2006 May

It could be a little more difficult to get the best mortgage rate. Here’s why!

Tuesday’s bond market has opened in negative territory despite large stock market losses. The Dow is currently down 112 points while the Nasdaq has lost 29 points. The bond market is currently down 2/32, which will likely keep this morning’s mortgage rates at Friday’s levels.

The Conference Board kicked off this week’s data with the release of their Con sumer Confidence Index (CCI) for May. It showed a sizable decline in confidence from April’s reading, but was still higher than forecasts had called for. The release showed a 103.2 reading, down from the previous month’s 109.8. However, analysts were expecting to see a 100.9 reading. This means that consumers were more confident about their own financial situations than thought. That is bad news for the bond market, but with the early stock losses, mortgage rates have not bee affected by the news.

There is no relevant economic news scheduled for release tomorrow, but we will get to see the minutes from the last FOMC meeting. Market participants will be looking for how Fed members voted for the last rate hike. A unanimous vote could mean that all voting members are still concerned about inflation, meaning that more rate hikes may be coming. However, a divided vote will likely be construed as an indication that the rate hikes may stop in the near future. The min utes will be released at 2:00 PM ET, so if there is a market reaction to them it will be evident during afternoon trading.

The revised 1st Quarter Productivity and Costs report will be released Thursday morning. This data measures employee output and employer costs for wages and benefits. It is considered to be a measurement of wage inflation and is thought to allow low inflationary economic growth when productivity is high. Last month’s preliminary reading revealed a 3.2% rate, but I don’t think this piece of data will have much of an impact on the bond market or mortgage pricing. Current forecasts are showing an upward revision to 4.2%.

Overall, I think we have a busy week ahead of us. The big report of the week is Friday’s Employment data, but the most volatility in rates will likely come Thursday or Friday. With several important reports still due to be posted this week, please maintain contact with your mortgage professional if you have not locked an int erest rate yet.

No Comments »

This holiday shortened week brings us the release of five important economic reports, three of the five are considered to be of high importance to the bond market and mortgage pricing. The financial and mortgage markets are closed tomorrow in observance of the Memorial Day holiday and will reopen Tuesday morning.

The Conference Board will start the week’s releases by posting their Consumer Confidence Index (CCI) at 10:00 AM Tuesday. This is an extremely important release that measures consumer willingness to spend. If the index rises, it indicates that consumers feel better about their personal financial situations and are more apt to make large purchases. If confidence is sliding, analysts think consumer spending may slow in the near future. The latter is good news for the bond market because it should ease concerns about inflationary pressures, making bonds more attractive to investors. This should boost bond prices and push mortgage rates lower Tuesday morning. It is expected to show a reading of 100.0 after April’s 109.2.

There is no relevant economic news scheduled for release Wednesday, but we will get to see the minutes from the last FOMC meeting. Market participants will be looking for how Fed members voted for the last rate hike. A unanimous vote could mean that all voting members are still concerned about inflation, meaning that more rate hikes may be coming. However, a divided vote will likely be construed as an indication that the rate hikes may stop in the near future. The minutes will be released at 2:00 PM ET, so if there is an market reaction to them it will be evident during afternoon trading.

The revised 1st Quarter Productivity and Costs report will be released Thursday morning. This data measures employee output and employer costs for wages and benefits. It is considered to be a measurement of wage inflation and is thought to allow low inflationary economic growth when productivity is high. Last month’s preliminary reading revealed a 3.2% rate, but I don’t think this piece of data will have much of an impact on the bond market or mortgage pricing. Current forecasts are showing an upward revision to 4.2%.

The next report also comes Thursday morning with the release of the Institute for Supply Management’s (ISM) manufacturing index. Th is highly important index measures manufacturer sentiment. A reading above 50 means that more surveyed manufacturing executives felt that business improved during the month than those who felt it had worsened. Analysts are expecting to see a 55.7 reading in this month’s release, meaning that sentiment slipped during May. A smaller reading will be good news for the bond market and mortgage shoppers while an unexpected increase could lead to higher mortgage rates Thursday.

