Thursday, December 29, 2011
30 Year Fixed Rate Trend
Below is a chart showing the trend of 30 year fixed rate mortgages over the last six weeks.
Wednesday, December 28, 2011
Home Sales Up in November
New home sales rose 1.6% in November, to an annualized rate of 315,000 units. This is the second highest rate in 2011. The video below from CNBC discusses this increase in sales:
Tuesday, December 27, 2011
This Week's Market Commentary
This week brings us the release of only one piece of monthly economic data that is considered important to mortgage rates. It is a true holiday-shortened week with the financial markets closed today for observance of Christmas and the bond market closing early Friday in recognition of the New Year’s Day holiday next weekend.
However, some traders will be working a short week, especially as it progresses, so we can expect to see some very light trading. That could mean little if nothing surprises the markets, but a significant piece of news or unexpected results from the little data being posted can cause a larger reaction than normal due to fewer traders working.
The week’s only and the year’s final important release comes late tomorrow morning when the Conference Board will post their Consumer Confidence Index (CCI) for December. This is a fairly important release because it measures consumer willingness to spend. If consumers are more confident about their personal financial situations, they are more apt to make large purchases. Since consumer spending makes up two-thirds of the U.S. economy, any related data is watched closely by market participants and can have a significant influence on mortgage rate direction. Current forecasts are calling for an increase in confidence from November’s reading of 56.0. Analysts are expecting tomorrow’s release to show a reading of 58.0, meaning consumers felt better about their own financial situation than they did in November. The lower the reading, the better the news for bonds and mortgage pricing.
With little economic data being posted this week, the Labor Department’s weekly unemployment numbers may help influence the markets and mortgage rates more than usual. They are expected to show Thursday that 368,000 new claims for unemployment benefits were filed last week, which would be an increase from the previous week. We usually don’t worry too much about this data because it tracks only a single week’s worth of new claims, but we should probably pay a little more attention to this particular release as it could impact mortgage rates slightly.
The bond market will close at 2:00 PM ET Friday, but the stock markets are scheduled to be open for a full day of trading. All banks and major U.S. financial markets will be closed Monday in observance of the New Year’s Day holiday. Everything will reopen next Tuesday morning for regular hours.
Overall, tomorrow will be the most important day of the week, but we may see some volatility any day. The thinnest trading will probably take place the latter part of the week as traders head home for the holiday. Despite last week’s shortened schedule, we saw plenty of movement in mortgage rates. This week likely will be the same as investors look to make year-end adjustments to their portfolios. Accordingly, I recommend keeping in contact with your mortgage professional if still floating an interest rate and closing in the immediate future.
However, some traders will be working a short week, especially as it progresses, so we can expect to see some very light trading. That could mean little if nothing surprises the markets, but a significant piece of news or unexpected results from the little data being posted can cause a larger reaction than normal due to fewer traders working.
The week’s only and the year’s final important release comes late tomorrow morning when the Conference Board will post their Consumer Confidence Index (CCI) for December. This is a fairly important release because it measures consumer willingness to spend. If consumers are more confident about their personal financial situations, they are more apt to make large purchases. Since consumer spending makes up two-thirds of the U.S. economy, any related data is watched closely by market participants and can have a significant influence on mortgage rate direction. Current forecasts are calling for an increase in confidence from November’s reading of 56.0. Analysts are expecting tomorrow’s release to show a reading of 58.0, meaning consumers felt better about their own financial situation than they did in November. The lower the reading, the better the news for bonds and mortgage pricing.
With little economic data being posted this week, the Labor Department’s weekly unemployment numbers may help influence the markets and mortgage rates more than usual. They are expected to show Thursday that 368,000 new claims for unemployment benefits were filed last week, which would be an increase from the previous week. We usually don’t worry too much about this data because it tracks only a single week’s worth of new claims, but we should probably pay a little more attention to this particular release as it could impact mortgage rates slightly.
The bond market will close at 2:00 PM ET Friday, but the stock markets are scheduled to be open for a full day of trading. All banks and major U.S. financial markets will be closed Monday in observance of the New Year’s Day holiday. Everything will reopen next Tuesday morning for regular hours.
