Fixed mortgage rates reverse course for the first time this year

A Freddie Mac sign stands outside the company's headquarters in McLean, Virginia, U.S., on Tuesday, April 8, 2014. Senator Sherrod Brown, an Ohio Democrat and a member of the Senate Banking Committee, said a bipartisan bill to replace Fannie Mae and Freddie Mac is too complicated and doesn't do enough to address too-big-to-fail concerns or provide assistance for affordable housing. The panel will consider the measure on April 29. Photographer: Andrew Harrer/Bloomberg (Andrew Harrer/Bloomberg News)

Fixed mortgage rates moved lower for first time in 2018.

According to the latest data released Thursday by Freddie Mac, the 30-year fixed-rate average slipped to 4.44 percent with an average 0.5 point. (Points are fees paid to a lender equal to 1 percent of the loan amount.) It was 4.46 percent a week ago and 4.3 percent a year ago.

The 15-year fixed-rate average fell to 3.9 percent with an average 0.5 point. It was 3.94 percent a week ago and 3.5 percent a year ago. The five-year adjustable rate average rose to 3.67 percent with an average 0.4 point. It was 3.63 percent a week ago and 3.28 percent a year ago.

[ Financial planning can help reduce anxiety of buying a home ]

“After holding steady for much of the week — even through Friday’s exceptionally strong jobs report — rates fell for the first time this year after inflation data reported Tuesday were weaker than anticipated, and news of the firing of Secretary of State Rex Tillerson prompted some financial market flight to safety,” said Aaron Terrazas, senior economist at Zillow. “Beyond the continued risk of geopolitical developments, the Fed is expected to raise short-term interest rates at next Wednesday’s [Federal Open Market Committee] meeting. The press conference following the meeting will be Chairman [Jerome] Powell’s first since taking over in mid-February and markets will study the FOMC’s quarterly forecasts for signals about the committee’s unspoken monetary policy leanings.”

Bankrate.com, which puts out a weekly mortgage rate trend index, found that nearly two-thirds of the experts it surveyed say rates will remain relatively stable in the coming week. Shashank Shekhar, the chief executive of Arcus Lending, is one who expects rates to hold steady.

“Rates went up too quickly at the beginning of the year and are now simply taking a pause,” Shekhar said. “Mortgage-backed securities, the trading of which directly influences the rate, seems to be agnostic even to big personnel changes in the White House and Britain’s action against Russia. It would take something even more dramatic and unexpected for the mortgage rates to move by a big margin either way, up or down.”

[ Know your mortgage options when searching for a new home ]

Meanwhile, mortgage applications were flat again last week, according to the latest data from the Mortgage Bankers Association. The market composite index — a measure of total loan application volume — increased 0.9 percent from a week earlier. The refinance index fell 2 percent, while the purchase index rose 3 percent.

The refinance share of mortgage activity accounted for 40.1 percent of all applications, its lowest level since September 2008.

“Although the purchase market continues to be constrained by a lack of supply, applications for home purchase loans increased 3 percent last week to the highest level in over a month, as demographic and economic conditions remain favorable for housing demand,” said Joel Kan, an MBA economist. “Refinance activity remains weak as rates have increased in essentially every week of 2018 thus far, reducing the benefit of a refinance for those borrowers currently in the market.”

Robert Bobby Darvish Platinum Lending Solutions Orange County California

Mortgage applications shoot up 8.3% to start the year

• Homebuyers this year are facing a new landscape on the tax front.
• Total mortgage application volume rose 8.3 percent during the first week of the year.
• Refinance applications led the charge, rising 11 percent from the previous week.

Ty Wright | Bloomberg | Getty Images

Potential home buyers walk past an 'Open House' sign displayed in the front yard of a property for sale in Columbus, Ohio, on Sunday, Dec. 3, 2017.

Pent-up demand from the holidays likely fueled the solid jump in mortgage applications last week.
Total application volume rose 8.3 percent during the first week of the year from the previous week, as mortgage rates held below year-ago levels, according to the seasonally adjusted Mortgage Bankers Association report.

Refinance applications led the charge, rising 11 percent from the previous week. Homeowners may be taking advantage of lower rates now, concerned that rates will move higher this year. Rates were higher at the start of 2017 than they are now. Homeowners also saw big gains in home equity last year and may be taking advantage of that in cash-out refinances.

