved higher today, following the Fed's much-anticipated policy announcement. Although the Fed changed quite a few words from the announcement's previous iteration (far more than normal), it wasn't the announcement itself that did the damage. Rather, it was the Fed members' economic projections, which include an assessment of where the Fed Funds Rate will likely be at the end of the next few years.
Specifically, a few of the Fed members who'd been holding out for slightly lower rates in 2018 moved their forecasts up enough to increase the odds of a 4th rate hike by December. This was already a strong possibility, but before today, those in the "3 hike" camp had a stronger case.
While the Fed's rate doesn't directly affect 30yr fixed mortgage rates, shifts in the Fed's rate hike outlook definitely do. In the bigger picture, this was a fairly minor adjustment. Moreover, rates markets were somewhat soothed by the press conference with Fed Chair Powell, which followed half an hour after the announcement.
The net effect was a slight increase in rates that leaves us a little bit closer to the 7-year highs seen in mid-May. Tomorrow morning brings more risk with the European Central Bank's policy announcement. Big moves in either direction are a possibility.
"Today's Fed Statement and Chairman Powell's press conference didn't sit well with bond markets today, as yields rose. I've been locking early as possible, this is precisely why. It's a RISING rate environment, gambling on rates dropping is less than astute," said Ted Rood, Senior Originator.
Tweets of the Day
The Fed statement was bullish on the consumer and the business sector. Curiously, no mention of housing, even though it is a quintessential leading indicator. Meanwhile, mortgage purchase applications have plunged in 6 of the past 7 weeks, at over a 30% annual rate, <1/2>— David Rosenberg (@EconguyRosie) June 13, 2018
and the homebuilding stocks are in an official bear market, down more than 20% from the highs. Is that a whistling sound I hear past the graveyard? <2/2>— David Rosenberg (@EconguyRosie) June 13, 2018
Not sure I agree with the end of the housing market calls. Inventory around the country super low and with exception of a few geographies still affordable and better than renting as rents have gotten out of control but seem peakey. Technical term!— Eric Clark (@thebrandindex) June 13, 2018
Inventory is always low and demand is always high at peaks.— Mike Mish Shedlock (@MishGEA) June 14, 2018
Think back to the alleged shortage in 2006 when people were standing in line overnight, in Florida for the "chance" to buy a condo in a lottery.
That is worth repeating.
Inventory is always low and demand is always high at peaks. Think back to the alleged shortage in 2006 when people were standing in line overnight, in Florida for the "chance" to buy a condo in a lottery.
For "Dot Plot" discussion, please see Fed Hikes Again, Modifies Accommodation Language, Plans on 2 More Hikes in 2018.