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Lake Tahoe Mortgage Rate Trends- October 28, 2015

WEDNESDAY AFTERNOON UPDATE:
This week’s FOMC meeting has adjourned with no change to key short-term interest rates. This did not come as a surprise to most analysts. However, what did catch many off guard was a strong hint in the Fed’s post-meeting statement that a move is quite possible during December’s meeting. This shouldn’t have come as a surprise to the markets since sometime in 2015 has been projected for quite some time. Apparently it did still surprise market participants, so we are seeing a negative reaction in the bond market.

Stocks have moved in both directions since the 2:00 PM adjournment, initially weakening and slipping into negative ground before rebounding back to their pre-announcement levels. The Dow is currently up 108 points while the Nasdaq is up 35 points. The bond market is currently down 15/32 (2.08%), which should cause an upward revision in mortgage rates of approximately .125 – .250 of a discount point. I believe this is knee-jerk reaction that will likely correct itself in the immediate future. Unfortunately, the potential improvement that was possible from this meeting has evaporated. Therefore, it may be time to shift back to more of a conservative stance towards mortgage rate direction.

We were already seeing some pressure build in bonds following the results of today’s 5-year Treasury Note auction at 1:00 PM ET. The sale did not go very well with several indicators pointing toward a weak level of investor interest in the securities. That makes it hard to be too optimistic about tomorrow’s 7-year Note auction. Results of it will be posted at 1:00 PM tomorrow, possibly affecting afternoon mortgage rates.

There are two economic reports scheduled for release early tomorrow morning. The much more important one is the preliminary reading of the 3rd Quarter Gross Domestic Product (GDP). The GDP is considered to be the benchmark measurement of economic growth because it is the total of all goods and services produced in the U.S. and therefore is likely to have a major impact on the financial markets and mortgage pricing. There are three versions of this report, each a month apart. Tomorrow’s release is the first and usually has the biggest influence on the markets. Current forecasts call for an increase of approximately 1.6% in the GDP, which would mean that the economy grew at a noticeably slower pace than the 2nd quarter’s 3.9% rate. If this report shows a much smaller increase, I am expecting to see the bond market rally and mortgage rates fall. However, a larger than expected rise could lead to a rally in stocks, bond selling and a sizable increase in mortgage pricing tomorrow morning.

The second report of the day will be last week’s unemployment figures. They are expected to show that 264,000 new claims for unemployment benefits were made last week, up from the previous week’s 259,000 initial claims. Rising claims indicates a softening employment sector, so the higher the number the better the news it is for mortgage rates. Although, it is worth noting that this is only a weekly update and the quarterly GDP is a much more influential report than this. Accordingly, don’t expect a significant reaction to the data.

Lake Tahoe Mortgage Rate Trends- October 28, 2015

Wednesday’s bond market has opened relatively flat as market participants await today’s FOMC results. The stock markets are showing early gains with the Dow up 68 points and the Nasdaq up 2 points. The bond market is currently down 2/32 (2.04%), which should keep this morning’s mortgage rates close to yesterday’s levels.

There is no relevant economic data being posted today, but we do have two afternoon events taking place, one of which is likely to significantly move the markets. The less important of the two is the 5-year Treasury Note auction results at 1:00 PM ET. If this type of sale is met with a strong demand from investors, bond prices often rise during afternoon trading. However, I don’t think we will see too much of a reaction today because of the second event that is much more important to the broader markets.

That would be the adjournment of this week’s two-day FOMC meeting at 2:00 PM ET. Some market participants feel this is when the Fed will make their first increase to key short-term interest rates since 2006. Since even the Fed has indicated they expect a rate hike before the end of the year, suspense is building that it will come at this meeting. There is only one more meeting scheduled this year, so if it doesn’t happen today the odds rise sharply it will come at December’s meeting. It is my opinion that we will not see a move at this meeting. I think December is the earliest with a decent chance it will not come until early 2016. Look for plenty of reaction and volatility to the post-meeting statement during mid-afternoon trading.

The strong personal feeling that no rate hike will come from this meeting is the basis for shifting to a less conservative stance on mortgage rates. If we don’t see an increase and don’t get a strong indication from the post-meeting statement that one will come at the next meeting, I suspect the bond market will react favorably and mortgage rates will improve. That rally may be short-lived though, so be prepared to act if we do get the expected improvement and still floating a rate. Depending on how the markets react and what the statement actually says, I could shift back to a cautious stance on rates as early as this afternoon.

Look for an update to this report shortly after the markets have an opportunity to initially react and then stabilize after the announcement is made. There is key data scheduled for release tomorrow (initial GDP reading), but it will be addressed in this afternoon’s revision.

