And Suddenly Everything Turned ǝpᴉsdn uʍop
Banks Crash, Fed Hikes, Mortgage Rates Dip
Last month we said, “Volatility is the Name of the Game.” But we had no idea it would be quite this volatile—or unpredictable. The mid-March banking “collapse” paralyzed activity for nearly a week as investors, lenders, agents, buyers, sellers, and everyone else waited anxiously to see what the Fed would do on Wednesday, March 22nd. And what they did—a rate hike of 0.25%—was hardly debilitating as Treasury yields and mortgage rates fell significantly after the announcement. Whew!! (a collective exhale of relief with a deep inhale of new-found optimism).
What It All Means
So, the Fed hikes interest rates, and mortgage rates drop sharply—to their lowest point since early February. That’s it in a nutshell. We would all do well to consider that panic in the financial markets is usually good for interest rates, with US Treasuries almost always faring much better than mortgage rates. This recent episode has been no exception. The US Treasury coupon that markets often use as a benchmark for mortgage rates had fallen almost twice as much as mortgage rates, but the gap is starting to get a bit tighter. Who’s to say what’s next?
Let’s Zoom Out
The Fed already had a tough job trying to bring down historic inflation. But thanks to SVB’s implosion, it now needs to balance its fight against inflation with preventing even more banking chaos. Such is the pickle we all find ourselves in.
Proceed With Caution
(But Proceed Nonetheless)
Although most experts posit more questions than answers right now, there is still an opportunity for buyers. As of this writing, we are back down below the 6.5% sweet spot we mentioned last month (6.38% to be exact; see chart and graph below). That, of course, lends itself to both buyer and seller activity. Eager buyers have been waiting to see what Fed Chair Jerome Powell would do. (His Federal Open Market Committee Meeting typically shakes up rates.) As rates have effectively dipped, offers should start flowing again as buyers hope to lock in a sub 6.5% rate before the tides invariably change again.
Today’s Mortgage Rates
Source: Mortgage News Daily, March 24, 2023
2023 30-Year Fixed Rate
Source: KCM Analysis, Mortgage News Daily
March Madness Tip
It’s been a wild ride the past few days. And though 30-year fixed rates dropped by more than half a percent (for most lenders), there is much low-grade anxiety hovering in the air. For my fellow Californians, I’ll reiterate: this is not the L.A. haze; it is anxiety. But seriously, in spite of last week’s turmoil, nothing catastrophic happened. And though the market is a bit nervous still—not knowing what sort of drama lies ahead—it is possible to find real opportunities as rates stay at 6.5% or lower. More than anything, this is a time for everyone, buyers and sellers, to stay in almost daily contact with their Realtor and lender. Because every single day carries with it the winds of volatility that seem to have settled in, so stay informed. It’s always your best weapon.