The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances of $453,100 or less was basically unchanged during the week, increasing just 1 basis point to 4.23 percent, with points decreasing to 0.35 from 0.37, including the origination fee, for 80 percent loan-to-value ratio loans.

Economic news was mixed during the week, which kept interest rates in check.

"For example, the ISM's nonmanufacturing index showed that growth in the services sector was down for the second month, and the BLS' December jobs report was weaker than expected," said Joel Kan, an MBA economist. "However, these were partially offset by slightly stronger factory orders for November and continued optimism of positive impacts from the tax reform plan."

Homebuyers also came back to the market after the holiday break. Mortgage applications to purchase a home rose 5 percent for the week but were 1 percent lower than the same week one year ago.

"This was likely a catch-up week for potential borrowers as we head into the new year," Kan said.

Homebuyers this year are facing a new landscape on the tax front. The Republican tax plan reduced the deductions that homeowners can take for property taxes and mortgage interest. In higher-priced housing markets and in states with high property-tax rates, that makes homebuying more expensive than it was just a few weeks ago.

Buyers are also facing higher prices due to a severe lack of supply. More homes should begin to come on the market this month and next, with sellers hoping to get the jump on the spring market, especially those who are selling in order to buy another home. Unfortunately for buyers, there is so much demand for housing right now that any new supply will likely be swallowed up quickly with competition and prices remaining high.

Robert Bobby Darvish Platinum Lending Solutions Orange County california

Mortgage refinance applications surge 9 percent as rates fall back

• Total mortgage applications rose 4.7 percent last week.
• The Mortgage Bankers Association's report showed a 9 percent weekly jump in applications to refinance.

Luke Sharrett | Bloomberg | Getty Images

Houses stand near the former Bethlehem Steel plant, now occupied by Gautier Steel Ltd., in downtown Johnstown, Pennsylvania.

Interest rates on home loans are now significantly lower than a year ago, and that may be bringing more homeowners back to their lenders to refinance.
Total mortgage applications rose 4.7 percent last week from the previous week.
The increase in the Mortgage Bankers Association's seasonally adjusted report was largely due to a 9 percent weekly jump in applications to refinance. Lenders suddenly have a strong sales pitch, now that rates are significantly lower than they were a year ago.
Rates jumped dramatically following the presidential election and remained higher for much of the past year, until now. Refinances are now down just 10 percent from a year ago because volume dropped by half for much of last year.

The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances of $424,100 or less decreased to 4.19 percent from 4.20 percent, with points increasing to 0.40 from 0.34, including the origination fee, for 80 percent loan-to-value ratio loans. The rate stood at 4.27 percent one year ago.

"The refinance share is at its highest level since September," said Mike Fratantoni, chief economist at the MBA. "Purchase volume continues to be supported by a strengthening job market."

Mortgage applications to purchase a home increased 2 percent for the week and are now 8 percent higher than a year ago. While buyer demand remains strong, the supply of affordable homes for sale is not, and that is holding back a more robust market for purchase loans.

Mortgage rates have not been moving much for the past two months, but they are now becoming slightly more volatile. The Republican tax plan, nearing a final form and vote in Congress, could cause a reaction in rates. Industry watchers expect rates to move higher in 2018, although that was the expectation in 2017, and they are now lower.

By Robert Bobby Darvish Platinum Lending Solutions Orange County

U.S. home prices soar by the most in 3 years, led by Seattle

WASHINGTON (AP) — U.S. home prices rose at the fastest pace in more than three years in September, lifted by a record-low supply of houses for sale. Seattle posted the highest year-over-year increase, topping all other cities by a hefty margin.

The Standard & Poor's CoreLogic Case-Shiller national home price index released Tuesday rose 6.2 percent in September from a year earlier, the largest gain since June 2014. In 13 of the 20 cities tracked by the index, yearly price gains in September were faster than in August.
Home buyers are desperately bidding up prices because so few properties are available. The number of homes for sale in September was the fewest for that month on records dating back to 2001, according to the National Association of Realtors. And home builders aren't yet putting up enough new homes to reduce the supply crunch.

Seattle, Las Vegas and San Diego reported the highest year-over-year gains. Home prices jumped 12.9 percent in Seattle, 9 percent in Las Vegas and 8.2 percent in San Diego. Las Vegas, one of the hardest-hit cities in the housing bust, has been making a comeback since prices bottomed out in 2012.
Home prices rose in all 20 cities. The smallest gains were in Washington D.C., where prices rose 3.1 percent; Chicago, with a 3.9 percent gain; and Miami, at 5 percent.
Unemployment is low and the economy is growing at a solid clip, fueling demand for homes. Mortgage rates also remain historically low, with the average rate on a 30-year mortgage below 4 percent.

