- My Forums
- Tiger Rant
- LSU Recruiting
- SEC Rant
- Saints Talk
- Pelicans Talk
- More Sports Board
- Coaching Changes
- Fantasy Sports
- Golf Board
- Soccer Board
- O-T Lounge
- Tech Board
- Home/Garden Board
- Outdoor Board
- Health/Fitness Board
- Movie/TV Board
- Book Board
- Music Board
- Political Talk
- Money Talk
- Fark Board
- Gaming Board
- Travel Board
- Food/Drink Board
- Ticket Exchange
- TD Help Board
Customize My Forums- View All Forums
- Show Left Links
- Topic Sort Options
- Trending Topics
- Recent Topics
- Active Topics
Started By
Message
Mortgage Interest Rates
Posted on 12/29/22 at 12:32 pm
Posted on 12/29/22 at 12:32 pm
We will be completing our new construction soon and are looking into locking the rates. Does anyone have any idea if we should go ahead and lock today or hold off to see if they drop a little in the next few weeks?
6
Posted on 12/29/22 at 1:45 pm to mitchel1128
They’re not dropping
Posted on 12/29/22 at 1:48 pm to mitchel1128
If rates are going to move again, they're probably going to go up.
Posted on 12/29/22 at 2:02 pm to mitchel1128
quote:
Does anyone have any idea if we should go ahead and lock today or hold off to see if they drop a little in the next few weeks?
What rate are you being quoted?
Posted on 12/29/22 at 2:19 pm to mitchel1128
oof
Posted on 12/30/22 at 9:38 am to mitchel1128
Why didn't you do a one time close and lock it in up front?
Posted on 12/30/22 at 10:31 am to WM_Tiger
quote:
They’re not dropping
They already dropped signifcantly
Posted on 12/30/22 at 7:46 pm to mitchel1128
Obviously this is not my area (or anybody here probably) area's of expertise, and predicting things like this are going to be difficult, but I don't see much potential for an increase and much more potential for a decrease for a couple reasons.
Inflation appears to have peaked and trending downward, and they way CPI measures housing costs (which make up like 30% of CPI) results in a pretty large lag because things like rental contracts are usually around 12 months (at least few are month to month) so it's hard to capture changes over the short term and changes take 6-12 months to really get reflected into the data. So various measures that attempt to capture real-time changes indicate that these have dropped pretty significantly over last 6 months or so and trending downward.
These changes should start to show up soon, and since we put a lot of weight on year-over-year inflation, this should correspond to about the time inflation really picked up last year due to the base effects (which worked in the opposite direction when inflation quickly picked up). Since inflation and treasury yields are positively correlated, they should remain, at worst, flat, but there is a lot of downside potential, even if fed funds rate remains constant.
In particular, the 10-year treasury yield is the important one to monitor since that largely determines 30-year mortgage rates. More specifically though, the spread between the 30-year fixed mortgage to 10-year yield has a historical average of about 1.7% with a standard deviation of about 0.5%. But for the last 6 months or so we've seen the spread between 2.5% and 3%.
Now I haven't seen any explanation why this is happening, but looking at a chart of this spread, but the spread does appear to correspond to rising rates and recession risk. So I think a bit of a cushion is built in here. So if rates remain flat, or begin to rise at a slower rate, I think this spread will decrease if it follows more historical patterns.
So altogether, I think the inflation data indicate that treasury yields are likely at or near their peak, and will likely level off if not decrease. So even if the spread remains the same, mortgage rates should also either flatten if not decrease. But because I think the spread has a cushion, and is more likely to decrease, I think even if yields remain flat, rates should decrease.
So depending on your construction timeline, but I suspect we're looking at spring completion at the earliest, if not more towards summer, if I was in your position, I would wait if I had at least a few months to lock in my rate. And it's my understanding the longer the locked in rate is in effect, the larger the fees tend to be. So added fees if you locked in, gives a bit of a cushion if rates increase if you don't lock it in.
Inflation appears to have peaked and trending downward, and they way CPI measures housing costs (which make up like 30% of CPI) results in a pretty large lag because things like rental contracts are usually around 12 months (at least few are month to month) so it's hard to capture changes over the short term and changes take 6-12 months to really get reflected into the data. So various measures that attempt to capture real-time changes indicate that these have dropped pretty significantly over last 6 months or so and trending downward.
These changes should start to show up soon, and since we put a lot of weight on year-over-year inflation, this should correspond to about the time inflation really picked up last year due to the base effects (which worked in the opposite direction when inflation quickly picked up). Since inflation and treasury yields are positively correlated, they should remain, at worst, flat, but there is a lot of downside potential, even if fed funds rate remains constant.
In particular, the 10-year treasury yield is the important one to monitor since that largely determines 30-year mortgage rates. More specifically though, the spread between the 30-year fixed mortgage to 10-year yield has a historical average of about 1.7% with a standard deviation of about 0.5%. But for the last 6 months or so we've seen the spread between 2.5% and 3%.
Now I haven't seen any explanation why this is happening, but looking at a chart of this spread, but the spread does appear to correspond to rising rates and recession risk. So I think a bit of a cushion is built in here. So if rates remain flat, or begin to rise at a slower rate, I think this spread will decrease if it follows more historical patterns.
So altogether, I think the inflation data indicate that treasury yields are likely at or near their peak, and will likely level off if not decrease. So even if the spread remains the same, mortgage rates should also either flatten if not decrease. But because I think the spread has a cushion, and is more likely to decrease, I think even if yields remain flat, rates should decrease.
