This week brings us the release of six monthly economic reports for the markets to digest. With very important data scheduled for release two different days and relevant data four of the five days, we will likely see a fair amount of volatility in the markets and mortgage pricing this week.
There is nothing scheduled for release Monday, leaving the bond market to movement in stocks and overseas news. As of now it appears we may see some pressure in bonds and a possible increase to mortgage rates tomorrow.
The first data is one of the most important reports of the week. The Commerce Department will give us October’s Retail Sales figures early Tuesday morning. This data measures consumer spending, which is considered extremely important to the markets because it makes up two-thirds of the U.S. economy. It is expected to show a 0.4% rise in spending, meaning consumers spent much less last month than they did in September. A larger increase would be considered negative news for bonds because large increases in spending fuels an economic recovery and raises inflation concerns in the marketplace. If Tuesday’s report reveals a smaller than expected increase in spending, bonds should react favorably, pushing mortgage rates lower. If it shows a larger than expected increase, mortgage rates will likely move higher.
Also Tuesday is the release of October’s Producer Price Index (PPI) from the Labor Department, which is one of the two key inflation readings on tap this week. The PPI measures inflationary pressures at the producer level of the economy. There are two portions of the index that are used- the overall reading and the core data reading. The core data is the more important of the two because it excludes more volatile food and energy prices. If it reveals stronger than expected readings, indicating that inflationary pressures are rising at the manufacturing level, the bond market will probably react negatively and cause mortgage rates to move higher. Analysts are expecting to see a 0.2% decline in the overall reading and a 0.1% increase in the core data.
Wednesday also has two reports scheduled that will likely influence mortgage rates. The first is October’s Consumer Price Index (CPI) at 8:30 AM ET. This index is similar to Tuesday’s PPI, except it measures inflationary pressures at the more important consumer level of the economy. We consider this report as one of the most important reports we get each month. The overall reading is expected to show no change from September’s level while the core data is expected to rise 0.1%. Weaker than expected readings would be good news for bonds and mortgage rates, while larger than forecasted increases could lead to higher mortgage rates Wednesday.
October’s Industrial Production data will be posted mid-morning Wednesday. It gives us a measurement of manufacturing sector strength by tracking output at U.S. factories, mines and utilities. It is expected to reveal a 0.4% increase in production, indicating moderate strength in the manufacturing sector. Stronger levels of production would be considered bad news for the bond market and mortgage rates, but this data is not as important as the CPI readings are. A significant surprise in the CPI would likely make this data a non-factor in Wednesday’s mortgage pricing.
Thursday’s only monthly data is October’s Housing Starts. This data gives us an indication of housing sector strength, but usually does not have a noticeable impact on mortgage rates. I don’t expect this month’s version to be any different unless it varies greatly from analysts’ forecasts. It is expected to show a sizable decline in starts of new homes.
The final report of the week will come from the Conference Board late Friday morning when they release their Leading Economic Indicators (LEI) for October. This is a moderately important report that attempts to predict economic activity over the next three to six months. It is expected to show a 0.6% increase, meaning economic activity will rise fairly rapidly over the next couple of months. Generally speaking, this would be bad news for bonds. However, since this data is considered only moderately important, its results need to vary by a wide margin from forecasts for it to affect mortgage rates.
Overall, look for Tuesday or Wednesday to be the most important with very important reports scheduled those days. It is difficult to label any particular day as the quietest day, but Thursday is a good candidate. The key releases will be Tuesday’s Retail Sales and Wednesday’s CPI reports. They will probably determine whether rates close the week higher or lower than tomorrow’s opening levels. Since this is likely to be a fairly active week for mortgage rates, it would be prudent to maintain regular contact with your mortgage professional if still floating an interest rate.
Tuesday, November 15, 2011
Monday, November 7, 2011
This Week's Market Commentary
This week brings us the release of only two relevant monthly economic reports but neither of them is considered to be highly important. There are two important Treasury auctions this week that may influence mortgage rates more than the minor economic data that is scheduled.