Yet Americans are remaining in their homes longer, according to a recent survey by the Realtors. Many are reluctant to sell because there are so few other homes to buy.
Builders are responding to the pent-up demand by building more houses. The construction of new homes jumped nearly 14 percent in October to the fastest pace in a year. But home builders are struggling to find the workers and land they need to ramp up construction more quickly.
"The past two months have shown promising signs of life from builders," Svenja Gudell, chief economist at real estate data provider Zillow, said. "But it's going to take a lot more than two good months to fully erase the housing deficit we're facing after years of underbuilding."
The Case-Shiller index covers roughly half of U.S. homes. The index measures prices compared with those in January 2000 and creates a three-month moving average. The September figures are the latest available.

Robert bobby Darvish platinum Lending Solutions

GOP tax plan would shrink mortgage interest benefit, slash corporate tax rate

By Damian Paletta and Mike DeBonis November 2 at 3:00 PM

Play Video 2:34

What's in the House GOP tax plan?

Embed

Share

House Republican leaders on Thursday, Nov. 2 proposed legislation that would overhaul the U.S. tax code. Here's what you need to know about it. (Monica Akhtar/The Washington Post)

House Republican leaders on Thursday proposed legislation that would overhaul the U.S. tax code, slash corporate and individual income tax rates and jettison numerous tax breaks Americans and businesses have used for years to limit their tax bills.
The release of the proposal accelerates a frantic political effort that could impact almost every American household and business. In a number of cases, the tax plan cuts back on tax benefits for families and individuals while expanding tax benefits for companies.
The Tax Cuts and Jobs Act would lower the corporate tax rate from 35 percent to 20 percent and collapse the seven tax brackets paid by families and individuals down to four. It would create giant new benefits for the wealthy by cutting business taxes, eliminating the estate tax, and ending the alternative minimum tax.

Economy & Business Alerts

Breaking news about economic and business issues.

The legislation would cut in half the popular mortgage interest deduction used by millions of American homeowners, changing the deduction’s rules for new mortgages. Presently, Americans can deduct interest payments made on their first $1 million worth of home loans. Under the bill, for new mortgages, they would only be able to deduct interest payments made on their first $500,000 worth of home loans.
This change could have a particularly big impact on high-cost areas, such as San Francisco, New York, Boston, and the Washington D.C. area, and housing groups and lawmakers will likely try to defeat it. The bill would allow people to deduct their local property taxes from their taxable income, though this benefit would be capped at $10,000.

Play Video 1:55

10 tax reform promises Trump has made

Embed

Share

A look at what President Trump has promised Americans as it relates to his tax reform plan. (Joyce Koh/The Washington Post)

[All your major questions about the GOP tax plan, answered]

The bill would nearly double the amount of money not subject to federal income tax, a tax break known as the “standard deduction.” Under the plan, that deduction would rise from $12,700 per family to $24,000. But this benefit would be partially offset by the personal exemption many Americans can claim, which can be large for families with multiple children.
The bill’s true impact on the middle class will be difficult to immediately measure. The bill would create a new “Family Credit” and expand the child tax credit used by working families. The child tax credit would grow from $1,000 per child to $1,600 for each child.
Families would also no longer be able to deduct their state income taxes from their federal taxable income, another change that would have a particular impact on places like New Jersey and New York, where state taxes are higher than in other areas. Taxpayers will be able to deduct their property taxes up to $10,000.
Americans would no longer be able to deduct their medical expenses or property and casualty losses, according to a document outlining the plan.
The legislative fight over the tax bill has become the Trump administration’s biggest political goal, after failed attempts to repeal the Affordable Care Act. Trump wants the legislation to pass the House and the Senate by the end of the year, though they must resolve numerous differences.
The bill would add $1.5 trillion to the debt over 10 years, but Republicans believe the changes would trigger a surge in economic growth, higher wages, and job creation.
Other changes in the bill would be far reaching. It would, for example, make changes to college savings programs and have new requirements for tax-exempt organizations like churches and charities.
The measure now moves into a contentious phase as Republican lawmakers look to make their preferred changes to the bill while nearly all Democrats work to block it, all while an army of lobbyists lean on Congress in a bid to protect their preferred deductions.
Robert Bobby Darvish Platinum Lending Solutions Orange County

Homebuyers rush to riskier mortgages as home prices heat up

• The number of adjustable-rate mortgage originations jumped just over 40 percent from the first quarter of this year to the second.
• Mortgage rates are still very low, historically speaking, but they have been inching up.
• Buyers this year are struggling with affordability and opting for a lower-rate product.

