September 22nd, 2008 8:48 AM by Lehel Szucs
Monday's bond market has opened in negative territory despite another round of stock market losses. The major stock indexes are kicking the week off with sizable losses. The Dow is currently down 160 points while the Nasdaq has fallen 30 points. The bond market is currently down 15/32, which will likely push this morning's mortgage rates higher by approximately .375 of a discount point.
There is no relevant economic news scheduled for release today. The rest of the week brings us the release of five economic reports for the markets to digest. Three of them are considered to be of low importance and likely will have little impact on mortgage rates. With none of the data being released until Wednesday, we will likely see the most activity in rates the latter part of the week.
The first piece of data comes Wednesday morning with the release of August's Existing Home Sales report. The National Association of Realtors posts this data, giving us an indi cation of housing sector strength by tracking home resales in the U.S. It is expected to show a decline from July's sales, however, this data is not considered to be of high importance to the bond market.
August's Durable Goods Orders will be posted early Thursday morning. This report gives us an indication of manufacturing sector strength by tracking orders for big-ticket items at U.S. factories. Current forecasts call for a drop in orders in the neighborhood of 1.3%. A larger decline could help bond prices and cause mortgage rates to drop Thursday. However, a smaller than expected decrease would indicate a stronger than expected manufacturing sector and would likely help push mortgage rates higher.
Also Thursday morning will be the release of August's New Home Sales. It is expected to show that sales of new homes rose slightly in August. As with Wednesday's Existing Home Sales data, this report will likely not have a significant impact on mortgage ra tes.
The first of Friday's two releases is the final revision to the 2nd Quarter Gross Domestic Product (GDP). Since this data is aged now and the preliminary reading of the 3rd Quarter GDP will be released next month, I don't see this revision having much of an impact on the financial markets or mortgage pricing. It is expected to show a slight increase from the previous estimate of a 3.3% annual rate.
The final report of the week is Friday's release of the University of Michigan's Index of Consumer Sentiment. This is the revised reading for September. The preliminary reading that was released earlier this month revealed a 73.1 reading. Analysts are expecting to see a downward revision, meaning confidence was not as higher as previously thought. A lower than expected reading should help improve mortgage rates Friday morning.
Overall, this will likely be a fairly active week for mortgage rates. The most important day will either be today or Thursday. We may see last week's market volatility continue today and Thursday's data is the most important of the week. Until the markets appear to have stabilized, I am holding the lock recommendations as it makes it difficult to predict what mortgage rates will do when we see such wild swings.
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... 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