Our Real Estate Blog

Mortgage Rates (1/16/2011 - The Week Ahead)

January 17th, 2011 11:52 AM by Lehel S.

his week brings us the release of only three pieces of economic data to digest, but none of them are considered to be highly important to the markets or mortgage rates. It is a shortened trading week with the stock and bond markets closed tomorrow in observance of the Martin Luther King Jr. holiday. The financial and mortgage markets will reopen Tuesday morning for regular trading hours. Accordingly, there will be no update to this report tomorrow morning.

Wednesday’s release of December's Housing Starts will be the first report of the week. It helps us measure housing sector strength and future mortgage credit demand by tracking construction starts of new homes. It is not considered to be one of the more important releases each month, so I don’t see it causing much movement in mortgage rates Wednesday.

Thursday has the remaining two monthly reports- December’s Existing Home Sales and Leading Economic Indicators (LEI) reports. Both will be released at 10:00 AM ET and considered moderately important to mortgage rates. The National Association of Realtors will give us the housing report, which tracks home resales in the U.S. It is expected to show an increase in home sales last month, meaning that the housing sector strengthened. Ideally, the bond market would prefer to see a decline in sales, but a small increase should not negatively affect mortgage rates Thursday.

The LEI attempts to measure economic activity over the next three to six months. It is considered to be of moderate importance to the bond and mortgage markets. Analysts are currently expecting the Conference Board to post a 0.6% increase, meaning that economic growth over the next few months will likely rise. Generally speaking, this would be bad news for the bond market because a strengthening economy makes long-term securities such as mortgage bonds less attractive to investors. However, a smaller than expected increa se would be taken as fairly good news for the bond market and mortgage rates, but a larger than expected rise could lead to bond selling and a minor increase to mortgage pricing Thursday.

Overall, Tuesday or Friday will probably be the least active days for mortgage rates with nothing of relevance scheduled in a pretty light week. Look for the stock markets to be the biggest influence on bond trading and mortgage pricing those days. The most important day will likely turn out to be Thursday with the two monthly reports scheduled (in addition to weekly unemployment figures). But, I don’t see rates moving significantly any day unless something unexpected happens in the markets. Accordingly, I am holding the optimistic approach towards floating an interest rate, at least for the time being.

If I were considering financing/refinancing a home, I would.... Float if my closing was taking place within 7 days... Float if my closing was taking place bet ween 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. 
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Posted by Lehel S. on January 17th, 2011 11:52 AM

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