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Mortgage Rates (11/23/2010)

November 23rd, 2010 8:22 AM by Lehel S.

Tuesday’s bond market has opened in positive territory again after news of the Korean conflict raised fears of further instability in the world markets. The stock markets have reacted negatively with the Dow down 145 points and the Nasdaq down 33 points. The bond market is currently up 19/32, which should improve this morning’s mortgage rates by approximately .125 - .250 of a discount point.

There were two relevant economic reports posted this morning. The initial revision to the 3rd Quarter Gross Domestic Product (GDP) was the first, showing a 2.5% annual rate of economic growth during the third quarter. This was a little higher than forecasts and a fairly sizable increase from the previous estimate of 2.0%, meaning economic activity was stronger than many had thought. This is bad news for the bond market and mortgage rates because long-term securities such as mortgage-related bonds are more attractive to investors in a weak eco nomic and low inflation environment. Still, to the benefit of mortgage shoppers the Korean news is taking center stage, at least during morning trading.

The National Association of Realtors reported late this morning that home resales fell 2.2% last month, nearly matching forecasts. This can be considered relatively favorable news for the bond market and mortgage rates because it indicates the housing sector remains weak. Since a weak housing sector makes a broader economic recovery more difficult, today’s results are good news. However, since there was little variance from forecasts and this data is not considered highly important, its impact on this morning’s rates has been minimal.

Later today brings us the release of the minutes from the last FOMC meeting. Traders will be looking for any indication of the Fed’s next move regarding monetary policy. They will be released at 2:00 PM ET, therefore, any reaction will come during afternoon trading. This release is one of those that may cause some volatility in the markets after they are posted, or could be a total non-factor. If they show anything surprising, we may see some movement in rates this afternoon, but it is more likely there will be no reaction.

We also have the first of this week’s two Treasury auctions that have the potential to change mortgage rates. 5-year Notes are being sold today while 7-year Notes will go to auction tomorrow. Neither of these sales will likely directly impact mortgage pricing, but they can influence general bond market sentiment. If the sales go poorly, we could see broader selling in the bond market that leads to upward revisions in mortgage rates. However, strong sales usually make bonds more attractive to investors and bring more funds into the bond market. The buying of bonds that follows often translates into lower mortgage rates. Results of each respective sale will be pos ted at 1:00 PM ET today and tomorrow, so look for any reaction to come during afternoon hours.

There are four reports scheduled for release tomorrow morning that may influence mortgage rates. October’s Durable Goods Orders is the first and will be posted early morning. This data helps us measure manufacturing strength by tracking orders for big-ticket items, but is known to be quite volatile from month-to-month. It is expected to show a 0.3% decline in new orders. A larger than expected drop would be considered good news for the bond market and mortgage rates. 

The second is October’s Personal Income and Outlays data. This data measures consumers’ ability to spend and their current spending habits. They are important because consumer spending makes up two-thirds of the U.S. economy. The report is expected to show that income rose 0.4% and that spending increased 0.6%. Smaller than expected readings would mean consum ers had less money to spend and were spending less than thought. That would be good news for bonds and could lead to improvements in mortgage rates tomorrow morning. 

The revised November reading to the University of Michigan Index of Consumer Sentiment will be posted late tomorrow morning. It will give us a measurement of consumer willingness to spend. If consumers are optimistic about their own financial situations, they are more apt to make a large purchase in the near future. Analysts are expecting to see little change to the preliminary reading of 69.3. Unless we see a significant variance from the forecasted reading, I don’t think this data will cause much movement in mortgage rates tomorrow.

Closing this week’s relevant economic news is October’s New Home Sales data late tomorrow morning. It tracks sales of newly constructed homes, which makes up the approximately 15% of home sales that today’s report did not cover. It actually is the week’s least important data and will likely have no impact on tomorrow’s mortgage rates unless it shows a significant variance from expectations. It is expected to reveal a small increase in sales of newly constructed homes.

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 of all/any other borrowers. 
Posted in:General
Posted by Lehel S. on November 23rd, 2010 8:22 AM



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