Carlo Allegri | Reuters

An aerial view of a retirement community in Central Florida

Home prices are heating up yet again, and that is sending more potential buyers looking for ways to afford a monthly mortgage payment.
The number of adjustable-rate mortgage originations jumped just over 40 percent from the first quarter of this year to the second, according to analysis by Inside Mortgage Finance. ARMs offer lower interest rates than fixed-rate loans, and today's ARMs usually have a fixed period of at least five years. That means the rate can change after five years. Still ARMs are considered riskier than the classic 30-year fixed mortgage.
The average contract interest rate on 30-year-fixed mortgages with conforming balances was 4.11 percent last week, according to the Mortgage Bankers Association. Compare that with the rate on a five-year ARM, which was 3.38 percent. The rate on an adjustable-rate loan, by definition, will change after the fixed period, moving higher or lower, depending on the broader market rate.
ARM demand usually rises from the first quarter to the second quarter, because spring is the busiest season for homebuying, and it's when families dominate the market, searching for bigger, higher-priced homes. Still, the jump in ARMs in the spring of 2016 was 15 percent compared with this year's 40 percent jump. This makes the case that buyers this year are struggling with affordability and opting for a lower-rate product.
While mortgage rates remain very low, historically speaking, they have been inching up. The vast majority of homebuyers favored the safety of the 30-year-fixed rate mortgage since the housing crash, but weakening affordability is now changing that.
Home prices have been rising steadily for the past three years, and while it looked like the gains were flattening recently, they appear to be heating up again. Prices nationally jumped 6.9 percent in August compared with August of 2016, the biggest gain in three years. The annual gain in July was 6.7 percent, according to CoreLogic.
"One thing that's helped to fuel demand, and certainly home price growth, as much as the lean inventory of for-sale homes is that mortgage rates have really cooperated," said Frank Nothaft, chief economist at CoreLogic.
Home prices have been rising far faster than inflation, but Nothaft predicts the gains will actually ease next year, if, as he expects, mortgage rates rise. That will be the tipping point, he said, although others argue that tight supply of homes for sale, especially on the low end, will keep prices lofty despite higher mortgage rates.
Already, close to half of the nation's top 50 housing markets are overvalued, in relation to income and employment growth.
"Prices are being driven up by very tight market conditions," noted Matthew Pointon, property economist at Capital Economics. "On a per capita basis, the number of existing homes for sale is at a record low, and buyers are therefore having to up their offers to secure a home."
Pointon said home prices should actually be rising by more than 10 percent, given the tight supply, but tight mortgage lending standards are restricting that growth.
"Cautious appraisals are preventing desperate buyers from bidding too much for a home, as are strict debt-to-income ratios," he said.
While ARM loans are often blamed for the epic housing crash in the late 2000s, the current ARMs are nothing like those of the past. Products like negative amortization loans, which offered very low rates up front but then tacked that initial savings amount onto the loan itself, no longer exist.
Loans must now be fully documented and underwritten to the full length of the loan in order to make sure borrowers can pay even if the rate goes up. Lenders must also make it very clear to borrowers that their rate is only fixed for a certain term, and that it will likely go up after that term, given the current trajectory of rates overall. That, again, was not the case in the past.

Mortgage rates slide lower as Fed considers unwinding its balance sheet

 

(Paul J. Richards/AFP/Getty Images)

Mortgage rates fell for the second week in a row ahead of the Federal Reserve’s July meeting.
According to the latest data released Thursday by Freddie Mac, the 30-year fixed-rate average slipped to 3.92 percent with an average 0.5 point. (Points are fees paid to a lender equal to 1 percent of the loan amount.) It was 3.96 percent a week ago and 3.48 percent a year ago.

The 15-year fixed-rate average dropped to 3.2 percent with an average 0.5 point. It was 3.23 percent a week ago and 2.78 percent a year ago. The five-year adjustable rate average fell to 3.18 percent with an average 0.5 point. It was 3.21 percent a week ago and 2.78 percent a year ago.
The Federal Reserve left its benchmark rate unchanged after its meeting this week but signaled that it would start rolling back its balance sheet “relatively soon.” The announcement came too late in the week to factor into Freddie Mac’s survey. The government-backed mortgage-backer aggregates current rates weekly from 125 lenders from across the country to come up with national average mortgage rates.