The week’s most important piece of economic data is also arguably the single most important report that we see each month. The Labor Department will post May’s Employment data early Friday morning. This report gives us key employment readings such as the U.S. unemployment rate and the number of jobs added or lost during the month. Analysts are expecting to see the unemployment rate remain at 4.7% with approximately 170,000 new jobs added. An increase in unemployment and fewer new jobs than expected would be great news for the bond market. It would probably create a sizable rally in bonds, leading to lower mortgage rates Friday.

The Commerce Department will release the last report of the week with April’s Factory Orders data late Friday morning. This manufacturing sector report is similar to last week’s Durable Goods Orders release, but also includes orders for non-durable goods. It can cause some movement in the financial markets if it varies from forecasts by a wide margin, but it isn’t expected to cause much change in rates this month. Current forecasts are expecting to see a drop in orders of 1.5%. With the Employment report being released Friday, I don’t see this data having much influence on bond trading or mortgage rates.

Overall, I think we have a busy week ahead of us. With the markets closed tomorrow, Tuesday’s data will set the tone for the first part of the week. The big report of the week is Friday’s Employment data. I wouldn’ t be as concerned with the unemployment rate as with the number of new jobs added. The payroll number has been at the forefront of recent releases and will likely drive all of the financial markets Friday. The most volatility in rates will likely come Thursday or Friday, but Tuesday’s CCI report after a long weekend may also lead to rate changes. With three out of the week’s four trading days possible volatile sessions, please maintain contact with your mortgage professional.

No Comments »

Wednesday’s bond market opened strong following the release of a much weaker than expected manufacturing report but has since given back those early gains. The stock markets are showing gains with the Dow up 55 points and the Nasdaq up 14 points. The bond market is currently unchanged from yesterday’s close, but we should still see an improvement in this morni ng’s mortgage rates of approximately .125 of a discount point.

The Commerce Department reported this morning that new orders for big-ticket products fell 4.8% last month. This was much weaker than the 0.5% decline that was expected and indicates that manufacturing activity was not as strong as thought. This is very good news for the bond market and mortgage rates.

Today’s second piece of news was also posted by the Commerce Department. They said late this morning that sales of newly constructed homes rose 4.9% last month, exceeding analysts’ forecasts of a sizable decline. This means that the housing sector was strong, which is not exactly good news for bonds.

The bond market opened with strong gains, but retreated after the housing data was released. It appears that we will fail to break 5.00% on the benchmark 10-year Note yet again. Therefore, I am holding the Lock recommendation for immediate and short-term periods.

The first of two revi sions to the 1st quarter Gross Domestic Product (GDP) will be early tomorrow morning. The second revision to this report comes next month but isn’t expected to have much of an impact on the financial markets. The GDP is the sum of all goods and services produced in the U.S. and is considered to be the best indicator of economic growth. Last month’s preliminary reading revealed a 4.8% annual rate of growth, but analysts are expecting a significant upward revision to this reading with the consensus being 5.8%. If true, we may see the bond market react negatively and mortgage rates rise.

No Comments »

Tuesday’s bond market has opened in negative territory due to early stock market gains. The Dow is currently up 46 points while the Nasdaq has gained 19 points. The bond market is currently down 5/32, which will likely push this morning’s mortgage rates higher by approximately .125 - .250 of a discount point.

There is no relevant economic news scheduled for release today. Early tomorrow morning, we will see April’s Durable Goods Orders data. This report gives us an indication of manufacturing sector strength by tracking orders at U.S. factories for big-ticket products. It is currently expected to show a decline in new orders of approximately 0.5%. If this report shows a stronger than expected reading, we should see mortgage rates rise because it indicates manufacturing growth. If it shows a larger than expected decline, we should see rates improve tomorrow morning.