Overall, tomorrow will be the most important day of the week, but we may see some volatility any day. The thinnest trading will probably take place the latter part of the week as traders head home for the holiday. Despite last week’s shortened schedule, we saw plenty of movement in mortgage rates. This week likely will be the same as investors look to make year-end adjustments to their portfolios. Accordingly, I recommend keeping in contact with your mortgage professional if still floating an interest rate and closing in the immediate future.
Thursday, December 22, 2011
30 Year Fixed Rate Trend
Below is a chart showing the trend of 30 year fixed rate mortgages in the last 6 weeks:
Monday, December 19, 2011
This Week's Market Commentary
This holiday-shortened trading week brings us the release of eight monthly or quarterly economic reports in addition to two semi-relevant Treasury auctions.
None of the releases are considered to be highly important to the markets and mortgage rates, but several of them do have the potential to cause some movement in rates. The more important news comes later in the week. Therefore, we may see more movement in mortgage pricing as the week progresses.
There is nothing of relevance scheduled for release tomorrow. This means we can look towards the stock markets for guidance on bond and mortgage rate direction. The Europe debt crisis will likely be in the headlines this week as leaders move to avoid downgrades by credit rating agencies that would be equivalent to adding gasoline to the fire. If the actions taken overseas are strong enough to calm investor fears here, stocks may bode well for the week, making it difficult for bonds to rally and push mortgage rates lower. On the other hand, if it becomes evident that the downgrades to their debt are unavoidable, fears about the impact they would have on the global economy will probably fuel stock selling and bond buying here. The latter would be good news for mortgage rates.
Tuesday’s only data is November’s Housing Starts, but it is the week’s least important data. I don’t see it causing much movement in mortgage rates unless it shows a huge variance from expectations. It is expected to show little change in construction starts of new homes, hinting at a flat housing sector last month. Generally speaking, an increase in new starts would be bad news for bonds and mortgage pricing, but unless there is a significant surprise it will likely have little impact on Tuesday’s mortgage rates.
November’s Existing Home Sales figures will be posted late Wednesday morning. This release will come from the National Association of Realtors while its sister release, Friday’s New Home Sales data, is a Commerce Department report. Both give us a measurement of housing sector strength and mortgage credit demand, however, neither is considered to be of high importance. And both of the reports are expected to show increases in sales, indicating housing sector growth. Weaker than expected readings would be considered positive for bonds and mortgage rates because they hint at a still weakening housing market. But unless the actual readings vary greatly from forecasts, the results will probably have little or no impact on mortgage rates.
Thursday brings us the release of three reports, with the first being the final revision to the 3rd Quarter Gross Domestic Product (GDP). I don’t think this data will have an impact on mortgage rates unless it varies greatly from its expected reading. Last month’s first revision showed that the economy expanded at a 2.0% annual pace during the quarter and this month’s revision is expected to show no change. A revision higher than the 2.0% rate that is expected would be considered bad news for bonds. But since this data is quite aged at this point, I don’t think it will have much of an impact on mortgage rates Thursday.
The second report of the day comes just before 10:00 AM ET when the revised University of Michigan Index of Consumer Sentiment for December is posted. Current forecasts are calling for a small upward revision from the preliminary reading of 67.7. This is fairly important because rising consumer confidence indicates that consumers may be more apt to make large purchases in the near future. A reading above the 68.0 that is forecasted would be negative for bonds and mortgage rates.
The Conference Board will release their Leading Economic Indicators (LEI) for the month of November. This 10:00 AM release attempts to measure or predict economic activity over the next three to six months. It is expected to show a small increase in activity, meaning that it predicts a slowly expanding economy over the next several months. This probably will not have much of an impact on bond prices or affect mortgage rates unless it exceeds current forecasts of a 0.3% increase from October’s reading. The lower the reading, the better the news for bonds and mortgage pricing. If it shows a smaller increase, the bond market may move slightly higher, leading to a minor improvement in rates.
