Our Real Estate Blog

Mortgage Rates (10/17/2010)

October 18th, 2010 7:14 AM by Lehel S.

This week brings us the release of four economic reports for the markets to digest, but none of them are considered to be highly important to mortgage rates. However, this by no means leads me to believe we will have an uneventful week. This will be an extremely busy week for corporate earnings, which usually translates into stock volatility. The lack of important economic data on this week's calendar makes it more likely that any significant swings in stock prices will influence bond trading and mortgage rates.

Tomorrow has September's Industrial Production data scheduled to be posted. It will be released mid-morning, giving us an indication of manufacturing strength by tracking output at U.S. factories, mines and utilities. It is expected to show a 0.2% increase in output from August's level, meaning that manufacturing activity rose slightly. A larger than expected increase in output would be negative for bonds and mortgage rates as it would indicate econo mic strength. A decline in output would likely push mortgage rates lower tomorrow morning.

September's Housing Starts is the week's second release, coming early Tuesday morning. This report will probably not have much of an impact on the bond market or mortgage rates. It gives us a measurement of housing sector strength and mortgage credit demand by tracking construction starts of new homes, but is usually considered to be of low importance to the financial and mortgage markets. It is expected to show a decline in new home starts between August and September. I believe we need to see a significant surprise in this data for it to influence mortgage rates.

The only report scheduled for release Wednesday will be released during afternoon trading when the Federal Reserve will post its Beige Book at 2:00 PM ET. This data details economic conditions throughout the U.S. by region. It is relied upon heavily by the Federal Reserve when determining monetary poli cy at their FOMC meetings. If it reveals stronger signs of economic growth from the last release, we could see mortgage rates revise higher shortly after its release.

The last report is September's Leading Economic Indicators (LEI) late Thursday morning. This index attempts to measure future economic activity, particularly during the next three to six months. Current forecasts are calling for an increase of 0.3% from August's reading. This would indicate that economic activity is likely to increase moderately over the next couple of months. That would be relatively bad news for the bond market and mortgage rates, but this report is considered to be only moderately important. Therefore, a small increase would not be of much concern to the bond and mortgage markets. Ideally, we would like to see a decline in the index.

Overall, I don't see a particular day that should be labeled the single most important. The week's economic reports are all moderately important to the markets, so we can't rely on any of them to drive rates. In fact, the biggest force behind any noticeable moves in mortgage pricing may actually come from the stock markets. There are many companies posting earning reports during the week, including some big names that include Apple and Citigroup. If the corporate earnings releases are generally weaker than forecasts, stocks may suffer, making bonds more appealing to investors. The end result would likely be an improvement in rates. The flip side though is stronger than expected earnings that drive stocks higher, pushing bond prices lower and mortgage rates upward.

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... Lock 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. 
Posted in:General
Posted by Lehel S. on October 18th, 2010 7:14 AM



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