It is also a holiday-shortened week with the bond market closed Friday in observance of the Veterans Day holiday. The stock markets will be open Friday, but bonds will not be traded meaning that many lenders will be closed.
Neither of this week’s monthly economic reports is expected to lead to noticeable changes in mortgage rates. This means that the stock markets will likely be a significant influence on bond trading and mortgage rates in addition to the two particular Treasury auctions. If the stock markets rally, we could see funds shift from bonds into stocks that potentially offer better returns, leading to higher mortgage rates. If stocks fall from current levels early in the week, bonds and mortgage shoppers should benefit.
The two important Treasury auctions come Wednesday and Thursday when 10-year Notes and 30-year Bonds are sold. The 10-year sale is the more important of the two as it will give us a better indication of demand for mortgage-related securities. If the sales are met with a strong demand from investors, we should see the bond market move higher during afternoon trading the days of the auctions. But a lackluster interest from buyers, particularly international investors, would indicate a waning appetite for longer-term U.S. securities and lead to broader bond selling. The selling in bonds would probably result in upward revisions to mortgage rates.
The first monthly data of the week is September’s Goods and Services Trade Balance report early Thursday morning. It helps us measure the size of the U.S. trade deficit, but usually is not a major influence on bond trading or mortgage pricing. It does affect the value of the U.S. dollar, which makes U.S. securities more attractive to international investors when the dollar is strong. This is because the securities’ proceeds are worth more when sold and converted to the investor’s domestic currency. However, its results will not likely directly lead to changes in mortgage rates. Analysts are expecting to see a $45.8 billion trade deficit.
November’s preliminary reading of the University of Michigan’s Index of Consumer Sentiment will be released late Friday morning. This index measures consumer confidence, which gives us an indication of consumer willingness to spend. It is expected to show a reading of 61.5, up from October’s final reading of 60.9. That would be considered negative news for bonds because rising sentiment means consumers are more optimistic about their own financial situations and are more likely to make large purchases in the near future. Since consumer spending makes up two-thirds of the U.S. economy, any related data is watched closely.
Overall, it is difficult to predict just how active this week will be for mortgage rates. As expected, last week brought us quite a bit of volatility in rates. This week could be very calm or could be just as active as last week was. I don’t believe the economic data on tap will be a catalyst. I think the key will be the stock markets and Wednesday’s Treasury auction. If they give us favorable results, mortgage rates will likely close the week lower than today’s opening levels.
It is also a holiday-shortened week with the bond market closed Friday in observance of the Veterans Day holiday. The stock markets will be open Friday, but bonds will not be traded meaning that many lenders will be closed.
Neither of this week’s monthly economic reports is expected to lead to noticeable changes in mortgage rates. This means that the stock markets will likely be a significant influence on bond trading and mortgage rates in addition to the two particular Treasury auctions. If the stock markets rally, we could see funds shift from bonds into stocks that potentially offer better returns, leading to higher mortgage rates. If stocks fall from current levels early in the week, bonds and mortgage shoppers should benefit.
The two important Treasury auctions come Wednesday and Thursday when 10-year Notes and 30-year Bonds are sold. The 10-year sale is the more important of the two as it will give us a better indication of demand for mortgage-related securities. If the sales are met with a strong demand from investors, we should see the bond market move higher during afternoon trading the days of the auctions. But a lackluster interest from buyers, particularly international investors, would indicate a waning appetite for longer-term U.S. securities and lead to broader bond selling. The selling in bonds would probably result in upward revisions to mortgage rates.
The first monthly data of the week is September’s Goods and Services Trade Balance report early Thursday morning. It helps us measure the size of the U.S. trade deficit, but usually is not a major influence on bond trading or mortgage pricing. It does affect the value of the U.S. dollar, which makes U.S. securities more attractive to international investors when the dollar is strong. This is because the securities’ proceeds are worth more when sold and converted to the investor’s domestic currency. However, its results will not likely directly lead to changes in mortgage rates. Analysts are expecting to see a $45.8 billion trade deficit.
