Welcome to 2010, The Week Ahead
Posted 01-04-2010 at 08:28 AM by VictorBurek
I hope everyone had a fantastic Christmas break and a safe new year, welcome to 2010!
Last year ended on a sour note for mortgage rates. Over the final two weeks of the year, mortgage rates moved higher by almost a full half percent. Many economists discount the final couple weeks of trading since most first team traders were on vacation. Today, the A Team traders are back and the directionality of rates will be set. The week ahead is full of economic data which will help determine the near term direction for mortgage rates but most agree mortgage rates are set to rise in 2010 as our economy recovers from the worst recession since the Great Depression.
Today we have a couple reports hitting the news wires. First out is the ISM Manufacturing index which gives us a measure of the strength of manufacturing conditions across the United States. The Institute for Supply Management surveys over 300 manufacturing firms on employment, production, new orders, supplier deliveries, and inventories. Readings above 50 indicate expanding conditions while readings below 50 indicate contraction. This survey has shown improving(above 50) conditions for the last four months and economists surveyed expect continued improvement with a 54.8 reading for December. The surveyed registered a better than expected 55.9.
Also out this morning is the Construction Spending report which represents the monthly change in the amount of money spent on new construction activity. Increased spending on construction could lead to more jobs and higher consumer spending which benefits the equities market. In addition, businesses would have to feel pretty confident in future sales to invest money on new construction or expansion of existing facilities. This also holds true for individuals looking to build as they would have to be very confident in their own financial position and job security to take on the building of a new home. This data has a two month lag so today’s report will show the change in construction spending for November. The report indicated that construction spending fell more than expected by 0.6% making for the seventh straight month of declines and falling to the lowest level in more than six years. October’s numbers were revised worse from an initially reported 0.0% to a decline of 0.5%.
Following the release of the economic data, mortgage backed securities and benchmark treasuries are both moving higher in price, lower in yield. To remind readers, as MBS move higher in price lenders can offer lower mortgage rates. If MBS can hold or continue to improve, lenders may offer better rates(lower borrowing costs) later today.
The rest of the week offers many high impacting reports
Tuesday
- Pending Home Sales
- Factory orders
Wednesday
- ADP Employment Report
- ISM Non-Manufacturing Index
- FOMC minutes from last meeting
Thursday
- Weekly Jobless Claims
- Announcement from Treasury of next offering of 30 year bonds, 10 year notes and 3 year notes which will be auctioned next week.
Friday
- EMPLOYMENT SITUATION REPORT!!!!!! This is the single highest impacting data released on a monthly basis. Expectations call for 0 jobs lost or created and the unemployment rate edging higher to 10.1%.
Reports from fellow mortgage professionals indicate the par 30 year conventional rate mortgage is in the 5.00 to 5.25% range for well qualified consumers. To secure a par interest rate you must have a FICO credit score of 740 or higher, a loan to value at 80% or less and pay all closing costs including an estimated one point loan origination/discount/broker fee. If you are looking to secure a 15 year fixed rate, you should expect a par rate in the 4.50% to 4.75% range with similar costs.
What is your outlook for 2010 regarding the mortgage industry? I would like to hear your opinion regarding mortgage rates, underwriting, Fed involvement, HVCC, etc…..
Mortgage Rates
a)rise b)fall c)briefly fall than rise d)hold steady
Underwriting
a)continue to toughen b)ease up c) stay the same
Fed Involvement in MBS
a)end buying as they stated b)extend the MBS program to support the recovery
HVCC
a)goes away b)no change c)FHA drops HVCC d)FHA institutes HVCC in February as stated
Last year ended on a sour note for mortgage rates. Over the final two weeks of the year, mortgage rates moved higher by almost a full half percent. Many economists discount the final couple weeks of trading since most first team traders were on vacation. Today, the A Team traders are back and the directionality of rates will be set. The week ahead is full of economic data which will help determine the near term direction for mortgage rates but most agree mortgage rates are set to rise in 2010 as our economy recovers from the worst recession since the Great Depression.
Today we have a couple reports hitting the news wires. First out is the ISM Manufacturing index which gives us a measure of the strength of manufacturing conditions across the United States. The Institute for Supply Management surveys over 300 manufacturing firms on employment, production, new orders, supplier deliveries, and inventories. Readings above 50 indicate expanding conditions while readings below 50 indicate contraction. This survey has shown improving(above 50) conditions for the last four months and economists surveyed expect continued improvement with a 54.8 reading for December. The surveyed registered a better than expected 55.9.
Also out this morning is the Construction Spending report which represents the monthly change in the amount of money spent on new construction activity. Increased spending on construction could lead to more jobs and higher consumer spending which benefits the equities market. In addition, businesses would have to feel pretty confident in future sales to invest money on new construction or expansion of existing facilities. This also holds true for individuals looking to build as they would have to be very confident in their own financial position and job security to take on the building of a new home. This data has a two month lag so today’s report will show the change in construction spending for November. The report indicated that construction spending fell more than expected by 0.6% making for the seventh straight month of declines and falling to the lowest level in more than six years. October’s numbers were revised worse from an initially reported 0.0% to a decline of 0.5%.
Following the release of the economic data, mortgage backed securities and benchmark treasuries are both moving higher in price, lower in yield. To remind readers, as MBS move higher in price lenders can offer lower mortgage rates. If MBS can hold or continue to improve, lenders may offer better rates(lower borrowing costs) later today.
The rest of the week offers many high impacting reports
Tuesday
- Pending Home Sales
- Factory orders
Wednesday
- ADP Employment Report
- ISM Non-Manufacturing Index
- FOMC minutes from last meeting
Thursday
- Weekly Jobless Claims
- Announcement from Treasury of next offering of 30 year bonds, 10 year notes and 3 year notes which will be auctioned next week.
Friday
- EMPLOYMENT SITUATION REPORT!!!!!! This is the single highest impacting data released on a monthly basis. Expectations call for 0 jobs lost or created and the unemployment rate edging higher to 10.1%.
Reports from fellow mortgage professionals indicate the par 30 year conventional rate mortgage is in the 5.00 to 5.25% range for well qualified consumers. To secure a par interest rate you must have a FICO credit score of 740 or higher, a loan to value at 80% or less and pay all closing costs including an estimated one point loan origination/discount/broker fee. If you are looking to secure a 15 year fixed rate, you should expect a par rate in the 4.50% to 4.75% range with similar costs.
What is your outlook for 2010 regarding the mortgage industry? I would like to hear your opinion regarding mortgage rates, underwriting, Fed involvement, HVCC, etc…..
Mortgage Rates
a)rise b)fall c)briefly fall than rise d)hold steady
Underwriting
a)continue to toughen b)ease up c) stay the same
Fed Involvement in MBS
a)end buying as they stated b)extend the MBS program to support the recovery
HVCC
a)goes away b)no change c)FHA drops HVCC d)FHA institutes HVCC in February as stated
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