The Mortgage Market Watch for the Week of November 23, 2009
Events Affecting the Mortgage Market This Week:
There will be $118 billion in Treasury auctions this week - 2-Year Notes on Monday, 5-year Notes on Tuesday, and 7-Year Notes on Wednesday. If these auctions are met with strong demand, we should see mortgage interest rates continue to stay down. However, if these auctions are met with lackluster demand, we may see an increase in mortgage interest rates this week.
The financial markets will be closed on Thursday in observance of Thanksgiving Day. There markets will not close early Wednesday. But, they will close early Friday. Friday will be a very light day in the mortgage market as many market participants will be home. We will likely see little change to mortgage interest rates that day.
Economic Reports to be Released This Week:
There are seven economic reports scheduled for release this holiday-shortened week. All of the economic report will be posted over the first three days of the week, so expect some volatility in mortgage interest rates.
Monday, November 23rd:
- Existing Home Sales Report for October - this report provides us with a measurement of housing sector strength and mortgage credit demand. The report is expected to show an increase in existing home sales, indicating that the housing sector may be strengthening. However, this report usually has little or no impact on the mortgage market or mortgage interest rates.
Tuesday, November 24th:
- Consumer Confidence Index (CCI) for November - released by the Conference Board, this report provides us with a measurement of consumer willingness to spend. Analysts are expecting to see little change from last month's reading, meaning consumer were just as concerned about their own financial situations as they were last month. If consumer confidence is rising, analysts believe that consumers are more apt to make larger purchases, essentially fueling economic growth. This raises inflation concerns and usually pushes mortgage interest rates higher.
Wednesday, November 25th:
- Durable Goods Orders fro October - this data helps us measure manufacturing strength by tracking orders for big-ticket items, but is known to be quite volatile from month-to-month. It is expected to show a 0.5% increase in new orders. A smaller than expected rise would be considered good news for the mortgage market and mortgage interest rates.
- Personal Income and Outlays Report for October - this data is thought to measure consumers' ability to spend and their current spending habits. This is important because consumer spending makes up two-thirds of the U.S. economy. It is expected to show 0.2% increase in income and a 0.5% increase in consumer spending. Smaller than expected readings would be good news for the mortgage market and help keep mortgage interest rates down.
- Revised University of Michigan Index of Consumer Sentiment reading for November - analysts are expecting to see an upward revision to the preliminary reading of 66.0. However, this data will usually has little to no impact on the mortgage market and mortgage interest rates.
- New Home Sales Report for October - the report is expected to show an increase in new home sales, indicating that the housing sector may be strengthening. However, this data will usually has little to no impact on the mortgage market and mortgage interest rates.
- Jobless Claims - New claims for unemployment are tabulated each week to show the number of individuals who filed for unemployment insurance for the first time. Analysts are predicting that 495,000 new claims for unemployment will have been filed last week. With a decreasing trend in the filing of new claims for unemployment, this suggests that the labor market is improving. However, this data is usually not considered to be very important to the mortgage market.
- Fed's MBS Purchase Program - The results of his week's purchases of mortgage backed securities by the Feds will be released in the afternoon. As of last Thursday, the Feds have purchased over $1.006 trillion in mortgage backed securities this year. The Feds plan on purchasing up to $1.25 trillion in mortgage backed securities through March 31st.
Thursday, November 26th:
- There are no economic reports scheduled for release today.
Friday, November 27th:
- There are no economic reports scheduled for release today.
How do Economic Data Releases Affect Mortgage Interest Rates?
One of the most important things for you to know when deciding when to lock in the interest rate on your mortgage is knowing what economic data is going to be released - and when - and how it may impact the mortgage market and mortgage interest rates.
While an in depth review of an economic event can help you make an informed decision, understanding the nuances of a release can't help you if you don't know when it's happening. Economic data releases are important because they provide a snapshot of what's happening in the economy. They also provide a foreshadowing of any upcoming market volatility. It's just as important to know when these data releases are happening as knowing what effect these releases can have on the mortgage market.
The chart below shows the price trend of the FNMA 30-Year 4.5% coupon over the past 30 days:
Recent Activity in Mortgage Backed Securities:
Remember - as the prices of mortgage backed securities goes up, the yields come down - and mortgage interest rates come down with it. Conversely, as the prices of mortgage backed securities goes down, the yields go up - and so do mortgage interest rates.
Mortgage Interest Rate Outlook:
Moderate Volatility. Overall, I believe that it is going to be an active week for the mortgage market. I expect to see volatility in mortgage interest rates the first three days of the week.
There's not much room for MBS prices to move higher or for mortgage interest rates to move lower at the moment. If you're happy with the rate being offered to you and don't want to risk mortgage interest rates moving higher, you should apply and lock in today. While there's still some room for MBS prices to tick higher, it's better to have locked when you should have floated than it is to float when you should have locked.
If you have not yet locked in your mortgage interest rate, please proceed with caution and maintain contact with your mortgage professional. Also, give very serious consideration to applying now and locking in before mortgage interest rates get worse.
East Bridgewater, MA 02333
Lew Corcoran, ASP®, IAHSP, IAHSP-CB