Mortgage Rate Update 09-01-2008

There are five relevant economic reports scheduled for release this week, but they are being posted over four days because the markets were closed today in observance of the Labor Day holiday.

The first piece of data this week comes tomorrow 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 a decline from last month’s reading of 50.0 to 49.5 in August. A reading above 50 means that more surveyed manufacturers felt business improved during the month than those who felt it worsened. An increase in the index would probably cause a rally in the stock markets and lead to mortgage rates rising tomorrow, while a reading below 49.5 should lead to lower rates.

The second report of the week is July’s Factory Orders data Wednesday morning. 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 0.4% increase in new orders. A smaller than expected rise should lead to lower mortgage rates Wednesday.

Also scheduled for release is the Wednesday afternoon Federal Reserve release of its Beige Book report. 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. It is usually released approximately two weeks prior to each FOMC meeting. If the 2:00 PM ET release reveals any significant surprises, we may see movement in the markets and mortgage pricing as analysts adjust their theories on the Fed’s next interest rate move. Most likely though, it will be a non-event and will not lead to a change in mortgage rates.

Thursday morning brings us the revision to the 2nd Quarter Productivity numbers, which measures employee productivity in the workplace. It is expected to show an upward change from the previous estimate of a 2.2% annual pace. Forecasts are currently calling for a reading of 2.9%, which would be good news for the bond market and possibly lead to slightly lower mortgage rates Thursday morning.

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 smaller than expected rise in new payrolls and earnings to remain unchanged. If we are that fortunate, I expect to see mortgage rates drop considerably Friday morning. Analysts are expecting to see the unemployment rate remain at 5.7% and 70,000 jobs lost in the month. Weaker then expected readings would be very good news for bonds and mortgage rates.

Overall, I expect to see the most movement in rates Friday, but Tuesday should also be fairly active. I am holding the short-term lock recommendations for the time being as there still seems to be plenty of profit taking opportunities for traders if they choose to do so. This could lead to a spike in mortgage rates if traders sell holdings to capture those gains. This does not mean that I think rates will necessarily move higher. It means that I feel the risk versus the potential reward of continuing to float an interest rate is leaning heavily towards the risky side. Accordingly, locking seems to be the prudent position at this time.

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.

Mortgage Market Rate Update April 29, 2008

Where We’ve been:
Tuesday’s bond market has opened in positive territory despite a stronger than expected economic reading. The stock markets are showing early losses with the Dow down 50 points and the Nasdaq down 9 points. The bond market is currently up 10/32, which with yesterday’s late strength should improve this morning’s mortgage rates by approximately .250 – .375 of a discount point.

The Conference Board gave us April’s Consumer Confidence Index (CCI) late this morning, revealing a stronger than expected reading of 62.3. However, an upward revision to March’s reading has actually worked favorably for bonds. The difference between forecasts and the previous March reading is extremely close to the difference between today’s reading and the revised March reading. This means that even though confidence was a little higher than thought in March, it dropped as much as it was expected to in April. The result is little impact on bond trading or mortgage rates.

Where We’re At:
Tomorrow is going to be a very interesting day as brings us the release of two important reports along with the FOMC meeting results. The first is the preliminary version of the 1st Quarter Gross Domestic Product (GDP). This is arguably the single most important report that we see on a regular basis. The GDP is the sum of all products and services produced in the U.S. and is considered to be the best indicator of economic growth or contraction. I expect this report to cause major movement in the financial markets tomorrow and therefore the mortgage market also. Analysts are expecting to see output at an annual rate of 0.5%. A smaller increase would be ideal for mortgage rates a sit would fuel recession concerns. But, a larger increase would almost certainly cause inflation concerns in the bond market that would push mortgage rates higher tomorrow morning.

The next report of the day is the 1st Quarter Employment Cost Index (ECI), which tracks employer costs for wages and benefits. This gives us a measurement of wage-inflation. If it shows a large increase, we may see inflation concerns cause the bond market to fall and mortgage rates to rise. A smaller than expected increase would be good news for the bond market and mortgage pricing. Current forecasts are showing a rise of 0.8%.

Where we’re Going:
This week’s FOMC meeting will began today but will not adjourn until tomorrow afternoon. It will likely adjourn with an announcement of another rate cut to key short term interest rates. Just how much of a reduction is open for debate. Look for another round of volatility following the 2:15 PM ET post-meeting statement.

Forecast:
If I were considering financing/refinancing a home, I would…. Float if my closing was taking place within 7 days… This is only an opinion of what one may 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.

If rates should fall lower or we revert to a recommendation to float, you’ll find out about it here at The Property Tip. So check back and check back often!

