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Weekly Rate Lock Advisory 

 

There are four relevant economic reports scheduled for release this week in addition to the minutes from the most recent Fed monetary policy meeting. There is no relevant data scheduled for release tomorrow, so look for the stock markets to directly affect bond trading and mortgage rates.

The first piece of data comes Tuesday morning with the release of the Institute for Supply Management's (ISM) manufacturing index at 10:00 AM ET. This index measures manufacturer sentiment and is expected to show an increase from last month's reading of 48.9. A reading above 50 means that more surveyed manufacturers felt business improved during the month than those who felt it worsened. A larger than expected increase in the index will probably cause a rally in the stock markets and lead to mortgage rates rising Tuesday, while a reading below 50 should lead to lower rates. Analysts are expecting a reading of 50.2, which would be the first reading above 50.0 since January 2 008 and indicate that the manufacturing sector is growing.

The second report of the week is the revision to the 2nd Quarter Productivity numbers, which measures employee productivity in the workplace. Strong levels of productivity allow the economy to expand without inflation concerns. It is expected to show a downward change from the previous estimate of a 6.4% annual pace. Forecasts are currently calling for a reading of 6.1%. A larger than expected reading would be considered good news for bonds and mortgage rates.

Also Wednesday morning comes July's Factory Orders data. This report measures manufacturing sector strength and is similar to last week's Durable Goods Orders, but includes orders for both durable and non-durable goods. This data is expected to show a 1.5% increase in new orders. A smaller than expected rise should lead to lower mortgage rates Wednesday, as long as the productivity number doesn't hurt bond prices.

The third and final event for Wednesday is the release of the minutes from the last FOMC meeting. There is a pretty good possibility of the markets reacting to them following their 2:00 PM ET release, especially if they show some divisiveness by its members. It will be interesting to see some of the Fed member's views on the economy and inflation and if they will hint what the Fed's next move may be. But this is one of those events that can cause significant movement in rates after its release or be a non-factor. It generally causes a little movement in bond prices but not enough to significantly affect mortgage pricing.

The big news of the week comes Friday morning. The Labor Department will post the unemployment rate, number of new jobs added or lost and average hourly earnings for August early Friday. The ideal scenario for the bond market and mortgage rates is rising unemployment, a larger than expected drop in payrolls and earnings to remain unchanged. Analysts are expecting to see that the unemployment rate moved from 9.4% to 9.5% and that 225,000 jobs were lost during the month. Weaker then expected readings would be very good news for bonds and lead to lower mortgage rates Friday. However, if we get stronger than expected numbers, mortgage rates will probably spike higher Friday.

Overall, I expect to see the most movement in rates Friday, but Tuesday and Wednesday should also be fairly active. Tomorrow or Thursday will likely be the calmest day due to the lack of any monthly or quarterly data being posted. Also worth mentioning though is the fact that next Monday is Labor Day so all markets will be closed. The bond market will not close early this Friday, but many traders may head home for the long weekend after Friday's data is posted. This means that trading will likely be thin Friday afternoon even though the markets will still be open. This could lead to additional volatility in rates as traders prepare for the long weekend, so please be careful this week if still floating an interest rate.

If I were considering financing/refinancing a home, I would.... Lock if my closing was taking place within 7 days... Lock if my closing was taking place between 8 and 20 days... Lock if my closing was taking place between 21 and 60 days... Float if my closing was taking place over 60 days from now... This is only my opinion of what I would do if I were financing a home. It is only an opinion and cannot be guaranteed to be in the best interest of all/any other borrowers.

August existing home sales were down 2.7 percent, with CNBC's Diana Olick.

RISMEDIA, September 25, 2009 - Nearly one in five (18%) prospective first-time home buyers said extending the $8,000 tax credit would be the primary influence on their decision to buy a home before the end of 2010, according to a Zillow survey. That would equate to 334,000 buyers from Dec. 1, 2009 to Nov. 30, 2010 – a likely time period for an extension, according to additional analysis. 