The final two economic reports of the week come Friday morning along with November’s New Home sales. The first is November’s Personal Income and Outlays data. It will give us an important measurement of consumer ability to spend and current spending habits. Since consumer spending makes up two-thirds of the U.S. economy, any related data usually has a noticeable impact on the financial markets and mortgage rates. Current forecasts are calling for a 0.2% increase in income and a 0.3% increase in spending. If this report reveals weaker than expected readings, we should see the bond market improve and mortgage rates drop slightly Friday morning.
November’s Durable Goods Orders is the last report, also being posted early Friday morning. This data gives 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 2.0% rise in new orders. A smaller increase 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 jump in orders could lead to mortgage rates moving higher early Friday morning. This data is known to be quite volatile from month-to-month, so it is not unusual to see large headline numbers on this report.
This week also has Treasury auctions scheduled the first three days. The two that are most likely to influence mortgage rates are Tuesday’s 5-year and Wednesday’s 7-year Note sales. If those sales are met with a strong demand, particularly Wednesday’s auction, bond prices may rise during afternoon trading. This could lead to improvements to mortgage rates shortly after the results of the sales are posted at 1:00 PM ET each day. But a lackluster investor demand may create bond selling and upward revisions to mortgage rates.
Overall, I am expecting to see some movement in the markets and mortgage rates, especially if we get some surprising results from the week’s data or news about Europe’s financial crisis. Despite the holiday season, we need to keep a cautious approach toward rates because we are likely to see very thin trading (light volume) as a result of many traders keeping short hours or home for the holiday altogether. This means that firms that trade bonds will likely be keeping only a skeleton staff the latter part of the week and raises the possibility of a stronger reaction to surprises in the economic data than we normally would see.
The least important day for mortgage rates will likely be tomorrow unless something drastic happens overnight. We will probably see the most movement in rates Friday, but Thursday’s economic data can also move mortgage pricing noticeably. With the Christmas holiday next weekend, it is being observed next Monday. The bond market will close early this Friday afternoon ahead of the holiday and will reopen next Tuesday morning. Accordingly, proceed cautiously this week if still floating an interest rate and closing by the end of the year.
None of the releases are considered to be highly important to the markets and mortgage rates, but several of them do have the potential to cause some movement in rates. The more important news comes later in the week. Therefore, we may see more movement in mortgage pricing as the week progresses.
There is nothing of relevance scheduled for release tomorrow. This means we can look towards the stock markets for guidance on bond and mortgage rate direction. The Europe debt crisis will likely be in the headlines this week as leaders move to avoid downgrades by credit rating agencies that would be equivalent to adding gasoline to the fire. If the actions taken overseas are strong enough to calm investor fears here, stocks may bode well for the week, making it difficult for bonds to rally and push mortgage rates lower. On the other hand, if it becomes evident that the downgrades to their debt are unavoidable, fears about the impact they would have on the global economy will probably fuel stock selling and bond buying here. The latter would be good news for mortgage rates.
Tuesday’s only data is November’s Housing Starts, but it is the week’s least important data. I don’t see it causing much movement in mortgage rates unless it shows a huge variance from expectations. It is expected to show little change in construction starts of new homes, hinting at a flat housing sector last month. Generally speaking, an increase in new starts would be bad news for bonds and mortgage pricing, but unless there is a significant surprise it will likely have little impact on Tuesday’s mortgage rates.
November’s Existing Home Sales figures will be posted late Wednesday morning. This release will come from the National Association of Realtors while its sister release, Friday’s New Home Sales data, is a Commerce Department report. Both give us a measurement of housing sector strength and mortgage credit demand, however, neither is considered to be of high importance. And both of the reports are expected to show increases in sales, indicating housing sector growth. Weaker than expected readings would be considered positive for bonds and mortgage rates because they hint at a still weakening housing market. But unless the actual readings vary greatly from forecasts, the results will probably have little or no impact on mortgage rates.
Thursday brings us the release of three reports, with the first being the final revision to the 3rd Quarter Gross Domestic Product (GDP). I don’t think this data will have an impact on mortgage rates unless it varies greatly from its expected reading. Last month’s first revision showed that the economy expanded at a 2.0% annual pace during the quarter and this month’s revision is expected to show no change. A revision higher than the 2.0% rate that is expected would be considered bad news for bonds. But since this data is quite aged at this point, I don’t think it will have much of an impact on mortgage rates Thursday.