November’s preliminary reading of the University of Michigan’s Index of Consumer Sentiment will be released late Friday morning. This index measures consumer confidence, which gives us an indication of consumer willingness to spend. It is expected to show a reading of 61.5, up from October’s final reading of 60.9. That would be considered negative news for bonds because rising sentiment means consumers are more optimistic about their own financial situations and are more likely to make large purchases in the near future. Since consumer spending makes up two-thirds of the U.S. economy, any related data is watched closely.
Overall, it is difficult to predict just how active this week will be for mortgage rates. As expected, last week brought us quite a bit of volatility in rates. This week could be very calm or could be just as active as last week was. I don’t believe the economic data on tap will be a catalyst. I think the key will be the stock markets and Wednesday’s Treasury auction. If they give us favorable results, mortgage rates will likely close the week lower than today’s opening levels.
Tuesday, November 1, 2011
This Week’s Market Commentary
This week brings us the release of four relevant economic reports for the markets to digest with two of those reports being much more important than the others. In addition to the factual reports, we also have another FOMC meeting to work around this week. This leads me to believe that we will see another active week for mortgage rates.
The first release of the week will come from the Institute for Supply Management (ISM), who will post their manufacturing index at 10:00 AM ET Tuesday. This index measures manufacturer sentiment, which is important because it gives us an indication of manufacturing sector strength. It is considered to be one of the more important reports we see each month, partly because it is the first report every month that tracks the preceding month’s activity. Tuesday’s release is expected to show a reading of 52.1, indicating that manufacturer sentiment rose from September’s level. This means more surveyed business executives felt business improved during the month than in September, hinting at manufacturing sector growth. A smaller than expected reading would be good news for bonds and likely lead to lower mortgage rates Tuesday.
This week’s FOMC meeting is a two-day meeting that begins Tuesday and adjourns Wednesday afternoon. There is no possibility of the Fed changing key short-term interest rates this week. But market participants will be looking at the post-meeting statement for any indication of when the Fed may make a move, particularly to help boost economic activity. The meeting will adjourn at 12:30 PM ET Wednesday, so look for any reaction to the statement to come during afternoon hours. The markets will actually be looking for news of another round of debt purchases by the Fed. If they do announce a sizable purchase program of government or mortgage debt Wednesday, we could see the bond market rally and mortgage rates move noticeably lower.
At 2:15 PM ET Wednesday, Fed Chairman Bernanke will host a press conference to answer questions about the Fed’s action (or lack of). These scheduled press conferences are new and just started this year. They are held four times a year, in an effort to keep the public current on the Fed’s thoughts and concerns. Since the minutes to the meetings aren’t released for a couple weeks after the FOMC meetings, these press conferences allow the press to interact directly with the Fed and in a much more timely manner. Therefore, expect the markets to react to his comments and any surprise answers during the Q&A portion.
Thursday has two reports scheduled. The first is the 3rd Quarter Productivity reading at 8:30 AM ET. It is expected to show a 2.8% increase in worker productivity during the third quarter. A larger increase would be good news for the bond market because higher levels of employee productivity allow the economy to expand without inflationary pressures being a concern.
The second report of the day will be September’s Factory Orders data. This report is similar to last week’s Durable Goods Orders release except it includes orders for both durable and non-durable goods. It is expected to show a 0.2% decline in new orders from August’s level. A smaller than forecasted increase would be good news for the bond market and mortgage rates while a larger than expected rise is bad news and could push rates slightly higher Thursday morning since it would indicate economic strength. It is worth noting though, that neither of these reports are considered to be highly important to mortgage rates.
