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This week has five pieces of economic data for the markets to digest in
addition to two potentially relevant Treasury auctions. The week’s data
starts late tomorrow morning with the release of March's Existing Homes
Sales numbers from the National Association of Realtors at 10:00 AM ET.
This report gives us an indication of housing sector strength and mortgage
credit demand. It is considered to be moderately important to the markets,
but can influence mortgage pricing if it shows a sizable variance from
forecasts. Ideally, the bond market would like to see a drop in home
resales because a soft housing sector makes a broader economic recovery
difficult. Analysts are expecting to see a small increase in sales between
February and March. The larger the increase, the worse the news it is for
bonds and mortgage rates.
The sister report to tomorrow’s housing data is March's New Home Sales. It
will be released late Tuesday morning, but tracks a much smaller portion of
all home sales as Monday’s report does. It also gives us an indication of
housing sector strength and future mortgage credit demand, however, it is
the week's least important report. Unless it varies greatly from analysts'
forecasts, I am not expecting the data to cause much movement in mortgage
rates. Analysts are currently forecasting an increase in sales of newly
constructed homes.
Wednesday morning's data is March's Durable Goods Orders that will be
released at 8:30 AM ET. This report gives us an indication of manufacturing
sector strength by tracking orders for big-ticket items at U.S. factories.
These are products that are expected to last three or more years, such as
appliances and electronics. Current forecasts are calling for a decline in
new orders of 3.1%. This would be a sign of manufacturing sector
contraction, but this data can be quite volatile from month-to-month.
Therefore, a small variance between forecasts and the actual results will
not heavily influence the markets or mortgage rates. A much larger decline
would be considered good news for bonds and mortgage pricing, while a large
increase would indicate manufacturing sector strength. A sign of solid
manufacturing growth could lead to higher mortgage rates Wednesday.
In addition to this week's economic reports, there are two relatively
important Treasury auctions that may also influence bond trading enough to
affect mortgage rates. There will be an auction of 5-year Notes Wednesday
and 7-year Notes on Thursday. Neither of these sales will directly impact
mortgage pricing, but they can influence general bond market sentiment. If
the sales go poorly, we could see broader selling in the bond market that
leads to upward revisions to mortgage rates. On the other hand, strong
sales usually make bonds more attractive to investors and bring more funds
into bonds. The buying of bonds that follows usually translates into lower
mortgage rates. Results of the sales will be posted at 1:00 PM ET each
auction day, so look for any reaction to come during afternoon hours.
Friday has the two remaining reports, one of which is highly important to
the financial and mortgage markets. That would be the preliminary version
of the 1st Quarter Gross Domestic Product (GDP). This is arguably the
single most important report that we see on a regular basis. The GDP is the
sum of all products and services produced in the U.S. and is considered to
be the best measure of economic growth or contraction. I expect this report
to cause sizable movement in the financial markets Friday and therefore the
mortgage market also. Analysts are expecting it to show that the economy
grew at an annual rate of 2.9%, which would be a much quicker pace than the
final quarter of last year. A smaller increase would be considered good
news for mortgage rates. But, a stronger than expected reading would almost
certainly cause stock prices to rise and bond prices to fall, leading to
higher mortgage rates Friday morning.
The last piece of a data is the University of Michigan's update to their
Index of Consumer Sentiment for April. This report gives us an indication
of consumer sentiment. I don't expect it to have a significant impact on
bonds and mortgage pricing unless it varies greatly from forecasts,
especially since it comes after the GDP reading. Current forecasts are
calling for little change from the preliminary reading of 72.3. This means
that surveyed consumers were just as optimistic about their own financial
situations as they were earlier this month. This data is relevant because
rising sentiment means consumers are more apt to make a large purchase in
the near future, fueling economic growth.
Overall, look for a fair amount of movement in the financial markets and
mortgage rates this week. Friday is the most important day due to the GDP,
but we should see movement in rates several days, particularly days that
stocks are active. Tuesday appears to be the best candidate for the
quietest day for mortgage rates. If this week's reports reveal weaker than
expected economic conditions, the bond market could extend its recent rally
and mortgage rates should fall for the week. However, I recommend taking a
cautious approach towards rates if still floating an interest rate and
closing in the near future.
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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