Tuesday, November 22, 2016 - Article by: James Brooks -
By James Brooks
The bond market is unchanged (2.31%), which will keep today's Mortgage Rates Unchanged.
The National Association of Realtors announced at 10:00 AM ET this morning that home resales rose 2.0% in October, exceeding expectations. Analysts were predicting a decline in home sales, not an increase. This means that the housing sector was stronger last month than many had thought, making the data negative for bonds and mortgage rates.
Today also has the first of this week’s two Treasury auctions that have the potential to affect mortgage rates slightly. 5-year Treasury Notes are being sold today while 7-year Notes will be auctioned tomorrow. 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 in mortgage rates. However, strong investor demand usually make bonds more attractive to investors and brings more funds into the bond market. The buying of bonds that follows often translates into lower mortgage rates. Results of the today's sale will be posted at 1:00 PM ET, so any reaction will come during early afternoon trading.
Tomorrow has all of this week’s remaining economic releases and other events. There are four pieces of economic data, the 7-year Note auction and the minutes from the last FOMC meeting all coming tomorrow. The first item on the agenda is October's Durable Goods Orders at 8:30 AM ET. This data helps us measure manufacturing strength by tracking orders for big-ticket items or products that are expected to last three or more years, such as airplanes, appliances and electronics. This data is known to be quite volatile from month-to-month, so sizable swings from the previous month are fairly normal. Tomorrow’s release is expected to show a 1.1% rise in new orders. A smaller than expected increase would be considered good news for the bond market and mortgage rates as it would indicate the manufacturing sector was not as strong as thought. We need to see a sizable variance from forecasts though for the markets to have a noticeable reaction due to the usual volatility in the data. It is worth mentioning though that this is one of the more important reports we get each month.
Last week's unemployment update will also be posted at 8:30 AM ET tomorrow. It is expected to show that 243,000 new claims for unemployment benefits were filed last week, up from the previous week’s 235,000 initial filings. This report usually doesn't cause much movement in the markets or mortgage rates unless it shows a significant jump or drop in initial claims for benefits. The higher the number of claims, the better the news it is for bonds and mortgage rates.
November's Consumer Confidence Index (CCI) will be the third report of the morning. This Conference Board index helps us track consumer willingness to spend. If a consumer's confidence in their own financial and employment situation is strong, analysts believe that they are more apt to make larger purchases, fueling economic growth. This is important because consumer spending makes up over two-thirds of the U.S. economy and makes long-term securities such as mortgage-related bonds less attractive to investors. Analysts are expecting to no change in confidence from last month's level, meaning surveyed consumers were just as optimistic about their own financial situations this month than they were last month. A weaker reading than the 91.6 that is expected would be good news for mortgage rates, while a stronger reading could help push mortgage rates higher tomorrow.
The final economic report of the day will be October's New Home Sales, also at 10:00 AM. It will give us an indication of housing sector strength, but is the week's least important monthly release. Analysts are expecting to see a decline between September and October's sales of newly constructed homes. It will take a large change in sales for this data to influence mortgage rates, partly because this report tracks such a small portion of all home sales. Today’s housing report covers most of the home sales in the U.S.
We can’t forget the minutes from the most recent FOMC meeting tomorrow afternoon that has the potential to have a heavy impact on the financial and mortgage markets. Traders will be looking for any indication of the Fed's next move regarding monetary policy, particularly if a rate increase will come next month. They will be released at 2:00 PM ET, so any reaction will come during afternoon trading. This release is one of those that may cause some volatility in the markets after they are posted, or could be a non-factor. If they show anything surprising regarding when the Fed will raise key short-term interest rates again, we will see some movement in rates tomorrow afternoon.
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... Lock 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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