The second report of the day comes just before 10:00 AM ET when the revised University of Michigan Index of Consumer Sentiment for December is posted. Current forecasts are calling for a small upward revision from the preliminary reading of 67.7. This is fairly important because rising consumer confidence indicates that consumers may be more apt to make large purchases in the near future. A reading above the 68.0 that is forecasted would be negative for bonds and mortgage rates.
The Conference Board will release their Leading Economic Indicators (LEI) for the month of November. This 10:00 AM release attempts to measure or predict economic activity over the next three to six months. It is expected to show a small increase in activity, meaning that it predicts a slowly expanding economy over the next several months. This probably will not have much of an impact on bond prices or affect mortgage rates unless it exceeds current forecasts of a 0.3% increase from October’s reading. The lower the reading, the better the news for bonds and mortgage pricing. If it shows a smaller increase, the bond market may move slightly higher, leading to a minor improvement in rates.
The final two economic reports of the week come Friday morning along with November’s New Home sales. The first is November’s Personal Income and Outlays data. It will give us an important measurement of consumer ability to spend and current spending habits. Since consumer spending makes up two-thirds of the U.S. economy, any related data usually has a noticeable impact on the financial markets and mortgage rates. Current forecasts are calling for a 0.2% increase in income and a 0.3% increase in spending. If this report reveals weaker than expected readings, we should see the bond market improve and mortgage rates drop slightly Friday morning.
November’s Durable Goods Orders is the last report, also being posted early Friday morning. This data gives 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 2.0% rise in new orders. A smaller increase 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 jump in orders could lead to mortgage rates moving higher early Friday morning. This data is known to be quite volatile from month-to-month, so it is not unusual to see large headline numbers on this report.
This week also has Treasury auctions scheduled the first three days. The two that are most likely to influence mortgage rates are Tuesday’s 5-year and Wednesday’s 7-year Note sales. If those sales are met with a strong demand, particularly Wednesday’s auction, bond prices may rise during afternoon trading. This could lead to improvements to mortgage rates shortly after the results of the sales are posted at 1:00 PM ET each day. But a lackluster investor demand may create bond selling and upward revisions to mortgage rates.
Overall, I am expecting to see some movement in the markets and mortgage rates, especially if we get some surprising results from the week’s data or news about Europe’s financial crisis. Despite the holiday season, we need to keep a cautious approach toward rates because we are likely to see very thin trading (light volume) as a result of many traders keeping short hours or home for the holiday altogether. This means that firms that trade bonds will likely be keeping only a skeleton staff the latter part of the week and raises the possibility of a stronger reaction to surprises in the economic data than we normally would see.
The least important day for mortgage rates will likely be tomorrow unless something drastic happens overnight. We will probably see the most movement in rates Friday, but Thursday’s economic data can also move mortgage pricing noticeably. With the Christmas holiday next weekend, it is being observed next Monday. The bond market will close early this Friday afternoon ahead of the holiday and will reopen next Tuesday morning. Accordingly, proceed cautiously this week if still floating an interest rate and closing by the end of the year.
Wednesday, December 14, 2011
Three Quarters of Sellers Overvalue Their Homes
The majority of homeowners, 76%, believe that their home is worth more than the recommended listing price their real estate agent suggests. This is up 3% from last year, according to a recent study conducted by HomeGain.The same study showed that 68% of buyers think that homes are overpriced, as well. Almost a third of buyers believe that homes are more than 10% overpriced.
According to the general manager of HomeGain, Louis Cammarosano, “home buyers and sellers continue to remain apart as to home valuations with the vast majority of home owners thinking their homes are worth more than their agents and the market are telling them.”
Thursday, December 8, 2011
Trend of 30 Year Fixed Rate Mortgages
Below is a chart showing the last six weeks of mortgage rates, at a cost of 0.7 point.
Tuesday, December 6, 2011
This Week's Market Commentary
This week is fairly light in terms of the number of economic releases scheduled for release. There are only three monthly or quarterly reports on the agenda that have the potential to influence mortgage rates and none of them are considered to be highly important. That means that the stock markets could be the focal point multiple days, especially the middle part of the week.
