This week brings us the release of three pieces of relevant economic news in
addition to the minutes from the most recent FOMC meeting and a speaking
engagement with Fed Chairman Bernanke and a congressional committee. Only
one of the economic reports is considered to be highly important to the
markets and mortgage rates, but the others do carry enough significance to
influence mortgage rates if they show a wide variance from forecasts.
Tomorrow and Tuesday have nothing of importance scheduled, so look for
stock movement to heavily influence bond trading and mortgage rates. Stock
gains will probably pressure bonds and cause mortgage rates to move higher.
If the major stock indexes show losses during the first couple days, we may
see bonds thrive and mortgage rates remain unchanged or move slightly
lower.
The National Association of Realtors will give us their Existing Home Sales
report at 10:00 AM ET Wednesday. This data tracks resales of existing homes
in the U.S. during April, giving us a measurement of housing sector
strength. This type of data is relevant because a weakening housing sector
makes a broader economic recovery less likely. Current forecasts are
calling for an increase in home sales between March and April. Ideally, the
bond market would prefer to see a decline, indicating housing sector
weakness. A large increase in sales could lead to bond weakness and a small
increase in mortgage rates Wednesday morning since a strengthening housing
sector raises optimism about broader economic growth.
Also late Wednesday morning will be testimony from Fed Chairman Bernanke to
the Joint Economic Committee of Congress. He will be updating them on the
status of the economy and the Fed’s outlook for future growth and monetary
policy. This will be watched closely and is one of those speaking
engagements that can cause considerable movement in the financial markets
and mortgage rates.
Furthermore, the minutes of the last FOMC meeting will be released
Wednesday afternoon. Market participants will be looking for how Fed
members voted during the last meeting and any comments about inflation
concerns in the economy and economic growth. The goal is to form opinions
about the Fed’s next move regarding interest rates and their current
bond-buying program (QE3). Since the minutes will be released at 2:00 PM
ET, if there is a market reaction to them it will be evident during
afternoon trading Wednesday.
April's New Home Sales report is the sister report of the Existing Home
Sales and will be released late Thursday morning. It gives us a similar
measurement of housing sector strength and future mortgage credit demand,
but tracks a much smaller portion of housing sales than Wednesday's report
does. Actually, it is the least important release of the week and probably
will not have much of an impact on mortgage pricing unless it shows a
sizable variance from forecasts. It is expected to show gains in sales from
March's level, meaning the new home portion of the housing sector also
strengthened last month.
Friday has the week's most important economic report with April's Durable
Goods Orders being posted. This data gives us an indication of
manufacturing sector strength by tracking orders at U.S. factories for
big-ticket products. These are items made with an expected life span of
three or more years. It is currently expected to show an increase in new
orders of approximately 1.6%, indicating the manufacturing sector remained
strengthened a little last month. That would be relatively bad news for the
bond market and mortgage rates, but this data is known to be quite
volatile. Therefore, a small variance from forecasts would likely have
little impact on Friday's mortgage rates.
Overall, I believe Wednesday will be the most important day for rates,
although Friday should be active also as it will be shortened due to the
early close ahead of the Memorial Day holiday and has the most important
report of the week. Still, Wednesday’s economic data and Chairman
Bernanke’s testimony in the morning and FOMC minutes in the afternoon means
we could see a couple changes to mortgage rates that day. I suspect that Tuesday
will be the calmest day of the week. There is nothing to be concerned with
tomorrow, but strong selling in bonds late Friday means there is a fairly
large increase in mortgage rates waiting if your lender did not make an
upward revision during afternoon trading. I don’t think we will see as much
movement in rates that we saw last week, however, it is still recommended
to maintain contact with your mortgage professional if you have not locked
an interest rate yet.
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...
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