The last report of the week is the most important. Friday brings us the release of one of the most important monthly pieces of economic news- the Employment report. The Labor Department will post October’s employment stats early Friday morning. The report is comprised of many statistics and readings, but the most important ones are the unemployment rate, the number of new jobs added or lost during the month and average hourly earnings. Current forecasts call for no change in the unemployment rate to keep the national unemployment rate at 9.1%, an increase in payrolls of approximately 88,000 and a 0.2% increase in average earnings. Weaker than expected readings should renew concerns about the labor market and rally bonds enough to improve mortgage rates, especially if the stock markets react poorly to the news.
Overall, the single most important day is likely to be Wednesday or Friday but Tuesday’s data is also considered to be highly important. In addition to the economic reports and the FOMC meeting, I believe stocks will continue to experience volatility that will also impact bond trading. The key to the week will be Friday’s employment numbers or the FOMC statement and press conference, but any significant swings in the stock markets may also influence whether mortgage rates close the week higher or lower than this morning’s levels.
The first release of the week will come from the Institute for Supply Management (ISM), who will post their manufacturing index at 10:00 AM ET Tuesday. This index measures manufacturer sentiment, which is important because it gives us an indication of manufacturing sector strength. It is considered to be one of the more important reports we see each month, partly because it is the first report every month that tracks the preceding month’s activity. Tuesday’s release is expected to show a reading of 52.1, indicating that manufacturer sentiment rose from September’s level. This means more surveyed business executives felt business improved during the month than in September, hinting at manufacturing sector growth. A smaller than expected reading would be good news for bonds and likely lead to lower mortgage rates Tuesday.
This week’s FOMC meeting is a two-day meeting that begins Tuesday and adjourns Wednesday afternoon. There is no possibility of the Fed changing key short-term interest rates this week. But market participants will be looking at the post-meeting statement for any indication of when the Fed may make a move, particularly to help boost economic activity. The meeting will adjourn at 12:30 PM ET Wednesday, so look for any reaction to the statement to come during afternoon hours. The markets will actually be looking for news of another round of debt purchases by the Fed. If they do announce a sizable purchase program of government or mortgage debt Wednesday, we could see the bond market rally and mortgage rates move noticeably lower.
At 2:15 PM ET Wednesday, Fed Chairman Bernanke will host a press conference to answer questions about the Fed’s action (or lack of). These scheduled press conferences are new and just started this year. They are held four times a year, in an effort to keep the public current on the Fed’s thoughts and concerns. Since the minutes to the meetings aren’t released for a couple weeks after the FOMC meetings, these press conferences allow the press to interact directly with the Fed and in a much more timely manner. Therefore, expect the markets to react to his comments and any surprise answers during the Q&A portion.
Thursday has two reports scheduled. The first is the 3rd Quarter Productivity reading at 8:30 AM ET. It is expected to show a 2.8% increase in worker productivity during the third quarter. A larger increase would be good news for the bond market because higher levels of employee productivity allow the economy to expand without inflationary pressures being a concern.
The second report of the day will be September’s Factory Orders data. This report is similar to last week’s Durable Goods Orders release except it includes orders for both durable and non-durable goods. It is expected to show a 0.2% decline in new orders from August’s level. A smaller than forecasted increase would be good news for the bond market and mortgage rates while a larger than expected rise is bad news and could push rates slightly higher Thursday morning since it would indicate economic strength. It is worth noting though, that neither of these reports are considered to be highly important to mortgage rates.
The last report of the week is the most important. Friday brings us the release of one of the most important monthly pieces of economic news- the Employment report. The Labor Department will post October’s employment stats early Friday morning. The report is comprised of many statistics and readings, but the most important ones are the unemployment rate, the number of new jobs added or lost during the month and average hourly earnings. Current forecasts call for no change in the unemployment rate to keep the national unemployment rate at 9.1%, an increase in payrolls of approximately 88,000 and a 0.2% increase in average earnings. Weaker than expected readings should renew concerns about the labor market and rally bonds enough to improve mortgage rates, especially if the stock markets react poorly to the news.