[Federal Reserve leaves interest rate unchanged, readies market for balance sheet changes]

Any shrinking of the central bank’s $4.5 trillion portfolio is likely going to have an impact on mortgage rates. The Fed has said it would reduce its holdings gradually, but too quick of a sell-off could send rates skyrocketing. Back in 2013 when then-Fed chairman Ben Bernanke testified before Congress about tapering the bond-buying program, the “taper tantrum” fueled a rapid rise in rates.
Michael Fratantoni, Mortgage Bankers Association chief economist, expects the Fed to announce in September that it will begin unwinding its balance sheet in October. He also predicts another rate increase later this year.
“The job market is tight,” Fratantoni said. “Many employers are finding it increasingly challenging to fill open positions. And yet wage growth and price inflation remain low. We agree with the Fed’s expectation that inflation will increase later this year and into next, and this will prompt further increases in the Fed’s short-term target, with the next hike most likely coming in December.”

[Need a mortgage? Now may be a good time to apply.]

Despite the news out of the Fed, most of the experts surveyed by Bankrate.com, which puts out a weekly mortgage rate trend index, say rates will remain relatively stable in the coming week.
“Even with the dial back on their balance sheet beginning ‘relatively soon,’ the Fed’s concerns about low inflation will keep a lid on mortgage rates for now,” said Greg McBride, chief financial analyst at Bankrate.com.
Meanwhile, mortgage applications were flat last week, according to the latest data from the Mortgage Bankers Association. The market composite index — a measure of total loan application volume — increased 0.4 percent. The refinance index rose 3 percent, while the purchase index fell 2 percent.
The refinance share of mortgage activity accounted for 46 percent of all applications.

Next up for markets: Fed could set a hawkish tone

• The Fed is likely to reveal some detail about its plan to begin the unwind of its $4.5 trillion balance sheet when it releases minutes from its last meeting at 2 p.m.
• If the Fed seems confident that inflation will move higher, or shows it wants to tighten because of financial conditions, the market may take its message as "hawkish."
• A hawkish Fed, appearing ready to raise interest rates, could trigger a sell-off in stocks and in Treasurys, which would send bond yields higher.

CNBC.com

38

SHARES

Joshua Roberts | Reuters

Federal Reserve Board Chairwoman Janet Yellen

The Federal Reserve could have an impact on trading when it releases the minutes from its last meeting Wednesday afternoon, particularly if it appears confident that it could raise interest rates again this year.

The Fed is also likely to provide some insight into its plan to unwind its $4.5 trillion balance sheet, which many market pros expect to begin in September. The Fed intends to taper back on its practice of replacing Treasurys and mortgages, as the issues it holds mature. Those securities were first purchased as part of the extraordinary easing it used to fight the financial crisis.

But traders were also focused on the fact that Fed speakers and even the European Central Bank have been sending somewhat hawkish messages recently, and the minutes could lean toward those comments.

"It almost seems like a concerted message from people at the Fed about financial conditions being very easy, perhaps too easy," said Stephen Stanley, chief economist at Amherst Pierpont. "It would be interesting to see if the committee discussed that and what the rhetoric was. …[Janet] Yellen, [Stanley] Fischer, [William] Dudley, each of them talked about financial conditions being easy one way or the other."

Stanley said Dudley, the New York Fed president, has made it clear if the Fed raises rates, and the markets react, it could slow its hiking. But if markets do not react at all, the Fed could increase its activity, he said.

The Fed minutes, to be released at 2 p.m. ET, are the first in a series of events that could reveal more about Fed policy for the second half of the year. On Friday, the June employment report will be released, and markets are watching the wages data to see if there are any early signs of returning inflation. Later Friday morning, the Fed will release its semi-annual monetary policy report at 11 a.m. ET, five days ahead of Fed chair Yellen's economic testimony before Congress. Then, the Federal Open Market Committee meets again on July 25 and 26, where it is not expected to take action on interest rates but could reveal more about its intentions.

The markets have doubted the Fed will hike rates for a third time this year, giving just about 50 percent odds for a September rate rise. Analysts are watching the minutes to see if the Fed signals that the recent dip in inflation is temporary and that it is on track to move ahead on interest rates unless the economy softens.