April’s New Home Sales data will also be released tomorrow morning. This report, along with Thursday’s Existing Home Sales data, gives us a measurement of housing sector strength and future mortgage credit demand. However, these are the least important releases of the week and probably will not have much of an impact on mortgage pricing.

The recent bond market rally brought the yield on the benchmark 10-year Treasury Note down to 5.00% yesterday. However, as expected the stock markets did rebound this morning and bond prices have suffered. This has pushed the yield to 5.06% this morning. Until we see support below 5.00%, I am extending the lock recommendation to longer periods.

This week’s economic data does have the potential to break that threshold, but it also can cause lead to the yield rising back above 5.10%. Accordingly, we should stay cautious until we see weaker than expected economic data and a favorable reaction to it in the bond market.

No Comments »

Monday’s bond market has opened well into positive territory following another round of stock market losses. The Dow is currently down 70 points while the Nasdaq has fallen 30 points. This has made bonds more attractive to investors, pushing the bond market up 13/32. The result should be an improvement in this morning’s rates of approximately .25 of a discou nt point.

This week brings us the release of six monthly reports for the markets to digest. However, only a few of them can be considered highly important to mortgage rates. All of the releases are scheduled to be posted the middle and latter part of the week, meaning we will likely see the biggest changes to mortgage rates later in the week.

There is no relevant economic news due out tomorrow. Wednesday morning, we will see April’s Durable Goods Orders data. This report gives us an indication of manufacturing sector strength by tracking orders at U.S. factories for big-ticket products. It is currently expected to show a decline in new orders of approximately 0.5%. If this report shows a stronger than expected reading, we should see mortgage rates rise because it indicates manufacturing growth. If it shows a larger than expected decline, we should see rates improve Wednesday morning.

April’s New Home Sales data will be released late Wednesday morning. This report, along with Thursday’s Existing Home Sales data, gives us a measurement of housing sector strength and future mortgage credit demand. However, these are the least important releases of the week and probably will not have much of an impact on mortgage pricing.

The recent bond market rally has brought the yield on the benchmark 10-year Treasury Note down to 5.00%. It will be interesting to see what happens from here. I expected the stock markets to pullback, leading to a shift of funds to bonds. However, how low the major stock indexes will go is the wild card. If they fall further, we should see more fund move into bonds, driving the yield below 5.00%. But if we see a bounce in stocks, bonds could suffer, pushing mortgage rates up form current levels. I have some concern that stocks will bounce relatively soon, therefore, I am holding the Lock recommendation for immediate closings.

Overall, I expect to see the biggest changes to mortgage rates the latter part of the week. It is difficult to name one particular day the most important of the week. Wednesday’s and Thursday’s data can both cause noticeable changes to mortgage rates and any significant surprises in Friday’s can do the same. Accordingly, please proceed cautiously is still floating any interest rate.

No Comments »

This week brings us the release of six monthly reports for the markets to digest. However, only a few of them can be considered highly important to mortgage rates. All of the releases are scheduled to be posted the middle and latter part of the week, therefore, expect tomorrow and Tuesday to be fairly quiet. On the other hand, this makes is quite likely that we will see sizable changes to mortgage rates later in the week.
Wednesday morning we will see April’s Durable Goods Orders data. This report gives us an indication of manufacturing sector strength by tracking orders at U.S. factories for big-ticket products. It is currently expected to show a decline in new orders of approximately 0.5%. If this report shows a stronger than expected reading, we should see mortgage rates rise because it indicates manufacturing growth. If it shows a larger than expected decline, we should see rates improve Wednesday morning.

April’s New Home Sales data will be released late Wednesday morning. This report, along with Thursday’s Existing Home Sales data, gives us a measurement of housing sector strength and future mortgage credit demand. However, these are the least important releases of the week and probably will not have much of an impact on mortgage pricing.