Mortgage Rate Update April 21, 2008

Where We’re At:
This week is fairly light in terms of economic news scheduled for release. There are four reports scheduled, but only one of them is likely to cause much movement in mortgage rates. Accordingly, there is a fairly decent possibility of seeing a fairly calm week in the mortgage market.

The week’s first piece of data is one of the least important of all four. The National Association of Realtors will post March’s Existing Homes Sales numbers Tuesday morning, which are expected to show a drop from February. A similar report to this one and actually the week’s least important data- March’s New Home Sales will be released Thursday morning. Both of these releases give us an indication of housing sector strength and mortgage credit demand, but unless they vary greatly from analysts forecasts, I don’t think they will cause much movement in mortgage rates.

Where we’re Going:
March’s Durable Goods Orders will be posted early Thursday 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 a small increase in orders. A smaller than expected increase could help boost bond prices and cause mortgage rates to drop Thursday morning. However, a stronger than expected reading would indicate that the manufacturing sector is gaining strength quicker than many had thought. This would be negative news and would probably help drive mortgage rates higher.

Also Thursday is a 5-year Treasury Note auction. These sales sometimes bring volatility to the bond market ahead of the actual sales as investors prepare for them. However, that weakness is usually only temporary and will correct itself after the sale is complete as long as it was met with a decent demand from investors. If there was a strong demand, bond prices should rise during afternoon trading. But, lackluster interest could lead to weakness and upward revisions to mortgage rates.

Forecast: Overall, look for Thursday to be the most important day of the week with the Durable Goods report being posted and the Treasury auction. The rest of the week will likely be heavily influenced by the stock markets. If the major stock indexes continue to rally, bonds will likely suffer and mortgage will move higher. If stocks pull back, we could see mortgage rates move lower this week.

If I were considering financing/refinancing a home, I would…. Float if my closing was taking place within 7 days… This is only an opinion of what one may 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.

If rates should fall lower or we revert to a recommendation to float, you’ll find out about it here at The Property Tip. So check back and check back often!

Mortgage Rate Update April 16, 2008

Where We’ve been:
Yesterday afternoon’s weakness in bonds was mostly the result a sizable stock rally, but inflation concerns that were mentioned in the Fed Beige Book also contributed. The report showed that the economy continued to weaken and that prices paid for raw materials spiked since the last report. The higher costs for materials usually means higher prices passed on to consumers. That inflation threat is a concern to bond traders because inflation erodes the value of a bond’s future fixed interest payments and leads to selling in bonds. That translates into higher mortgage rates for borrowers.

The Labor Department released weekly unemployment claims, saying that 372,000 new claims for benefits were filed. This was up form the previous week, but was close to forecasts. Therefore, it also had no impact on this morning’s rates.

Where We’re At:Thursday’s bond market has opened down slightly as yesterday’s late weakness carried into this morning’s trading. The stock markets are showing losses with the Dow down 31 points and the Nasdaq down 15 points. The bond market is currently down 5/32, but weakness late yesterday will push this morning’s mortgage rates higher by approximately .375 of a discount point over yesterday’s morning rates.

Where we’re Going: There is no relevant data scheduled for release tomorrow. Look for the stock markets to be the biggest influence eon bond trading and mortgage rates. If stocks move higher, binds will likely fall and mortgage rates will inch up. If we see stock weakness, mortgage rates should improve tomorrow.

Forecast: Mortgage interest rates remain historically favorable and taking advantage of rates at these levels to lock in a low interest rate for years to come would be prudent. If I were considering financing/refinancing a home, I would…. Lock if my closing was taking place within 7 days… This is only an opinion of what one may 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.

If rates should fall lower or we revert to a recommendation to float, you’ll find out about it here at The Property Tip. So check back and check back often!

Mortgage Rate Update April 10, 2008

Where We’re At:
This week brings us the release of only two relevant economic reports in addition to the minutes from the last FOMC meeting and a Treasury auction. Both of the relevant reports are scheduled for release late in the week, so the most movement in rates may come the latter part of the week.

So far this week Mortgage prices are roughly unchanged, and aside from the WaMu news (opting out of the wholesale market) there is little news. The release of the minutes of the March 18th FOMC meeting, along with February’s pending home sales (expected to have decreased -1% following January’s unchanged) were as follows: Fed minutes release actually gave us favorable news. The Fed was clearly concerned about economic growth and likelihood of a recession during the last FOMC meeting. They indicated that the economic slowdown could continue well into next year, which surprised many analysts. This is generally good news for bonds because weak economic conditions make stock less appealing to investors. As a result, funds are shifted into bonds, leading to lower mortgage rates.

