Our Real Estate Blog

Mortgage Rates (12/23/2009)

December 23rd, 2009 10:04 AM by Lehel S.

Wednesday's bond market has opened in positive territory after this morning's economic data gave us favorable results. The stock markets are mixed with the Dow down 11 points and the Nasdaq up 5 points. The bond market is currently up 11/32, which will likely improve this morning's mortgage rates by approximately .250 of a discount point.

November's Personal Income and Outlays report was the first of today's three releases. It showed that personal income rose 0.4% last month while spending rose 0.5%. Both of these readings were below forecasts, indicating that consumer ability to spend and their actual spending was not as strong as thought. This is fairly good news for bond and mortgage rates. They still posted strong increases that point towards a strengthening economy, but since they fell short of expectations we can consider the readings positive for bonds.

The second report also gave us a bit of good news. The University of Michigan revise d their Index of Consumer Sentiment for December, posting a 72.5 reading that was lower than the previous estimate of 73.4. Current forecasts were calling for a reading of 73.8. This index measures consumer confidence, which is relevant to the markets because falling confidence usually means consumers are less apt to make large purchases in the near future. Slowing consumer spending indicates slower economic growth and makes bonds more attractive to investors.

The last report of the day also gave us results that were positive for bonds and mortgage rates, but since this was the week's least important report its impact on rates has been minimal. November's New Home Sales report revealed an 11.3% decline in sales of newly constructed homes. This was a huge difference from forecasts and hints that part of the housing sector is not stable yet.

Tomorrow's only important data is November's Durable Goods Orders that will be posted early morning. This data g ives 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 tomorrow.

The stock and bond markets will close early tomorrow ahead of the Christmas Day holiday and will remain closed Friday. They will reopen Monday morning for regular trading hours. I strongly suspect that trading will be thin tomorrow as many firms keep only a skeleton staff on Christmas Eve. This will likely be the same for many mortgage companies also, so it is highly unlikely to see any afternoon revisions to mortgage rates tomorrow.

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 December 23rd, 2009 10:04 AM

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