The first of two revisions to the 1st quarter Gross Domestic Pro duct (GDP) will be released at 8:30 AM Thursday. The second revision to this report comes next month but isn’t expected to have much of an impact on the financial markets. The GDP is the sum of all goods and services produced in the U.S. and is considered to be the best indicator of economic growth. Last month’s preliminary reading revealed a 4.8% annual rate of growth, which was much lower than expected. Some analysts expect a significant upward revision to this reading with the consensus being 5.8%. If true, we may see the bond market react negatively and mortgage rates rise.

Friday brings us the release of two important reports. The first is April’s Personal Income and Outlays data at 8:30 AM. This report gives us an indication of consumer ability to spend and current spending habits. An increase in income means that consumers have more money available to spend. Since consumer spending makes up two-thirds of the U.S. economy, this data can cause mo vement in the financial markets and mortgage rates. Current forecasts are showing a 0.7% rise in income and a 0.6% increase in spending.

The second report of the day and the last important data of the week will come from the University of Michigan who will update their Index of Consumer Sentiment for May. An upward revision may lead to slightly higher mortgage rates, while a downward change may help push rates slightly lower. The preliminary reading was 79.0

Also worth noting is the fact that the bond market will close early Friday afternoon ahead of the Memorial Day holiday next Monday. The stock markets will be open all day, but the early close in bond trading may put a little extra pressure on bond prices as investors protect themselves over the long weekend. The markets will be closed next Monday and will reopen Tuesday morning.

Overall, I expect to see the biggest changes to mortgage rates the latter part of the week. It is difficu lt to name one particular day the most important of the week. Wednesday’s and Thursday’s data can both cause noticeable changes to mortgage rates and any significant surprises in Friday’s can do the same. Accordingly, please proceed cautiously is still floating any interest rate.

No Comments »

Friday’s bond market has opened in positive territory again despite a lack of relevant economic news being released today. The stock markets opened with small gains but have since slipped into negative ground. The Dow and Nasdaq are both currently down 3 points. The bond market is currently up 5/32, which should improve this morning’s mortgage rates by appro ximately .125 of a discount point.

There is no relevant economic data scheduled for release today, but Treasury Secretary John Snow will speak before the Bond Market Association mid-day. The New York Fed President will also be speaking, but I am not expecting either to cause noticeable changes in bond prices or mortgage rates.

The yield on the benchmark 10-year Treasury Note has fallen to 5.04% over the past week. This is good news for mortgage shoppers since mortgage rates tend to follow the bond yield. However, it brings us to a point of caution, especially if you have not locked an interest rate. As we inch closer to the 5.00% threshold, it will be interesting to see if that level acts as support. If so, it will be difficult for mortgage rates to improve much in the immediate future. Accordingly, I have shifted to a Lock recommendation for immediate term closings. Longer periods are still optimistic until we see what happens in the next few days.
Next week brings us the release of a few important pieces of economic news, but none are scheduled for release until Wednesday. Until then, we may see bonds remain fairly calm, keeping mortgage rates close to their current levels. Look for more details on next week’s events in Sunday evening’s weekly preview.

No Comments »

Think back over the past few years- Since the DotCom bust, the economy has been in a slump- Remember also that over that same period we have experienced record low mortgage rates. Here are few factors affecting mortgage rates today. Enjoy!

Thursday’s bond market has opened fairly strong following the release of weaker than expected economic data. The stock markets are showing modest gains after yesterday’s major sell-off. The Dow is currently up 3 points while the Nasdaq has gained 6 points. The bond market is currently up13/32, which will likely improve this morning’s mortgage rates by appro ximately .250 of a discount point despite yesterday’s late weakness.

The Labor Department reported early morning that 367,000 new claims for unemployment benefits were filed last week. This was much more than expected, but is being attributed to the partial government shut down in Puerto Rico. Approximately 46,000 new claims are being blamed on that event. Without those additional claims, the number would have been pretty close to forecasts.