Where we’re Going:
Thursday’s bond market opened in positive territory but has since fallen into negative ground as stocks have gained strength. The stock markets are now showing noticeable gains with the Dow up 80 points and the Nasdaq up 30 points. The bond market is currently down 8/32, but we likely will see mortgage rates improve by approximately .125 – .250 of a discount points as a result of strength in bonds late yesterday and early this morning. We could see some weakness in bonds ahead of the sale as investing firms sell current holdings to prepare for it. This weakness is usually only temporary if the sales are met with a decent demand. The results of the sale will be posted at 1:00 PM ET. If the demand from investors was strong, the bond market could rally during afternoon trading, If the sales were met with a poor demand, the afternoon weakness may cause upward revisions to mortgage pricing tomorrow afternoon.leading to lower mortgage rates.

Forecast:
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…

If rates should fall lower or we revert to a recommendation to float, you’ll find out about it here at The Property Tip. So check back and check back often!

Mortgage Rate Update March 24, 2008

Where We’ve been:
Monday’s bond market has opened down sharply following an early stock rally and stronger than expected housing news. The stock markets are kicking the week off quite strong with the Dow up 212 points and the Nasdaq up 60 points– which will likely push this morning’s mortgage rates higher by approximately .500 of a discount point over Thursday’s rates.

Where We’re At:
The first report of the week came late this morning with the release of February’s Existing Home Sales. It showed a 2.8% increase in home resales last month when it was expected to show another decline. This is good news for the housing sector, but considered bad news for bonds.

Where we’re Going: The rest of the week brings us the release of six more reports for the bond market to digest. The next one is the first important data of the week when March’s Consumer Confidence Index (CCI) is posted late in morning. This index gives us an indication of consumers’ willingness to spend. Bond traders watch this data closely because consumer spending makes up two-thirds of our economy. If this report shows that confidence is falling, it would indicate that consumers are more apt to delay making large purchases. If the report reveals that confidence looks to be growing, we may see bond traders sell, pushing mortgage rates higher tomorrow morning. It is expected to show a decline from February’s reading of 75.0 to 73.4.

Forecast:
Overall, it is difficult to label one particular day as the most important of the week. I am expecting the CCI or Durable Goods Orders reports to have the biggest influence on mortgage rates, so by default we can declare tomorrow or Wednesday to be of high importance. The truth is that rather than a significant change in rates one or two days, we will most likely see a slight change several days. Accordingly, the risk of floating an interest rate this week is not as great as last week, but with a low expectation of much improvement in rates the next several days, I am holding the lock recommendations for the time being.

If rates should fall lower or we revert to a recommendation to float, you’ll find out about it here at The Property Tip. So check back and check back often!

Weekly Mortgage Rate Update March 17, 2008

Where We’ve been: This St Patrick’s Day Monday Mortgage rates began the day improving after weaker than expected economic news and EARLY stock losses. These losses on the stock markets are a result of the news of the Bear Stearns bailout raised concerns about the stability of the U.S. banking system. Not to mention the news of the Fed’s rare Sunday evening announcement to lower the Discount Rate by a quarter-point. The discount rate is the rate that the Fed charges banks for loans and is considered less important than the benchmark Federal Funds rate that will be addressed at tomorrow’s FOMC meeting.

Where We’re At: This holiday-shortened week is moderately active in terms of economic releases scheduled to be posted, however, it does bring us another Federal Open Market committee (FOMC) meeting. There are four reports due to be released this week, with one of them considered to be of high importance. The first piece of data came mid-morning today when February’s Industrial Production report. This report measures manufacturing sector strength and revealed a drop in output. This is good news for the bond market and mortgage rates since it adds fuel to the theory that the economy is in a recession already.

Where we’re Going: The FOMC meeting begins early tomorrow and is expected bring another sizable cut short-term interest rates. Many analysts are predicting a .50 cut, but the .75 is a possibility. This cut could go either way, if it’s a .75 rate cut then bonds will rally the bond market and lead to lower mortgage rates, while only a .25 drop could be considered as bad news for bonds and lead to higher mortgage rates. Let’s watch this one closely.

What will likely cause volatility in the markets is the post-meeting statement. Traders are hoping to pick up an indication of future Fed moves, particularly if the Fed expects to cut rates again anytime soon. It is often the post-meeting comments that cause the most volatility because the Fed move is often predicted. However, there are plenty of different opinions on what the Fed will do at this meeting, therefore, the move itself and the following statement could both cause significant movement in the markets.

Forecast:
Overall, look for tomorrow to be the most important day of the week due to the FOMC meeting and PPI release. The rest of the week will likely be driven by outside factors such as stock movements. If the stock markets stage a significant rally or sell-off, we should see bonds move in the opposite direction (which = lower rates). The bond market will close early Thursday and remain closed Friday in observance of the Good Friday Holiday. There is a possibility of seeing additional volatility in the markets as investors prepare for the long weekend. If considering financing/refinancing a home, I would Lock if my closing was taking place within 7 days.

If rates should fall lower or we revert to a recommendation to float, you’ll find out about it here at The Property Tip. So check back and check back often!