October’s Factory Orders is the first, coming late this morning. This report is similar to the Durable Goods Orders report that was released the week before last, except this one includes manufacturing orders for both durable and non-durable goods. This data usually isn’t a major influence on bond trading, but with little data this week that can impact mortgage rates, it could draw more attention than usual. Analysts are expecting to see a decline in new orders of approximately 0.4%. The larger decline, the better the news for bond prices and mortgage rates because it would signal manufacturing sector weakness.
There is no other relevant economic news scheduled for release until Friday morning. October’s Goods and Services Trade Balance report will be posted early Friday morning. This report gives us the size of the U.S. trade deficit, but it is considered to be of low importance to mortgage rates. It is expected to show a $44.0 billion trade deficit. Unless it varies greatly from forecasts, I don’t expect this data to affect mortgage pricing Friday.
Also Friday is the release of December’s preliminary reading to the University of Michigan’s Index of Consumer Sentiment. This index measures consumer willingness to spend and can usually have enough of an impact on the financial markets to change mortgage rates slightly. Consumer sentiment or confidence is tracked because the more comfortable consumers are about their own financial situations, the more likely they are to make a large purchase in the near future. Since consumer spending makes up two-thirds of the economy, any related data is watched closely. Friday’s release is expected to show a reading of 65.0, which would be an increase from last month’s final reading. A decline in confidence would be considered good news for the bond market and mortgage rates.
Overall, today will probably bring us the most movement in rates as the markets digest weekend news. I don’t believe we will see as much volatility in the stock markets as we saw last week though. Interestingly, despite the sizable rally in stocks last week, mortgage rates didn’t take much of a hit. Even though mortgage bonds showed resilience last week, I still think that the upward risk outweighs the likelihood of seeing noticeable improvements in rates in the immediate future. Therefore, I recommend maintaining contact with your mortgage professional if still floating an interest rate.
October’s Factory Orders is the first, coming late this morning. This report is similar to the Durable Goods Orders report that was released the week before last, except this one includes manufacturing orders for both durable and non-durable goods. This data usually isn’t a major influence on bond trading, but with little data this week that can impact mortgage rates, it could draw more attention than usual. Analysts are expecting to see a decline in new orders of approximately 0.4%. The larger decline, the better the news for bond prices and mortgage rates because it would signal manufacturing sector weakness.
There is no other relevant economic news scheduled for release until Friday morning. October’s Goods and Services Trade Balance report will be posted early Friday morning. This report gives us the size of the U.S. trade deficit, but it is considered to be of low importance to mortgage rates. It is expected to show a $44.0 billion trade deficit. Unless it varies greatly from forecasts, I don’t expect this data to affect mortgage pricing Friday.
Also Friday is the release of December’s preliminary reading to the University of Michigan’s Index of Consumer Sentiment. This index measures consumer willingness to spend and can usually have enough of an impact on the financial markets to change mortgage rates slightly. Consumer sentiment or confidence is tracked because the more comfortable consumers are about their own financial situations, the more likely they are to make a large purchase in the near future. Since consumer spending makes up two-thirds of the economy, any related data is watched closely. Friday’s release is expected to show a reading of 65.0, which would be an increase from last month’s final reading. A decline in confidence would be considered good news for the bond market and mortgage rates.
Overall, today will probably bring us the most movement in rates as the markets digest weekend news. I don’t believe we will see as much volatility in the stock markets as we saw last week though. Interestingly, despite the sizable rally in stocks last week, mortgage rates didn’t take much of a hit. Even though mortgage bonds showed resilience last week, I still think that the upward risk outweighs the likelihood of seeing noticeable improvements in rates in the immediate future. Therefore, I recommend maintaining contact with your mortgage professional if still floating an interest rate.
Thursday, December 1, 2011
Trend of 30 Year Fixed Rate Mortgages
Below is the six week trend of 30 year fixed rate mortgages, based on the Freddie Mac Weekly Primary Mortgage Market Survey as of 12/01/11.
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