Zillow queried adults who qualify as a first-time home buyer, asking them if an extension of the tax credit would influence their plans to buy a home before the end of 2010. If the credit were extended, of those who intend to buy a home, 18% called the credit the “primary influence” in their decision, 25% said it would be a “significant influence,” and 27% said the credit would have “some” influence on any home buying decision. Thirty-one percent said it would have no influence on their decision. 

Zillow analysis of current market trends shows that, if the credit were extended, a total of 1.86 million first-time home buyers would purchase homes between Dec. 1, 2009 and Nov. 30, 2010. If all could take advantage of the full $8,000 tax credit, this could mean up to $14.86 billion in tax credits. “Although nearly two million first-time home buyers may receive the tax credit if it is extended for another year, the incremental impact of the credit is far smaller,” said Zillow Chief Economist Stan Humphries. “These numbers suggest that extending the credit might bring an additional 334,000 homebuyers who would not otherwise purchase a home into the market. While 334,000 may seem like a small number relative to the total number of home buyers who would claim the credit, their addition to the market next year could make the difference between a robust annual increase in home sales next year and a flat or negative change in home sales relative to this year. 

“There’s little doubt that the tax credit will boost demand at the margin, and that fact will make it easier to work down our current high inventory levels of existing homes on the market. That said, the cost of bringing these additional home buyers into the market is substantial. Assuming 1.86 million first-time buyers take advantage of the full credit once extended, this translates into an additional $14.86 billion in government spending. For every five home buyers who receive the credit, four would have bought their home even without the credit.” 

The current $8,000 first-time home buyer tax credit is set to expire on Nov. 30, 2009. Home buyers who do not currently own a primary residence and have not owned one for the past three years can be eligible for the credit.

The Federal Finance Agency unveiling new evidence that the housing market is starting to stabilize, with CNBC's Diana Olick.

This week brings us the release of five relevant economic reports in addition to another FOMC meeting and two important Treasury auctions. None of the factual reports are considered to be highly important. In fact, most of the economic news is considered to be only moderately important. This should help limit the possibility of significant changes to mortgage rates most days this week.

Unlike many Mondays, there is relevant data being posted on Monday. The Conference Board will release its Leading Economic Indicators (LEI) for August late Monday morning. This index attempts to measure economic activity over the next three to six months. It is expected to show a 0.7% rise, meaning that it is predicting a sizable increase in economic activity over the next several months. A larger than expected reading would be considered bad news for bonds and could lead to a minor increase in mortgage rates.

There is nothing of importance scheduled for release Tuesday, but the first of this week's two important Treasury sales will take place Wednesday and the Fed's two-day FOMC meeting will adjourn Wednesday afternoon. The Treasury will sell 5-year Notes Wednesday and 7-year Notes Thursday. If investor demand in these sales is strong, particularly from international buyers, the broader bond market should move higher pushing mortgage rates lower. But a lackluster interest from investors could lead to bond selling and higher mortgage pricing. The results of each sale will be announced at 1:00 PM ET each day, so any reaction to the results will come during afternoon trading Wednesday and Thursday.

The FOMC meeting will begin Tuesday and adjourn at 2:15 PM Wednesday. There is little possibility of seeing any type of change to key short-term interest rates. However, the post-meeting statement could very well lead to volatility during afternoon trading as investors dissect it in an effort to find when the Fed's next move may come. The wild card is how the markets react to the statement because the lack of a change to monetary policy will not affect the markets. If we see significant weakness in stocks, the bond market may benefit as a safe-haven from the volatility. This could lead to lower mortgage rates Wednesday afternoon and Thursday morning.

August's Existing Home Sales report will be released late Thursday morning. The National Association of Realtors posts this data, giving us an indication of housing sector strength by tracking home resales in the U.S. It is expected to show a moderate increase from July's sales, however, this data is not considered to be of high importance to the bond market unless it varies greatly from forecasts.