Bond market pros are also looking to see if the Fed will reveal any clues about when it will start tapering back its purchases of Treasury and mortgage securities.

The minutes are from the June 14 meeting when the FOMC raised rates for a second time this year and revealed details on how it intends to gradually begin paring back its balance sheet.

"Right now, many market participants don't expect a [rate hike] in September," said Kate Warne, investment strategist at Edward Jones. "Investors are thinking they won't move unless they get stronger inflation." She said the Fed could indicate it is willing to discount the downward move in inflation as short-term.

"If the minutes are more hawkish than expected, we would see investors surprised by the minutes. I don't think that's likely to be the case. Stocks would probably react negatively and interest rates would continue to rise," Warne said.

Stocks started out the month of July Monday on an upswing that sent the Dow to new highs, but selling in technology stocks pulled down the Nasdaq. On Wednesday, stocks opened slightly higher, after the July 4 holiday Tuesday. Treasury yields were also higher, and the dollar was firmer, ahead of the release of Fed minutes.

The yield on the 2-year note, the most sensitive to Fed hiking, was at 1.41 percent, after touching 1.426 percent Monday, its highest level since 2009.

"I think the expectations are for the Fed to confirm their tapering intentions," said Ian Lyngen, head of U.S. rates strategy at BMO.

"I think a September taper has become very consensus," said Lyngen. "If you see a uniform view reflected within the minutes, I think it's going to be bearish in the Treasury market because it suggests there will be follow-through with the tapering and hiking. If there's a divergence, it would be bullish."

Treasury yields move opposite prices, so a hawkish view would send rates higher.

"I don't really think they're going to change the overall tone or direction of the Treasury market," said Lyngen, adding he would expect the most action in the 5-year note as a reflection of future Fed policy moves. The 5-year yield was at 1.93 percent Wednesday. The 10-year was at 2.34 percent.

"I certainly don't think we'll get a rate hike in July, but I do think there's a chance we'll get the balance sheet announcement in July," said Lyngen. "You could make a case for September. My thought is they want to keep the balance sheet discussion separate as much as possible."

The Fed has said it would pause in its rate hiking when it begins action on its balance sheet. The balance sheet reduction is expected to put slight upward pressure on interest rates.

The Fed said it would cap its tapering back of purchases of Treasurys and mortgages at $10 billion a month, before increasing the cap at three-month intervals. The Fed is not adding to its balance sheet any longer, but it does replace securities it holds as they mature. It is that process that will be "tapered" back.

WATCH: On rates, I'm the most dovish on the committee right now: Fed's Bullard

On rates, I'm the most dovish on the committee right now: Fed's Bullard  Friday, 30 Jun 2017 | 1:12 AM ET | 03:02

Fed Raises Key Interest Rate For 4th Time Since 2015

Federal Reserve Chair Janet Yellen speaks to reporters in Washington, D.C., on Wednesday after the Fed announced it would increase interest rates by a quarter-point.

Susan Walsh/AP 

 

Updated at 3:55 p.m. ET.
Federal Reserve policymakers have raised their target for the benchmark federal funds interest rate by a quarter-point, to a range of 1 percent to 1.25 percent.
Despite the increase — the fourth since December 2015 — interest rates remain near historic lows, but the move will mean higher borrowing costs for consumers. The Fed previously raised rates in March, and on Wednesday, it signaled plans for one more rate increase this year.

In a statement Wednesday, the policymakers said that "the labor market has continued to strengthen and that economic activity has been rising moderately so far this year."
The economy grew at a rate of 1.2 percent in the first quarter of this year, about half as fast as it did in the final three months of 2016. Unemployment dipped to 4.3 percent in May, a 16-year low.
"Job gains have moderated but have been solid, on average, since the beginning of the year, and the unemployment rate has declined," the Fed statement said. "Household spending has picked up in recent months, and business fixed investment has continued to expand."

