Our Real Estate Blog

Mortgage Rates (6/2/2008)

June 2nd, 2008 9:40 AM by Lehel Szucs

This week brings us the release of a couple important pieces of economic data in addition to some moderately important reports. There are a total of four or five reports that are worth watching and are most likely to affect mortgage rates.

The first is the Institute for Supply Management's (ISM) manufacturing index late tomorrow morning. This highly important index measures manufacturer sentiment. A reading below 50 means that more surveyed manufacturing executives felt that business worsened during the month than those who felt it had improved. A sub-50 reading is also considered recessionary news. Analysts are expecting to see a 48.0 reading in this month's release, meaning that sentiment slipped slightly during May. A smaller reading will be good news for the bond market and mortgage shoppers while an unexpected increase could contribute to higher mortgage rates.

Tuesday's only relevant news is the Commerce Department's release of April's Fac tory Orders data. This manufacturing sector report is similar to last week's Durable Goods Orders release, but also includes orders for non-durable goods. It can cause some movement in the financial markets if it varies from forecasts by a wide margin, but it isn't expected to cause much change in rates this month. Current forecasts are expecting to see an increase in orders of 0.1%.

The revised 1st Quarter Productivity and Costs report will be released Wednesday morning. This data measures employee output and employer costs for wages and benefits. It is considered to be a measurement of wage inflation. It is believed that the economy can grow with low inflationary pressures when productivity is high. Last month's preliminary reading revealed a 2.2% rate, but I don't think this piece of data will have much of an impact on the bond market or mortgage pricing unless it varies greatly from its forecasted reading of 2.5%.

The second report of the day may have a significant impact on the markets or be a non-factor depending on its result. The Institute for Supply Management will release its services index late Wednesday morning. It is expected to show a reading of 51.0, with the same principals as Monday's manufacturing index. If this reading varies greatly from forecasts, we may see volatility in the markets and mortgage rates. However, if its results are in the general area of expectations, it will likely have no influence on the markets and mortgage pricing.

There is no relevant economic news scheduled for release Thursday, however, Friday's sole report is arguably the single most important report that we see each month. The Labor Department will post May's Employment data early Friday morning. This report gives us key employment readings such as the U.S. unemployment rate and the number of jobs added or lost during the month. Analysts are expecting to see the unemployment rate climb to 5 .1% with approximately 52,000 jobs lost during the month. A higher than expected increase in the unemployment rate and a larger drop in payrolls would be great news for the bond market. It would probably create a sizable rally in bonds, leading to lower mortgage rates Friday. But, stronger than expected numbers would likely lead to a spike in mortgage rates.

Overall, tomorrow or Friday are likely to be the most important days of the week as they bring us the two most important reports on the agenda. If they give us weaker than expected results, we will probably close the week with lower mortgage rates than tomorrow's opening levels. However, if we see stronger than expected readings in those two releases, I expect mortgage rates to move higher on the week.

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... Lock 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.

_________________________________________________________________

Monday's bond market has opened in positive territory despite stronger than expected economic news. Helping boost bond prices this morning are sizable stock losses with the Dow down 132 points and the Nasdaq down 27 points. The bond market is currently up 6/32, but we will likely still see an increase in this morning's mortgage rates of approximately .125 of a discount point due to weakness late Friday.

The first data of the week was the Institute for Supply Management's (ISM) manufacturing index. It revealed a reading of 49.6 that was over a full point higher than forecasts. This means that manufacturers were more optimistic about business conditions than analysts had thought. That is considered negative news for bonds because strengthening manufacturing activity usually leads to strong overall economic activity and raises inflation concerns. Fortunately, traders seem to be more interested in today's stock weakness than this data.

Tomorrow's only relevant news is the Commerce Department's release of April's Factory Orders data. This manufacturing sector report is similar to last week's Durable Goods Orders release, but also includes orders for non-durable goods. It can cause some movement in the financial markets if it varies from forecasts by a wide margin, but it isn't expected to cause much change in rates this month. Current forecasts are expecting to see a decline in orders of 0.1%.

Overall, look for Friday to be the most important day of the remaining week with the release of May's Employment figures. This morning's data failed to drive bond prices or mortgage rates in any direction, but Friday's data most likely will. If we see stronger than expected readings Friday, I expect to see mortgage rates close the week higher than this morning's levels.

If I were considering financing/refinancing a home, I would.... Lock if my closing was taking place within 7 days... Lock if my closing w as 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.


©Mortgage Commentary 2008

Posted in:General
Posted by Lehel Szucs on June 2nd, 2008 9:40 AM

Archives:

Categories:

My Favorite Blogs:

Sites That Link to This Blog: