The Mortgage Market Watch for the Week of December 21, 2009
Events Affecting the Mortgage Market This Week:
We can expect very thin trading this week because of the Christmas holiday. We may see a larger reaction in the mortgage market than normal to some news because there will be fewer traders working and less transactions being made.
Economic Reports to be Released This Week:
There are 6 economic reports scheduled for release this week that could have an impact on the mortgage market and mortgage interest rates.
Monday, December 21st:
- There are no economic reports scheduled for release today.
Tuesday, December 22nd:
- Final Revision to the 3rd Quarter GDP - analysts are expecting the report to show that the GDP grew at an annualized rate of 2.7%. Last month's first revision showed that the economy expanded at a 2.8% annualized rate. This data usually does not have an impact on the mortgage market unless it varies greatly from forecasts.
- Existing Home Sales Report for November - released by the National Association of Realtors (NAR), this report will provide us with a measurement of housing sector strength and mortgage credit demand. Analysts are expecting the report to show an increased in existing home sales to an annualized rate of 6.25 million. In October, existing homes sold at an annualized rate of 6.10 million. This data usually does not have an impact on the mortgage market unless it varies greatly from forecasts.
Wednesday, December 23rd:
- Personal Income and Outlays data for November - this report provides us with a measurement of the consumer's ability to spend and their current spending habits. Analysts are expecting the report to reveal a 0.5% increase in income, and a 0.6% increase in spending. Because consumer spending makes up two-thirds of the U.S. economy, any related data usually has a impact on the mortgage market and mortgage interest rates. If this report reveals stronger than expected readings, we should see prices of mortgage backed securities fall and mortgage interest rates rise.
- The Revised University of Michigan Index of Consumer Sentiment for December - analysts are expecting a reading of 73.5 - a slight upward revision from the preliminary reading of 73.4. An increase in consumer confidence indicates that consumers may be more apt to make large purchases in the near future. An upward revision to the consumer sentiment index could lead to slightly higher mortgage interest rates.
- New Home Sales Report for November - this report will provide us with another measurement of housing sector strength and mortgage credit demand. Analysts are expecting the report to show an increased in new home sales to an annualized rate of 440,000. In October, new homes sold at an annualized rate of 430,000. This data usually does not have an impact on the mortgage market unless it varies greatly from forecasts.
Thursday, December 24th:
- Durable Goods Orders Report for November - this report provides us with an important measurement of manufacturing sector strength by tracking orders for big-ticket items or products that are expected to last at least three years. Analysts are expecting the report to show a 0.5% increase in new orders. There was a 0.6% decline in October. If this report reveals stronger than expected readings, we should see prices of mortgage backed securities fall and mortgage interest rates rise.
- 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 470,000 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 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 $1.070 trillion in mortgage backed securities this year. The Feds plan on purchasing up to $1.25 trillion in mortgage backed securities through March 31st.
Friday, December 25th:
- There are no economic reports scheduled for release today. The markets are closed in observance of Christmas Day.
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.
Mortgage Interest Rate Outlook:
Moderate to High Volatility. Overall, I am expecting to see some movement in the mortgage market and mortgage interest rates this week, but nothing drastic unless we get some surprising results from the week's data.
The bond and mortgage markets will close early Thursday and will be closed all day Friday in observance of Christmas Day. This means that trades in mortgage backed securities will light during the latter part of the week. This raises the possibility of stronger reactions to surprises in the mortgage market from economic data than we normally would see.
There's not much room for MBS prices to move higher or for mortgage interest rates to move lower at the moment. Mortgage interest rates are still at historic lows. 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