Professional Home Staging and Photography Blog: The Mortgage Market Watch for the Week of September 21, 2009

The Mortgage Market Watch for the Week of September 21, 2009


The Mortgage Market Watch for the Week of September 21, 2009

Events Affecting the Mortgage Market This Week:

There are 3 important Treasury auctions scheduled this week. They are the 2-year Note auction on Tuesday, the 5-year Note auction on Wednesday, and the 7-year Note auction on Thursday. Normally, the increased supply of Notes and bonds puts upward pressure on the bond and mortgage markets. But if these auctions are met with strong demand from investors, prices of mortgage backed securities should move higher which in turn should push mortgage rates lower. If these auctions are met with weak demand, then expect higher mortgage interest rates.

The Federal Open Market Committee (FOMC) will meet on Tuesday and Wednesday this week. While there is widespread expectation that key short-term interest rates will remain unchanged, the post-meeting statement could lead to volatility in the mortgage market. Investors will be focusing on any changes in balance sheet expansion or planned unwinding as well as comments on the status of recovery. It's expected the minutes will acknowledge recent improvements in economic activity. At the same time, it will indicate that the recovery is expected to be relatively weak and will persist for some time. If we see any significant weakness in stock markets, then investors may return to the mortgage market as a safe-haven from the volatility. This could lead to lower mortgage interest rates Wednesday afternoon.

Economic Reports to be Released This Week:

There are five relevant economic reports scheduled for release this week. However, none of the reports are considered to be highly important to the mortgage market. This should help limit significant changes in mortgage interest rates most days this week.

Monday, September 21st:

  • Leading Economic Indicators (LEI) for August - released by the Conference Board, this index provides an estimate economic activity over the next three to six months, and is expected to show a 0.7% increase. This would indicate that analysts are predicting a sizable increase in economic activity over the next several months. A larger than expected reading would lead to falling prices for mortgage backed securities and an increase in mortgage interest rates.

Tuesday, September 22nd:

  • There are no economic reports expected to be released today.

Wednesday, September 23rd:

  • There are no economic reports expected to be released today.

Thursday, September 24th:

  • Existing Home Sales Report for August - released by the National Association of Realtors, this report provides us with an indication of housing sector strength by tracking sales of existing homes, and is expected to show a moderate increase from July's sales. Unless it varies greatly from forecasts, this data is usually not considered to be very important to the mortgage market.
  • 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 555,000 new claims for unemployment will have been filed last week. There were 545,000 new claims filed the previous week. The weekly job loss appears to have steadied just above the 550,000 level. With the high rate of people unemployed, the threat of wage based inflation remains subdued. Employers do not have to pay higher wages to attract new employees during high unemployment times as people will be happy just to have a job. This data is usually not considered to be very important to the mortgage market.

  • Fed's MBS Purchase Program - The results of this 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 $862 billion in mortgage backed securities this year. The Feds plan on purchasing up to $1.25 trillion in mortgage backed securities through December 31st.

Friday, September 25th:

  • Durable Goods Orders for August - this report gives us an indication of manufacturing sector strength by tracking orders placed with manufacturers for immediate and future delivery of durable goods. Current forecasts call for a 1.0% increase in orders for durable goods. A smaller than expected increase could lead to an increase in prices of mortgage backed securities and a drop in mortgage rates. However, a larger than expected increase would indicate a stronger than expected manufacturing sector and could lead to higher mortgage interest rates.

  • University of Michigan's Index of Consumer Sentiment Revised Reading for September - the preliminary reading that was released earlier this month was 70.2, and analysts are expecting it to remain unchanged. If it remains unchanged, this would mean that consumer confidence has not changed since the last reading. A higher than expected reading could lead to lower prices for mortgage backed securities and higher mortgage interest rates.

  • New Home Sales for August - this report is expected to show that sales of newly constructed homes rose slightly in August. However, this data is usually not considered to be very important to the mortgage market.

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.

Recent Mortgage Interest Rate Activity:

The chart below shows the upward trend in the price of the FNMA 30-Year 4.5% coupon over the past two weeks:

The trend in the price of the FNMA 30-Year 4.5% coupon over the past two weeks from 9-4-2009 to 9-18-2009

The graph below shows the upward trend in the price of the FNMA 30-Year 4.5% coupon over the past 30 days (white line) as well as its 30 day moving average (green line):

The trend in the price of the FNMA 30-Year 4.5% coupon over the past 30 days from 8-7-2009 to 9-18-2009

Remember - as the prices of mortgage backed securities goes down, the yields go up - and so do mortgage interest rates. Conversely, as the prices of mortgage backed securities goes up, the yields come down - and mortgage interest rates come down with it.

Mortgage Interest Rate Outlook:

Moderate Volatility. Overall, I don't believe any of this week's data has the potential to move the mortgage market or mortgage interest rates much this week. The Durable Goods Orders report is the single most important report of the week. However, the most important day will probably be the release of the minutes from the FOMC meeting and the results of the 5-year Note auction Wednesday afternoon. Thursday's 7-year Note sale is actually a little more important for mortgage rates than Wednesday's auction but the first of the two will give us an idea of what to expect from Thursday's sale. We may some change in mortgage interest rates every day, with the biggest changes most likely occurring the last three days of this week.

 

East Bridgewater, MA 02333
Phone: (508) 443-1332

Lew Corcoran, ASP®, IAHSP, IAHSP-CB
Accredited Home Staging Professional
Professional Real Estate Photographer

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Comment balloon 0 commentsLew Corcoran, ASP® • September 21 2009 08:32AM

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