So depending on your construction timeline, but I suspect we're looking at spring completion at the earliest, if not more towards summer, if I was in your position, I would wait if I had at least a few months to lock in my rate. And it's my understanding the longer the locked in rate is in effect, the larger the fees tend to be. So added fees if you locked in, gives a bit of a cushion if rates increase if you don't lock it in.
Posted on 12/30/22 at 7:54 pm to Cobra Tate
quote:
They’re not dropping
They already dropped signifcantly
What rates are you seeing? They dropped a little but seem back up again. For example today:
quote:
With 700-719
30-yr fixed - 7.555%
15-yr fixed - 6.235%
10 / 6 ARM - 7.572
800+
30-yr fixed - 6.928%
15-yr fixed - 6.226%
10 / 6 ARM - 7.265
Posted on 12/30/22 at 8:05 pm to molsusports
quote:The rates google provides never seem right. According to the weekly Primary Mortgage Market Survey provided by Freddie Mac, which is what the St. Louis Fed's FRED data uses (Thursday is the reporting data used), rates peaked at 7.08% on 10/27, bottomed out at 6.31% on 12/15 and have risen a bit to 6.42% on 12/29.
What rates are you seeing? They dropped a little but seem back up again. For example today:
So relative to the peak, they've come down quite a bit, but they are off the lows of 2 weeks ago, which makes sense as the 10-year treasury yield has increased a bit since mid-December.
Posted on 12/30/22 at 8:16 pm to buckeye_vol
quote:I did a bit more analysis of these data, and ran a little scatter plot and regression with the monthly mortgage rates and 10-year treasury yield since 1971.
In particular, the 10-year treasury yield is the important one to monitor since that largely determines 30-year mortgage rates. More specifically though, the spread between the 30-year fixed mortgage to 10-year yield has a historical average of about 1.7% with a standard deviation of about 0.5%. But for the last 6 months or so we've seen the spread between 2.5% and 3%.
Now I haven't seen any explanation why this is happening, but looking at a chart of this spread, but the spread does appear to correspond to rising rates and recession risk. So I think a bit of a cushion is built in here. So if rates remain flat, or begin to rise at a slower rate, I think this spread will decrease if it follows more historical patterns.
The R-Squared of this relationship is 0.978 (so a correlation of 0.989), so they're nearly perfectly correlated. In addition, the resulting simple regression equation is 30-year Mortgage Rates = 1.017*(10-year treasury yield) + 1.6054. With the current yield of 3.879%, that would indicate an expected 30-year mortgage rate of about 5.55%.
So with mortgage rates at about 0.8% to 1% above their expected rates, it looks like there is a lot of room to come down, even if the 10-year stays flat, and a pretty large cushion if it rises.
This post was edited on 12/30/22 at 8:17 pm
Posted on 12/30/22 at 8:24 pm to buckeye_vol
quote:
relative to the peak, they've come down quite a bit, but they are off the lows of 2 weeks ago
I guess everything is relative. Everything is 2-3 times higher compared to the nearly free credit lenders were providing in recent years.
The buyers seemed to drop off rapidly this summer when they crossed 5% (which is still obviously lagging data since most closings were locked in more than 30 days earlier at sub 5 and probably 3 something). I think we're unlikely to see rates drop below 4% next year- which is probably what it would take to Incentivize buyers at current housing prices.
Most sellers seem to still be asking for almost as much as buyers could afford at around or sub 3 rates. IDK whether rates will be closer to 5 or 7.5 next year but my guess is if they aren't under 4.5 or 4 selling prices will have to drop significantly because of simple affordability issues
Posted on 12/30/22 at 10:01 pm to molsusports
Respect to BuckeyeVol for his work in this thread. A little off topic-On the construction side-What I’ve seen with new construction in Louisiana is builders with inventory calling potential buyers back with dramatic price decreases . They are working hard to get buyers in a home with a specific monthly payment like they are car dealers. I spoke to new home buyers who said DSLD called them with a 15% price drop on a home. As for interest rates , I think 5.5 gets things moving again in the first time buyers and production home market. I think pressure and supply issues in the rental market will help motivate first time homebuyers also in conjunction with these other factors.
Posted on 12/31/22 at 9:09 am to molsusports
quote:
What rates are you seeing? They dropped a little but seem back up again. For example today:
Those rates are retail pricing with buckets built in most likely 2%
Take 1% off those rates for wholesale pricing (brokers)
FHA rates are in the high 4s with a 660 for example
Rates were dropping hard but that new 1.7tril spending did not help the inflation fight which is what drives Mortgage Rates
Posted on 12/31/22 at 12:06 pm to buckeye_vol
quote:
I did a bit more analysis of these data, and ran a little scatter plot and regression with the monthly mortgage rates and 10-year treasury yield since 1971.
The last time inflation was as running at these levels was approximately 40 years ago. Rates 40 years ago were between 16-18. We won’t see them that high, but they have more room up in the next 6 months. I was downvoted heavily for predicting rates in excess of 7% this year back in April and told I’d lost my mind for suggesting 8% rates were possible in 18 months. I still think we will see rates at 8% before the end of 2023. I’d definitely do an ARM if I Were purchasing a home right now.
For those saying rates are off their peak, the same could be said when they dropped in February, May, and July. Rates do not straight line.
Page 1 of 1
Popular
Back to top
Follow TigerDroppings for LSU Football News