Greg McBride, an analyst with consumer financial site Bankrate.com, tells NPR's Yuki Noguchi that, taken together, the Fed's moves have caused home equity and car loan rates to increase about 1 percentage point over the last two years.
"The combination of rising debt burdens and rising interest rates is starting to strain some households, and we're seeing delinquencies pick up from recent lows," McBride says.
In the wake of the financial crisis, the central bank added Treasury securities and mortgage-backed securities to its balance sheet. Now it's making plans to reduce those holdings, which total more than $4 trillion.
The Fed said it "currently expects to begin implementing a balance sheet normalization program this year, provided that the economy evolves broadly as anticipated."
As Reuters reports:

"The central bank said it would gradually ramp up the pace of its balance sheet reduction and anticipates the plan would feature halting reinvestments of ever-larger amounts of maturing securities.
"The Fed said the initial cap for Treasuries would be set at $6 billion per month initially and increase by $6 billion increments every three months over a 12-month period until it reached $30 billion per month in reductions to its holdings.
"For agency debt and mortgage-backed securities, the cap will be $4 billion per month initially, increasing by $4 billion at quarterly intervals over a year until it reached $20 billion per month."

Robert Bobby Darvish Platinum Lending Solutions Newport Beach CA

Why We Could Get Negative Interest Rates Even Though The Fed Is Hiking

Federal Reserve Board Chairman Janet Yellen speaks during a briefing on March 15, 2017 in Washington, DC. / AFP PHOTO / Brendan Smialowski/Getty Images

At its March meeting, the Federal Reserve raised interest rates by 0.25%. In doing so, it hiked rates for only the third time since 2006. However, in a strange turn of events, the Fed’s move was perceived as a dovish one by the markets.
That’s because even with inflation at its highest level since 2012, the Fed said monetary policy will remain accommodative “for some time.” As has been the case in the past, the Fed is willing to let inflation consolidate above its 2% target before embarking on a more aggressive tightening path.
This willingness to let inflation “run hot” means even as nominal rates rise, real rates—that is, the nominal interest rate minus inflation—are headed into negative territory.
So what are the implications of negative real rates?
Negative Real Rates Drive Gold Higher
The consumer price index (CPI), the most widely used measure of inflation, averaged 2.67% for the first two months of the year. Even if inflation averaged only 2% for all of 2017—the Fed’s target—it would be a big problem for investors and savers alike.
Today, a one-year bank CD pays about 1.4%. Therefore, anyone who keeps their money in a bank is watching their purchasing power erode.
Of course, there are other options. You can put your money in U.S. Treasuries or dividend-paying stocks—both popular sources of fixed income.
However, with both the 10-year Treasury yield and the average dividend yield for a company on the S&P 500 hovering around 2.35%, that doesn’t leave much in the way of real gains if inflation is running at 2% per annum.
If inflation rises or bond yields fall, real interest rates will be pushed into the red… and that’s very bullish for gold.
Gold is known as the yellow metal with no yield, but simple math tells us no yield is better than a negative one. Because of this, gold has done well when real rates are in negative territory. In fact, real US interest rates are a major determinate of which direction the price of gold moves in.
A study from the National Bureau of Economic Research found that from 1997–2012, the correlation between real U.S. interest rates and the gold price was -0.82.
This means as real rates rise, the price of gold falls and vice versa. A -1.0 reading would be a perfect negative correlation, so this is a tight relationship.

The Fed’s hesitation to raise rates faster is contributing to another trend that is also bullish for gold.
A Falling Dollar Equals Higher Gold Prices
In the six weeks following the US election, the dollar skyrocketed 5.6%—a huge move for a currency.
However, since the beginning of the year, the greenback has given back most of its post-election gains. This is in part due to the Fed’s “dovishness” on interest rates.
The strong negative correlation between gold and the U.S. dollar is a major reason the yellow metal is up over 9% year to date.

Market Realist

In the March edition of Bank of America Merrill Lynch’s Global Fund Manager Survey, respondents thought the dollar was at its most overvalued level since 2006. As the chart shows, the survey has a good track record of determining when the dollar is overvalued.

Bank of America Merrill Lynch

Tying it all together, what do these trends mean for gold?
Gold Should Go Higher from Here
With arguably the two biggest drivers of the gold price trending in the yellow metal’s favor, gold is likely to go higher. Although the dollar could rise if Washington implements some structural reform, real rates aren’t headed higher anytime soon based on the Fed’s actions.
Bank of America Merrill Lynch said these two trends were part of the reason why it upgraded its forecast for gold to $1,400 per oz. by year-end. As the chart below shows, the market turned bullish on gold following the Fed’s December rate hike.
In closing, after nine years of doing its utmost to generate inflation, the Fed has finally succeeded. If past is prologue, as inflation rises over the coming months, gold will do very well.
If you’re considering getting some gold before it goes up, do your homework first.

Robert Bobby Darvish Platinum Lending Solutions