The remaining three reports will all be released Friday morning. August's Durable Goods Orders will be posted early morning. This report gives us an indication of manufacturing sector strength by tracking orders for big-ticket items at U.S. factories. Current forecasts call for an increase in orders of 0.3%. A smaller than expected increase could help bond prices and cause mortgage rates to drop Friday. However, a larger than expected rise would indicate a stronger than expected manufacturing sector and would likely help push mortgage rates higher.

The second report is the University of Michigan's Index of Consumer Sentiment. This is the revised reading for September. The preliminary reading that was released earlier this month revealed a 70.2 reading. Analysts are expecting to see a small upward revision, meaning consumer confidence was slightly higher than previously thought. A lower than expected reading would be good news for bonds and help improve mortgage rates Friday morning.

The final report of the week is August's New Home Sales. It is expected to show that sales of newly constructed homes rose slightly in August. As with most of this week's data, this report will likely not have a significant impact on mortgage rates unless its readings differ greatly from forecasts.

Overall, the single most important report of the week is Friday's Durable Goods Orders, but the most important day will probably be Wednesday due to the FOMC adjournment and the 5-year Treasury Note auction. Thursday's 7-year Note sale is actually a little more important for mortgage rates than Wednesday's auction but the first of the two will give us an idea of what to expect from Thursday's sale. I don't believe any of this week's data has the potential to move the markets or mortgage rates heavily. But, we may some change in rates day-to-day, with the most likely coming mid-week.

If I were considering financing/refinancing a home, I would.... Lock if my closing was taking place within 7 days... Lock if my closing was taking place between 8 and 20 days... Float if my closing was taking place between 21 and 60 days... Float if my closing was taking place over 60 days from now... This is only my opinion of what I would do if I were financing a home. It is only an opinion and cannot be guaranteed to be in the best interest of all/any other borrowers.

TODAY's Al Roker talks to real estate agent Barbara Corcoran about some of the mistakes that could cost home sellers big bucks.

Weekly Rate Lock Advisory 

This week brings us the release of five relevant economic reports that may influence mortgage rates. A couple of these reports are considered to be highly important to the financial and mortgage markets, meaning that we may see significant changes to rates this week. There is a very good chance of seeing noticeable changes in rates at least one day, if not several days this week. There is no relevant news scheduled to be posted tomorrow, so look for the stock markets to be the biggest force behind bond trading and changes to mortgage rates until we get to the data releases.

There are two highly important reports scheduled to be posted early Tuesday morning. The first is the release of August's Retail Sales report. It will give us a measurement of consumer spending, which is very important to the markets because consumer spending makes up two-thirds of the U.S. economy. Current forecasts are calling for a 1.9% increase in sales. The sizable jump is expected to come from auto sales that were fueled by the Cash For Clunkers program. Analysts are calling for a 0.4% rise in sales if auto sales are excluded. A larger than expected increase would be considered bad news for bonds and likely lead to an increase in mortgage pricing.

The second important piece of data Tuesday morning is the release of August's Producer Price Index (PPI). This report will give us a very important measurement of inflationary pressures at the producer level of the economy. There are two readings that analysts follow in this release. They are the overall index and the core data reading. The core data is the more important of the two because it excludes more volatile food and energy prices. Analysts are currently predicting a 08% increase in the overall index, and a rise of 0.1% in the core data. Stronger than expected readings could fuel inflation concerns in the bond market and lead to an increase in mortgage rates Tuesday morning. Both of the day's reports are considered to be extremely important to the markets and mortgage rates.

August's Consumer Price Index (CPI) will be released Wednesday morning. The CPI is one of the most important reports we see each and every month. It is considered to be a key indicator of inflation at the consumer level of the economy. As with its sister PPI report, there are two readings in the report- the overall index and the core data reading. Current forecasts are calling for a 0.3% increase in the overall reading and a 0.1% rise in the core data reading. A larger increase in the core data would likely lead to higher mortgage rates Wednesday morning.

Also scheduled for Wednesday morning is August's Industrial Production data. This report gives us a measurement of manufacturing sector strength by tracking output at U.S. factories, mines and utilities. It is considered to be moderately important but could help change mortgage rates if there is a significant difference between forecasts and the actual reading. Analysts are currently expecting to see a 0.7% increase in production. A higher level of output could lead to higher mortgage rates, while a weaker than expected figure would be considered good news for bonds and rates.

