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Mortgage Rates (1/30/2011 - The Week Ahead)

January 31st, 2011 9:04 AM by Lehel S.

This week is extremely busy in terms of economic data scheduled for release and will likely be another active week for mortgage rates. There are five economic releases scheduled for the week, some of which are known to be extremely influential on the financial and mortgage markets. All five of these reports are considered to be of moderate or high importance, meaning we should see quite a bit of movement in mortgage rates this week.

The first report of the week is January's Personal Income and Outlays data tomorrow morning, which gives us an indication of consumer ability to spend and current spending habits. This is important because consumer spending makes up two-thirds of the U.S. economy. Current forecasts call for an increase in income of 0.5% while spending is expected to rise 0.6%. Larger increases would be good news for the stock markets and could hurt bond prices, driving mortgage rates higher tomorrow. Smaller than expected increases would be consi dered good news for mortgage rates.

Tuesday also has only one economic report with the Institute of Supply Management's (ISM) manufacturing index. This index tracks manufacturer sentiment by rating surveyed trade executives' opinions of business conditions. It is usually the first economic data released each month and is one of this week's very important reports. Current forecasts are calling for a reading in the neighborhood of 57.5 that would be an increase from December's reading. The lower the reading, the better the news for the bond market and mortgage rates because weak sentiment indicates a slowing manufacturing sector.

Wednesday has no government reports scheduled or data that is considered likely to impact mortgage rate. However, there are a couple of private sector employment-related reports due to be released. They normally would not be of much concern, but one of them showed an unexpected spike in new hires recently that caused selling in bonds and an increase in mortgage rates. I still am not too concerned about their results, but the potential does exist that a significant variance in the numbers could lead to changes in mortgage pricing.

Employee Productivity and Costs data for the 4th quarter will be released early Thursday morning. It can cause some movement in the bond market, but should have a minimal impact on mortgage pricing. If it varies greatly from analysts' forecasts of a 2.2% increase, we may see some movement in mortgage rates. However, the markets will be much more interested in Friday's data, so a slight difference shouldn’t cause a noticeable movement in mortgage rates.

Late Thursday morning, December's Factory Orders data will be posted. It is similar to last week's Durable Goods Orders release in giving us a measurement of manufacturing sector strength, but this data includes new orders for both durable and non-durable goods. It is one of the less important reports of the week, but can influence mortgage pricing if it varies greatly from forecasts. Analysts are expecting a 0.7% decline in new orders, hinting at manufacturing sector weakness.

Friday's data is by far the most important of the week. The Labor Department will post January's Employment data early Friday morning, giving us the U.S. unemployment rate and the number of jobs added or lost during the month among other related statistics. Analysts are expecting to see the unemployment rate rise from 9.4% to 9.6% and that approximately 150,000 new jobs were added to the economy. An increase in unemployment and a loss in payrolls would be great news for the bond market. It would probably create a bond market rally, leading to lower mortgage rates Friday morning. However, if Friday's report reveals stronger than expected results, we can expect to see mortgage rates move higher.

Overall, look for tomorrow, Tuesday or Friday to be the biggest day for mortgage rates. Friday's Employment report is the most important piece of data, but Tuesday’s ISM Index draws a lot of attention also. We could also see movement in rates tomorrow morning following the activity at the end of last week. If we get weaker than expected results from Tuesday's ISM report and Friday's employment data, we should see rates close the week lower than last Friday's closing levels. If the data shows stronger than expected results, we may see mortgage rates move higher for the week. With some very important data being posted over the next five days, I strongly recommend keeping fairly constant contact with your mortgage professional if still floating an interest rate.

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 da ys... 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. 
Posted in:General
Posted by Lehel S. on January 31st, 2011 9:04 AM



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