Overall, the single most important day is likely to be Wednesday or Friday but Tuesday’s data is also considered to be highly important. In addition to the economic reports and the FOMC meeting, I believe stocks will continue to experience volatility that will also impact bond trading. The key to the week will be Friday’s employment numbers or the FOMC statement and press conference, but any significant swings in the stock markets may also influence whether mortgage rates close the week higher or lower than this morning’s levels.
Monday, October 31, 2011
Home Building Spiked in September
Home building reached the highest pace in 17 months during September with new projects, according to an article in the Seattle Times, which is a hopeful sign for both the economy and the market.
A large part of this was apartment construction, which bodes well for job creation and the economy but does not significantly affect the housing market.
Single family homes made up about 70% of the building projects, a small increase. The Commerce Department said on Wednesday that 658,000 homes were built in September, about half of the ideal healthy economic amount but still a 15% improvement over August.
A large part of this was apartment construction, which bodes well for job creation and the economy but does not significantly affect the housing market.
Single family homes made up about 70% of the building projects, a small increase. The Commerce Department said on Wednesday that 658,000 homes were built in September, about half of the ideal healthy economic amount but still a 15% improvement over August.
Thursday, October 27, 2011
Wednesday, October 19, 2011
Foreclosures Slow Down in Bay Area
Bay Area foreclosures slowed in September, down 7% from August and 10% from this time last year, according to an article in the Contra Costa Times. A report released Thursday by RealtyTrac revealed these numbers, though how long the decline will last is uncertain.
2,594 homeowners in the Bay Area were given a notice of default in September, the first step in the foreclosure process.
RealtyTrac does not include Santa Clara County in its definition of the Bay Area, however, and there was a slight increase in foreclosures in that county, as well as in San Mateo County, though that is included in the Bay Area defined by the company.
RealtyTrac CEO Daren Blomquist said that “in the next six months, it’s likely that default notices will be on a consistent upward rise in the Bay Area, once banks catch up with their backlog of current foreclosures and more people fall behind on their mortgages.”
Tuesday, October 4, 2011
Biggest First-Time Homebuyer Mistakes to Avoid
Looking for your first home can be an exciting experience, but it can easily get overwhelming. There are some mistakes that are pretty easy to make if you aren’t familiar with real estate.
Looking Without Knowing Your Price Range
This is a waste of time for you and your real estate agent. It can give you the wrong idea of a realistic fit for your financial situation. The first thing you should do is sit down and figure out what you can afford. Once you’ve done that, your Realtor can show you houses that fit your price range.
Discounting a Great Home Because of Decor
Just because you can’t afford to replace the hideous wallpaper right now doesn’t mean you won’t be able to soon. Getting too picky over small details that can be changed could keep you from ending up in your dream home. Use your imagination and visualize what the house could be like after you’ve put your touch on it.
Shopping Without A Mortgage Pre-Approval
What you have determined you can afford and what banks are willing to lend might not be the same thing. If you go into contract on a home and can’t get the loan you need, you will have wasted a lot of people’s time and gotten your hopes up. Contact a mortgage professional in order to get qualified for a loan before you do any serious house-hunting.
Looking Without Knowing Your Price Range
This is a waste of time for you and your real estate agent. It can give you the wrong idea of a realistic fit for your financial situation. The first thing you should do is sit down and figure out what you can afford. Once you’ve done that, your Realtor can show you houses that fit your price range.
Discounting a Great Home Because of Decor
Just because you can’t afford to replace the hideous wallpaper right now doesn’t mean you won’t be able to soon. Getting too picky over small details that can be changed could keep you from ending up in your dream home. Use your imagination and visualize what the house could be like after you’ve put your touch on it.
Shopping Without A Mortgage Pre-Approval
What you have determined you can afford and what banks are willing to lend might not be the same thing. If you go into contract on a home and can’t get the loan you need, you will have wasted a lot of people’s time and gotten your hopes up. Contact a mortgage professional in order to get qualified for a loan before you do any serious house-hunting.
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