August's Housing Starts report will be posted early Thursday morning. This report will probably not have much of an impact on the bond market or mortgage rates. It gives us a measurement of housing sector strength and mortgage credit demand, but is usually considered to be of low importance to the financial markets. It is expected to show little change between July's and August's starts.

Overall, I think we need to label Tuesday as the most important day of the week with the Retail Sales and PPI reports both being posted that day. However, Wednesday's CPI release is also extremely important to the markets, so Wednesday cannot be ignored either. Monday or Friday will probably end up being the calmest days, but we still may see minor changes to rates those days. But we could see a significant change to rates this week if the major reports vary greatly from forecasts.

If I were considering financing/refinancing a home, I would.... Lock if my closing was taking place within 7 days... Float if my closing was taking place between 8 and 20 days... Float if my closing was taking place between 21 and 60 days... Float if my closing was taking place over 60 days from now... This is only my opinion of what I would do if I were financing a home. It is only an opinion and cannot be guaranteed to be in the best interest of all/any other borrowers.

Weekly Rate Lock Advisory

This week brings us the release of only three pieces of economic data, but none of them are considered to be highly important. In addition to the economic releases, we also have two Treasury auctions that may play a role in this week's mortgage pricing. The markets are closed tomorrow in observance of the Labor Day holiday, meaning mortgage lenders will follow suit.

The first release of the week comes Wednesday afternoon. The Federal Reserve will release its Beige Book report at 2:00 PM ET Wednesday. This report details current economic conditions in the U.S. by region. It is believed to be a key source of data when the Fed meets for their FOMC meetings and is usually released approximately two weeks prior to each meeting. If it reveals any significant surprises, we may see movement in the markets and mortgage pricing as analysts adjust their theories on the Fed's next move. Most likely though, it will be a non-event and will not lead to a noticeable change in mortgage rates.

Also Wednesday is the 10-year Treasury Note auction, which will be followed by the 30-year Bond auction Thursday. It is fairly common to see some weakness in bonds before these sales as investors prepare for them. But, if the sales are met with a decent demand from investors, those losses are normally recovered after the results are announced. The results will be posted at 1:00 pm ET each day. If demand was strong, particularly from international investors, we should see mortgage rates improve during afternoon trading Wednesday and Thursday.

July's Goods and Services Trade Balance data will be posted early Thursday morning, giving us the size of the U.S. trade deficit. It is expected to show a deficit of approximately $27.4 billion, which would be a small increase from June's $27.0 billion. However, I would consider this the least important of this week's releases, meaning it will likely have little impact on bond trading or mortgage rates regardless of its results. 

The last report of the week will be posted by the University of Michigan. Their Index of Consumer Sentiment will give us an indication of consumer confidence, which hints at consumers' willingness to spend. If confidence is rising, consumers are more apt to make large purchases. But, if they are growing more concerned of their personal financial situations, they probably will delay making that large purchase. This influences future consumer spending data and can impact the financial markets. It is expected to show a reading of 67.8 that would mean confidence rose from August's final reading. That would be considered bad news for bonds and mortgage rates.

Overall, this week looks like it will be much less active for mortgage rates than last week was. With the financial markets closed tomorrow, we only have four days of trading. There is no particular data that is important enough to label its day of release as the mo st important of the week. This may allow the stock markets to heavily influence bond trading and therefore, impact mortgage rates this week. As long as the stock markets do not stage a sizable rally or sell-off this week, I believe we will only see minor changes to mortgage rates the next few days.

If I were considering financing/refinancing a home, I would.... Lock if my closing was taking place within 7 days... Lock if my closing was taking place between 8 and 20 days... Float if my closing was taking place between 21 and 60 days... Float if my closing was taking place over 60 days from now... This is only my opinion of what I would do if I were financing a home. It is only an opinion and cannot be guaranteed to be in the best interest of all/any other borrowers.