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Mortgage Rates (1/19/2011)

January 20th, 2011 6:48 AM by Lehel S.

Wednesday’s bond market has opened in positive territory following the release of some mixed housing data and early stock losses. The Dow is currently down 3 points while the Nasdaq has lost 22 points. The bond market is currently up 4/32, but we will still likely see an increase of approximately .125 of a discount point in this morning’s rates due to weakness late yesterday.

December's Housing Starts was the day’s only relevant economic data. It showed that starts of new home construction fell much more than expected last month. That is good news for the bond market because it hints at a slowing housing sector. However, clouding the picture was a spike in new permits issued that gives us an indication of future home starts. Prior to construction beginning, builders must pull permits from local city and county offices. The unexpected increase in new permits tells us that more projects are about to get under way, making it likely that w e will see an increase in January’s Housing Starts data. Therefore, we can consider this data neutral towards mortgage rates.

There are two monthly reports scheduled for release late tomorrow in addition to weekly unemployment figures that have carried a little more significance lately than they usually do. December’s Existing Home Sales is the first and is considered to be moderately important. The National Association of Realtors will give us this 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 tomorrow.

December’s Leading Economic Indicators (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 mar kets also. 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 increase should 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 tomorrow.

The Labor Department will release employment figures from last week early tomorrow morning. They are expected to announce that 425,000 new claims for unemployment benefits were filed last week. This would be a fairly sizable drop from the previous week’s 445,000 new claims and would point towards a strengthening labor market. Since the bond market thrives in weaker economic conditions, this would be c onsidered negative news for mortgage rates. If we see a much higher total than the 425,000, this data should help boost bond prices tomorrow. Unfortunately (or fortunately if the results are unfavorable to bonds), since this data tracks only a single week’s worth of new claims, its impact on mortgage rates is usually minimal unless it shows a significant variance from forecasts. Worth noting though is the fact that we have seen some sizable surprises recently that have allowed this data to influence mortgage pricing more than usual.

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 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 i n the best interest of all/any other borrowers. 
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Posted by Lehel S. on January 20th, 2011 6:48 AM

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