January 18th, 2010 12:08 PM by Lehel S.
This week brings us the release of three pieces of economic data to digest, but only one is considered to be of high importance. It is also 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.
The first two reports will be released early Wednesday morning. The Labor Department will post their Producer Price Index (PPI) and the Commerce Department will release December's Housing Starts data, both at 8:30 AM. The PPI is much more important to the markets and mortgage rates because it measures inflationary pressures at the producer level of the economy. It is the sister report to last week's Consumer Price Index (CPI) that didn't give us any major surprises. Analysts are expecting to see no change in the overall reading and a 0.1% increase in the more important core data reading that excludes volatile food and energy prices. Unexpected increases, particularly in the core reading, could mean higher mortgage rates Wednesday.
December's Housing Starts 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.
The Leading Economic Indicators (LEI) for December is the last piece of data of the week. It will be released late Thursday morning, attempting 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 to see a 0.7% increase, meaning that economic growth over the next few months should rise fairly rapidly. A smaller than expected increase would be 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, Wednesday will likely turnout to be the most important day of the week with the PPI scheduled. If it meets expectation or is lower than forecasts, we could see mortgage rates close the week lower than Tuesday's opening levels. Generally speaking, I suspect this may be a fairly quiet week for mortgage rates, at least compared to the last couple of weeks.
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 o f all/any other borrowers.