What Will Move Mortgage Rates in the Week Ahead
Posted 07-26-2010 at 08:31 AM by VictorBurek
Not much to recap from last week. Consumer borrowing costs moved higher at the beginning of the week but recovered the losses by the weekend. This was despite the stock market posting a healthy rally indicating the rates market remained disconnected from stocks. It appears this disconnect is continuing this morning. The par 30 year conventional rate mortgage has been holding in the 4.375% to 4.625% range for quite some time as market participants are hesitant to drive mortgage backed securities prices higher which would allow lenders to offer lower rates. Maybe mortgage rates are at the bottom, what do you think?
Our economic calendar is light today but does pick up by the week’s end.
Our lone report today gives us another reading on the health of the struggling housing sector with the release of New Home Sales for June. The U.S. Bureau of the Census considers a new home sold when the buyers sign the contract. The home can be in any stage of construction such as not yet started, under construction, or already completed. New home sales in May plunged more than 33% to an annualized pace of 300,000. This is the slowest pace since 1963! The supply of new homes on the market also surged higher from April’s 5.8 months to 8.5 months in May. The decline in sales was to be expected thanks to the end of the home buyer tax credit.
Today’s report indicated New Home Sales in June rebounded from May’s dismal levels to a better than expected annualized pace of 330,000. Economists were only expecting 310,000. Offsetting the positive move was May’s numbers were revised even lower to an annualized pace of only 267,000! Year over year, New Home Sales have declined 16.7%. Available new homes on the market eased from last month’s revised 9.6 month supply to 7.6 months. The median home price also fell 1.4% last month to $213,400. On the news, stocks edged higher, but MBS are holding at opening levels.
Here is a look at the scheduled events which can have an impact on the direction of mortgage rates…
Tuesday
- S&P/Case-Shiller Home Price Index (medium impact) This data tracks the monthly change in the value of residential real estate across the United States.
- Consumer Confidence (medium impact). An optimistic consumer is more likely to spend money which benefits stocks while a pessimistic consumer is more likely to save or pay off debt which benefits the bond market.
- Treasury auction: $38billion of 2 year notes (low to medium impact)
Wednesday
- MBA Applications Index (low impact)
- Durable Goods Orders (high impact) This data tells us the month over month change in new orders for durable goods. A busy factory means there is demand for durable goods, which implies the engines of American economic growth are running. Additionally, a busy factory can lead to more jobs.
- Treasury auction: $35billion of 5 year notes. Since the life of a mortgage is closer to 5 years than 2 years, this auction has more potential to move mortgage rates. (medium to high impact)
Thursday
- Weekly Jobless Claims: Recent reports have shown jobless claims holding at stubbornly high levels. This implies companies are still hesitant to hire new staff as economic conditions remain uncertain. (medium impact)
- Treasury auction: $29billion of 7 year notes. (medium to high impact)
Friday
- Gross Domestic Product(GDP): This is the first reading called the Advance reading of second quarter U.S. Economic Output. (high impact) We receive three reports each quarter on GDP… The advance reading, a month later the data is revised and we get the Preliminary reading and one month later the data is revised again and we received the Final print.
- Chicago PMI (low to medium impact)
- Consumer Sentiment (medium impact)
Lender rate sheets this morning are very similar to what we had at the end of last week. The par 30 year conventional rate mortgage remains in the 4.375% to 4.625% range for well qualified consumers. To be considered well qualified you must have a FICO credit score of 740 or higher. Consumers with lower FICO scores will either have to pay additional costs thanks to Loan Level Price Adjusters or accept a higher interest rate. To secure a par interest rate you will have to pay all closing costs, lender and title fees, and pay 1 point loan origination/discount/broker fee. If you plan to keep your current home for less than 3 years, you should consider a no cost loan which rolls no costs into the loan but you will have to accept a higher interest rate. No cost loans are currently around 5% for a 30 year fixed.
I continue to favor locking all loans closing within the next 30 days as I see little benefit in floating. Does anyone think rates will move lower?
Our economic calendar is light today but does pick up by the week’s end.
Our lone report today gives us another reading on the health of the struggling housing sector with the release of New Home Sales for June. The U.S. Bureau of the Census considers a new home sold when the buyers sign the contract. The home can be in any stage of construction such as not yet started, under construction, or already completed. New home sales in May plunged more than 33% to an annualized pace of 300,000. This is the slowest pace since 1963! The supply of new homes on the market also surged higher from April’s 5.8 months to 8.5 months in May. The decline in sales was to be expected thanks to the end of the home buyer tax credit.
Today’s report indicated New Home Sales in June rebounded from May’s dismal levels to a better than expected annualized pace of 330,000. Economists were only expecting 310,000. Offsetting the positive move was May’s numbers were revised even lower to an annualized pace of only 267,000! Year over year, New Home Sales have declined 16.7%. Available new homes on the market eased from last month’s revised 9.6 month supply to 7.6 months. The median home price also fell 1.4% last month to $213,400. On the news, stocks edged higher, but MBS are holding at opening levels.
Here is a look at the scheduled events which can have an impact on the direction of mortgage rates…
Tuesday
- S&P/Case-Shiller Home Price Index (medium impact) This data tracks the monthly change in the value of residential real estate across the United States.
- Consumer Confidence (medium impact). An optimistic consumer is more likely to spend money which benefits stocks while a pessimistic consumer is more likely to save or pay off debt which benefits the bond market.
- Treasury auction: $38billion of 2 year notes (low to medium impact)
Wednesday
- MBA Applications Index (low impact)
- Durable Goods Orders (high impact) This data tells us the month over month change in new orders for durable goods. A busy factory means there is demand for durable goods, which implies the engines of American economic growth are running. Additionally, a busy factory can lead to more jobs.
- Treasury auction: $35billion of 5 year notes. Since the life of a mortgage is closer to 5 years than 2 years, this auction has more potential to move mortgage rates. (medium to high impact)
Thursday
- Weekly Jobless Claims: Recent reports have shown jobless claims holding at stubbornly high levels. This implies companies are still hesitant to hire new staff as economic conditions remain uncertain. (medium impact)
- Treasury auction: $29billion of 7 year notes. (medium to high impact)
Friday
- Gross Domestic Product(GDP): This is the first reading called the Advance reading of second quarter U.S. Economic Output. (high impact) We receive three reports each quarter on GDP… The advance reading, a month later the data is revised and we get the Preliminary reading and one month later the data is revised again and we received the Final print.
- Chicago PMI (low to medium impact)
- Consumer Sentiment (medium impact)
Lender rate sheets this morning are very similar to what we had at the end of last week. The par 30 year conventional rate mortgage remains in the 4.375% to 4.625% range for well qualified consumers. To be considered well qualified you must have a FICO credit score of 740 or higher. Consumers with lower FICO scores will either have to pay additional costs thanks to Loan Level Price Adjusters or accept a higher interest rate. To secure a par interest rate you will have to pay all closing costs, lender and title fees, and pay 1 point loan origination/discount/broker fee. If you plan to keep your current home for less than 3 years, you should consider a no cost loan which rolls no costs into the loan but you will have to accept a higher interest rate. No cost loans are currently around 5% for a 30 year fixed.
I continue to favor locking all loans closing within the next 30 days as I see little benefit in floating. Does anyone think rates will move lower?
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