April’s Leading Economic Indicators (LEI) was released by the Conference Board late this morning. This report attempts to measure economic activity over the next three to six months and indicated a decline in activity may be coming. The 0.1% drop in the index was weaker than the 0.1% rise that was expected. This is good news for the bond market and mortgage rates.

This morning’s speech by Fed Chairman Bernanke hasn’t affected the markets much. He did say that the cooling in the housing sector is moderate and e xpected. There has been no direct hint of the Fed’s next move regarding monetary policy. Former Chairman Alan Greenspan will speak to the Bond Market Association today, but I don’t expect his words to influence trading today.

There is no relevant economic data scheduled for release tomorrow, but Treasury Secretary John Snow will speak before the Bond Market Association mid-day. The New York Fed President will also be speaking, but I am not expecting either to cause noticeable changes in bond prices or mortgage rates.

No Comments »

Wednesday’s bond market has opened in negative territory following the release of stronger than expected inflation readings. The stock markets also have reacted negatively to the news with the Dow down 140 points and the Nasdaq down 27 points. The bond market is currently down 18/32, which will likely push this morning’s mortgage rates higher by approximatel y .250 of a discount point.

The Labor Department brought us the bad news this morning. The released April’s Consumer Price Index (CPI), showing a 0.6% increase in the overall reading and a 0.3% rise in the core data. Both of these readings were slightly higher than analysts’ forecasts, raising inflation fears in the economy. Inflation is considered to be the number one nemesis of the bond market since it erodes the value of a bond’s future fixed interest payments. This leads to lower bond prices and higher mortgage rates.

April’s Leading Economic Indicators (LEI) will be posted late tomorrow morning. This Conference Board report attempts to measure economic activity over the next three to six months. It is expected to show an increase of 0.1%, meaning that economic activity is likely to rise slightly during the next few months. A decline would be good news for the bond market and mortgage rates, while a larger than expected increase could cause mortgage r ates to inch higher tomorrow.

Also worth noting are public appearances by several Fed members including Fed Chairman Bernanke and former Chairman Alan Greenspan. Mr. Bernanke and Mr. Greenspan will talk publicly tomorrow. If their speeches give any indication of a future Fed move, expect the markets to react accordingly.

No Comments »

This is truly one of the biggest choices a homebuyer can have. Both sides have benefits and drawbacks. It will ultimately come down to what you (as the consumer) desire most.

Some of the pros of new construction are as follows:

• It’s a brand new house: you will have little in the way of upkeep or repair
• You will have the piece-of-mind of a home warranty
• You can buy relatively cheap per sq. ft compared to existing homes

The drawbacks:

• The neighborhood will not be as pleasing to the eye for quite some time; small trees, basic landscaping, on-going construction
• Risk that the neighborhood may not “take-off”- Values of property can stand-still or even drop as builders try to find new buyers

The benefits of existing homes:

• Character in the home- age brings a lived in look that sells
• Mature neighborhoods are sought after- large trees, mature landscaping, etc.
• Amenities- most older neighborhoods have dining, shopping, etc. built around them in response to the neighborhood

Some of the drawbacks:

• An older home may require more upkeep and repair- systems get old and breakdown- be prepared to spend a little more in the first few years than with new construction
• Most older neighborhoods, because of the benefits, will carry a higher price tag
• Older homes may also be behind current design trends- For example- try to find a large walk-in closet in a home built in the 1960’s- or a spacious bathroom with double vanities- These are common fixtures in new homes, but they were rare luxuries in the old days

The key to choosing is to really evaluate what is important to you- this includes the home, the yard, amenities, the time that you have to spend on your home, and many other factors. Only then can you make the decision for what it is that you are truly looking for in a new home. I highly recommend enlisting the services of a Realtor. They help you quickly match your wants with the reality of what is available.

Call me if I can help in any way.

No Comments »