Weekly Mortgage Rate Update March 10, 2008

Where We’ve been:
Last weeks Market ended in an improvement by about .125 to mortgage rates after significant increases, leaving expectations for significant market movement this week. So this week brings us the release of four economic releases for the bond and mortgage markets to digest along with a 10-year Treasury Note auction. None of the important economic news is scheduled for release until Thursday. Two of the four reports are considered to be of high importance to the markets. This means that we will likely see the most movement in rates the latter part of the week.

Where We’re At:
The first piece of news comes Tuesday morning with the release of January’s Goods and Services Trade Balance. This report gives us the size of the U.S. trade deficit. It is the week’s least important piece of news and likely will not influence mortgage rates much. Thursday brings the release of February’s Retail Sales data. This report is extremely important to the financial markets because it measures consumer spending. Since consumer spending makes up two-thirds of the U.S. economy, data that is related usually has a big impact on the financial markets. If we see a decline in sales, the bond market should rise and mortgage rates will likely fall.

Where we’re Going: The Labor Department will post February’s Consumer Price Index (CPI) early Friday morning. This index measures inflationary pressures at the consumer level of the economy. If the index shows a large increase, inflation concerns may rise, making long-term investments such as mortgage-related bonds less attractive to investors. This would lead to higher mortgage rates Friday morning.

Also on tap Friday is the University of Michigan’s Index of Consumer Sentiment for March at 9:45 AM. This index gives us a measurement of consumer willingness to spend. A drop in confidence will probably hurt the stock markets and boost bond prices, leading to lower mortgage rates.

Forecast:
Overall, it will likely be another active week in the mortgage market. Thursday or Friday both can be labeled as the most important day of the week. Either can lead to a significant change to mortgage pricing. Generally speaking, this week is definitely a good one to maintain contact with your mortgage professional if an interest rate has not been locked yet, particularly the latter part of the week. If I were considering financing/refinancing a home, I would…. Lock if my closing (refinance /Purchase) was taking place within 7 days… It is only an opinion and cannot be guaranteed to be in the best interest of all/any other borrowers.

If rates should fall lower or we revert to a recommendation to float, you’ll find out about it here at The Property Tip. So check back and check back often!

The Million Dollar Mortgage Rate Question!!

Been Watching this weeks Interest Rates climb & climb this week??? 

So here’s the million $Dollar question…. When are mortgage prices going to improve?  Why is the 10-yr Treasury down into the 3.5% range, yet conforming/conventional 30-yr loans, eligible for FNMA & FHLMC, back up into the 6% range? The widening that is occurring out to these levels, which statistically speaking happens once every 4,000 years, is a combination of several factors.

First, investors and money managers feel safer putting their money into Treasury securities rather than mortgage-related securities (right now, that seems like a “no brainer”) Subjecting their money to the potential of borrowers defaulting and property depreciation is something that many prefer not to do. These two factors have led to losses for FNMA & FHLMC, along with others, and some investors have been selling mortgage securities in order to meet capital requirements. And selling has led to lower prices, and thus higher rates. That’s it in a nut shell.

Stay tuned to see how this weeks volitale market continues… 

Wilshire Weekly Mortgage Rate Update March 4, 2008

Where we are at:

Monday’s bond market opened in negative territory despite weaker than expected economic news and a lack of stock selling. The stock markets are flat with the Dow and Nasdaq each down a point or two. The bond market is currently down 14/32, which will likely push this morning’s mortgage rates higher by approximately .125 – .250 of a discount point.

Where We are going:
There is no relevant economic news scheduled for release tomorrow but there are two reports scheduled for release Wednesday morning. The first is the revised Productivity index for the 4th Quarter of last year. The preliminary reading posted last month showed an annual rate of 1.8% increase in worker output. Analysts are expecting to see no revision to last month’s initial reading. Employee productivity is watched closely because a higher level of output per hour is believed to mean that the economy can expand without inflation concerns.

January’s Factory Orders will be posted late Wednesday morning, which will give us a measurement of manufacturing sector strength. A larger than expected drop would be good news for the bond market and could lead to an improvement in mortgage rates. The Fed Beige Book will be posted Wednesday afternoon. This report details economic activity throughout the country by region. The Fed relies heavily on this data during their FOMC meetings, so look for a potential reaction during afternoon trading Wednesday. Overall, look for a fairly active week unless comparing to last week’s volatility.

Forecast:
There will be some optimism leading up to Friday’s Employment report. The market is expecting to see very weak numbers Friday morning and has already built that into current pricing. The problem is that if it simply meets forecasts, or is even slightly stronger than expected, we could see bonds drop and mortgage rates rise. If I were considering financing/refinancing a home, I would…. Lock if my closing was taking place within 7 days…