Our Real Estate Blog

Mortgage Rates (7/1/2010)

July 6th, 2010 9:55 AM by Lehel S.

Thursday's bond market is in positive territory after this morning's economic data gave us favorable results and the stock markets opened with losses. The major stock indexes are extending yesterday's negative tone with the Dow down 95 points and the Nasdaq down 24 points. The bond market is currently up 7/32, which should improve this morning's mortgage rates by approximately .125 of a discount point.

This morning's important data came from the Institute of Supply Management (ISM) who reported that their manufacturing index fell to a reading of 56.2 from May's 59.7. This was below forecasts of 59.0, indicating that manufacturer sentiment was not as strong as expected. That is good news for the bond market and mortgage rates since it hints at manufacturing sector weakness.

Also released this morning were last week's unemployment figures from the Labor Department. They announced that 472,000 new claims for unemployment benefits were filed last w eek when analysts were expecting to see that only 458,000 were filed. This data tracks only a single week's worth of new claims, so it usually has little impact on the bond market and mortgage rates unless it varies greatly from forecasts. That was the case this morning as traders are more interested in tomorrow's monthly report.

Tomorrow morning brings us the release of two reports, including the extremely important Employment report from the Labor Department. This report will give us June's unemployment rate, number of new payrolls added or lost and average hourly earnings. These are considered to be very important readings of the employment sector and can have a huge impact on the financial markets. The ideal scenario for the bond market is rising unemployment, a large decline in payrolls and no change in earnings. Weaker than expected readings would likely help boost bond prices and lower mortgage rates tomorrow. However, stronger than expected readings cou ld be extremely detrimental to mortgage pricing. Analysts are expecting to see the unemployment rate rise 0.1% to 9.8%, with 100,000 jobs lost and a 0.1% rise in earnings.

The Commerce Department will post May's Factory Orders data late tomorrow morning, which is similar to the Durable Goods Orders report that was released last week. The biggest difference is that this week's report covers both durable and non-durable goods. It usually doesn't have as much of an impact on the bond market as the durable goods data does, but can lead to changes in mortgage pricing if it varies greatly from forecasts because it measures manufacturing sector strength. Current expectations are showing a 0.7% decline in new orders from April's levels. A larger decline in orders would be considered good news for the bond market and could help lower mortgage rates slightly tomorrow. However, the employment data is much more important to the markets than this report is.

If I wer e 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 July 6th, 2010 9:55 AM

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