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Mortgage Rates (12/20/2009 - The Week Ahead)

December 20th, 2009 9:37 PM by Lehel S.

This holiday-shortened trading week brings us the release of six monthly or quarterly economic reports. Only a couple of the reports being released are considered to be of high importance to the markets. With the Christmas holiday falling during the week we can expect very thin trading, meaning that we may see a larger reaction than normal to some news because there will be fewer traders working and less transactions being made.

There is no relevant economic news scheduled for release tomorrow, so look for the stock markets to help drive bond trading and mortgage rates. Two of the week's reports are scheduled for posting Tuesday. The first is the final revision to the 3rd Quarter GDP. I don't think this data will have an impact on mortgage rates unless it varies greatly from its expected reading. Last month's first revision showed that the economy expanded at a 2.8% annual pace during the quarter and this month's revision is expected to show the same. A sign ificant upward revision would be considered bad news for bonds, but since this data is quite aged at this point I don't think it will have much of an impact on mortgage rates Tuesday.

The second report of the day is November's Existing Home Sales report. This release will come from the National Association of Realtors while Wednesday's New Home Sales data is a Commerce Department report. Both give us a measurement of housing sector strength and mortgage credit demand, however, neither are considered to be of high importance. And both of the reports are expected to show a small increase in sales. Weaker than expected readings would be considered positive for bonds and mortgage rates because they hint at a weakening housing market, but unless the actual reading varies greatly from forecasts the results will probably have little or no impact on mortgage rates.



Wednesday brings us the release of three reports. The first is November's P ersonal Income and Outlays data. It will give us an important measurement of consumer ability to spend and current spending habits. Since consumer spending makes up two-thirds of the U.S. economy, any related data usually has a noticeable impact on the financial markets and mortgage rates. Current forecasts are calling for a 0.5% increase in income and a 0.7% increase in spending. If this report reveals weaker than expected readings, we should see the bond market improve and mortgage rates drop slightly Wednesday morning.

The second report of the day comes late morning when the revised University of Michigan Index of Consumer Sentiment for December is posted. Current forecasts are calling for a small upward revision from the preliminary reading of 73.4. This is fairly important because rising consumer confidence indicates that consumers may be more apt to make large purchases in the near future. An unexpected upward revision could lead to slightly higher mortgage rates Wednesday.

The last report of the day is November's New Home Sales. It is this week's least important report and is unlikely to influence mortgage rates.



November's Durable Goods Orders will be posted early Thursday morning. This data gives us an important measurement of manufacturing sector strength by tracking orders for big-ticket items or products that are expected to last at least three years. Analysts are expecting the report to show a 0.5% increase in new orders. A decline in orders would indicate that the manufacturing sector was weaker than many had thought. This would be good news for the bond market and should drive mortgage rates lower. However, a larger than expected rise in orders could lead to mortgage rates moving higher early Thursday morning.

Overall, I am expecting to see some movement in the markets and mortgage rates, but nothing drastic unless we get some surprising results from the week's da ta. The bond market will close early Thursday and will be closed all day Friday in observance of the Christmas Day holiday. This means that firms that trade bonds will likely be keeping only a skeleton staff the latter part of the week and raises the possibility of a stronger reaction to surprises in the economic data than we normally would see. Accordingly, proceed cautiously this week if still floating an interest rate and closing in the immediate future.

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.

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Posted by Lehel S. on December 20th, 2009 9:37 PM



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