Vail Daily column: Presidential actions cause confusion in mortgage markets
Mortgage rates are impacted by the emotions of the investors who decide how much money gets invested where and typically in times of uncertainty money flows into the bond markets for safety and that lowers mortgage rates.
When President Donald Trump was first elected the stock markets were jubilant as investors thought Trump would throw off cumbersome regulations inhibiting business growth and probably thought trade with Russia might even improve and surely massive spending on defense would help ramp up some sectors of the economy.
But now reality has settled in on the Trump White House and they are finding out that signing executive orders (when he remembers to sign them, that is) doesn’t just magically make things happen.
Many of Trump’s grandest schemes and plans are unraveling and relations with Russia are deteriorating. Add to this the dynamics of China and North Korea and the future is anything but clear for many aspects of the political spectrum. Defunding massive programs of the State Department that are devoted to diplomatically keep the peace leaves even more uncertainty.
As a result, many investors are once again studying the safety of the U.S. bond markets and money is flowing inward once again. So far the impact has been modest and to a great degree tempered by the gradual withdrawal of another major player in the mortgage backed bonds — the Federal Reserve Bank, which during the past 10 years has purchased trillions of dollars in bonds to keep the housing market moving along.
Not An Indefinite Situation
The Federal Reserve Bank has actually made hundreds of billions in profits on this move, but it’s not a situation that should go on indefinitely and they should be exiting the bonds and leaving it to private money (so long as there is enough private money, which there really has not been for the past several years).
So, while rates are not at their historic lows of the past, they have eased off somewhat since the election with some notable good and bad days. The direction of the Federal Reserve’s activities are pretty well charted and unlikely to change, leaving it to the fickle choices of investors as to the future of mortgage rates.
The constant gyrations of the president on his views towards China, Russia, Syria and North Korea leave investors with little clarity on the actual position of the U.S. and that stirs unease about how future and current trade deals might work out. During the campaign, Trump promised actions to make the U.S. dollar stronger, which makes imports cheaper but exports more expensive to those buying our goods and services. This week, he said the dollar may be too strong for its own good. He wants to withdraw from the North American Free Trade Agreement and the Pacific Rim treaty, which could cut U.S. exports (and jobs).
All in all, the president often sounds like a teenager trying to figure out which clique in school is the coolest to hang with and figure out the meaning of life as expressed in musical lyrics. Everybody went through that phase once, but the president of the United States should, shall we say, take a bit more practical view of the world.
Chris Neuswanger is a loan originator at Macro Financial Group in Avon and may be reached at 970-748-0342. He welcomes mortgage related inquiries from readers. His blog and a collection of his columns may be found at http://www.mtnmortgage guy.com.
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