July 28th, 2008 7:39 AM by Lehel Szucs
There are several important reports scheduled for release this week that are likely to affect mortgage pricing. The first piece of news comes late Tuesday morning when the Conference Board posts their Consumer Confidence Index (CCI) for July. This index measures consumer sentiment, giving us an idea of consumer willingness to spend. This is important because consumer spending makes up two-thirds of the U.S. economy. If the CCI reading is weaker than expected, we may see bond prices rise and mortgage rates drop Tuesday. Current forecasts are calling for a reading of 50.0, which would be a lightly lower reading than June's reading.
There is no governmental economic news scheduled for release Wednesday that is relevant to mortgage rates. However, there are two on the schedule for Thursday. The first is the quarterly Gross Domestic Product (GDP), which is considered to be the best indicator of economic growth. It is the sum of all goods and services produced in the U.S. and usually has a great deal of influence on the financial markets. Current forecasts are estimating a 1.8% pace. A larger increase will probably hurt bond prices, leading to higher mortgage rates. But a smaller increase would likely fuel a bond market rally.
The second report of the day is the 2nd Quarter Employment Cost Index (ECI) that measures employers' costs for wages and benefits. It is considered to be an important measurement of wage inflation and can have a pretty big impact on the bond market and mortgage rates. If it shows a rapid increase, raising inflation concerns, the bond market may drop and mortgage rates rise. It is expected to reveal an increase of 0.7%.
Friday mornings brings us the release of two important reports, including one of the most important reports we see each month. This report gives us the U.S. unemployment rate, number of new jobs added to the economy and the average hourly earnings reading. The ideal situatio n for the bond market is rising unemployment, a loss of new jobs and little increase in earnings. This report is considered to be one of the single most important releases that we see each month.
While the GDP can be considered the single most important report in general, it is posted quarterly rather than monthly like the Employment report. Friday's report is expected to show that the unemployment rate rose to 5.6% last month while approximately 68,000 new jobs were lost and a 0.3% increase in average earnings. The unemployment rate probably will not be much of a factor if the new jobs number varies from forecasts. However, due to the importance of the payroll numbers, we will undoubtedly see quite a bit of volatility in the markets and mortgage pricing.
Also scheduled for release Friday is the Institute for Supply Management's (ISM) Manufacturing Index for July. This index measures manufacturer sentiment by surveying trade executi ves about business conditions during the previous month. A reading above 50.0 means that more surveyed executives felt that business improved than those who said it had worsened. A smaller than expected reading would be great news for the bond market and would likely improve mortgage rates Friday, assuming that the Employment report doesn't give us an major surprises.
Overall, it likely will be a fairly active week in the mortgage market. With several important economic reports on tap, we will likely see noticeable movement in mortgage rates more than one day. The most important day of the week is Friday with the Employment and ISM reports being released, but Thursday's GDP release is highly important to the markets and could heavily influence mortgage pricing also.
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... 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