Lake Tahoe Mortgage Rate Trends- October 27, 2015

Tuesday’s bond market has opened in positive territory following weaker than expected economic data. The major stock indexes aren’t doing anything to hurt bonds either by being in negative ground in early trading. They are showing minor losses of 31 points in the Dow and 11 points in the Nasdaq. The bond market is currently up 10/32 (2.02%), which should improve this morning’s mortgage rates by approximately .125 of a discount point.

The Commerce Department gave us the first of this morning’s two relevant reports. At 8:30 AM ET they posted September’s Durable Goods Orders report that showed a 1.2% decline in new orders for big-ticket products. These are items that are expected to last three or more years and include appliances, electronics and airplanes. This was very close to the 1.3% decline that was expected and considering the traditional volatility in this data we can label it as a match. The good news came in a secondary reading that strips out transportation-related orders such as new airplanes. That reading showed a 0.4% drop when analysts were expecting to see a small increase. Since the data does give some indication of weaker than expected manufacturing activity, we can consider this report slightly favorable news for mortgage rates.

October’s Consumer Confidence Index (CCI) was posted at 10:00 ET today, revealing a reading of 97.6. This was a sizable decline from September’s revised reading of 102.6 and well below forecasts of 102.5. That means surveyed consumers were not nearly as optimistic about their own financial and employment situations this month as many had thought. Because waning confidence usually translates into weaker levels of consumer spending and economic growth, this is good news for bonds and mortgage rates.

Tomorrow has two events taking place, both during afternoon trading. The first is the 5-year Treasury Note auction results at 1:00 PM ET. If this type of sale is met with a strong demand from investors, bond prices often rise during afternoon trading. However, I don’t think we will see too much of a reaction in tomorrow’s auction because of the second event of the day that is much more important to the broader markets.

The second event of the day will be the FOMC meeting adjournment at 2:00 PM ET. Some market participants feel this is when the Fed will make their first increase to key short-term interest rates since 2006. Since even the Fed has indicated they expect a rate hike before the end of the year, suspense is building that it will come at this meeting. There is only one more meeting scheduled this year, so if it doesn’t happen tomorrow the odds rise sharply it will come at December’s meeting. It is my opinion that we will not see a move at this meeting. I think December is the earliest with a decent chance it will not come until early 2016. Look for plenty of reaction and volatility to the post-meeting statement during mid-afternoon trading tomorrow.

Lake Tahoe Mortgage Rate Trends- October 26, 2015

Monday’s bond market has opened in positive territory due partly to weaker than expected housing news. The stock markets are starting the week with modest losses of 21 points in the Dow and 7 points in the Nasdaq. The bond market is currently up 7/32 (2.06%), but due to weakness late Friday we should see little change in this morning’s mortgage rates if comparing to Friday’s early pricing.

Today had a single piece of economic data released. September’s New Home Sales was posted at 10:00 AM ET today. The Commerce Department said that sales of newly constructed homes fell 11.5% last month, falling well short of expectations. This indicates the new home portion of the housing sector was softer than many had thought last month, making the data favorable for bonds and mortgage rates.

The rest of the week brings us the release of six more economic reports and two Treasury auctions in addition to another FOMC meeting. We have data or other events that are expected to influence mortgage rates set every day, so we could see plenty of movement in rates this week. The data scheduled this week ranges from minor to extremely important, meaning some reports will have a much bigger impact on trading than others.

Tomorrow has two of those reports, starting with the Durable Goods Orders report for September at 8:30 AM ET. This report gives us a measurement of manufacturing sector strength by tracking orders at U.S. factories for big-ticket items, or products that are expected to last three or more years. Analysts are currently calling for a decline in new orders of approximately 1.3%. If we see a large increase in orders, mortgage rates will probably rise as bond prices fall. On the other hand, a significantly larger than expected decline should be good news for the bond market and mortgage rates, but this data can be quite volatile from month to month and is difficult to forecast. Therefore, a small variance from forecasts likely will have little effect on tomorrow’s bond trading or mortgage pricing.

October’s Consumer Confidence Index (CCI) will be released at 10:00 AM ET tomorrow. This Conference Board index gives us a measurement of consumer willingness to spend. It is expected to show a drop in confidence from last month’s 103.0 reading. That would mean that consumers did not feel as good about their own financial and employment situations as they did last month, indicating they are less likely to make large purchases in the near future. That would be good news for the bond market because consumer spending makes up over two-thirds of our economy. Current forecasts are showing a reading of 102.5. The lower the reading, the better the news it is for mortgage rates.

Overall, it appears Wednesday or Thursday could be the most active day for mortgage rates while today was the best candidate for lightest. The importance of tomorrow and Friday’s reports makes them likely to be active day also, although I suspect the most movement in rates will take place the middle days due to the FOMC meeting and GDP report. With some much data and other events relevant to mortgage rates scheduled this week, it would be prudent to maintain contact with your mortgage professional if still floating an interest rate and closing in the near future.

Lake Tahoe Mortgage Rate Trends- October 25, 2015

This week brings us the release of seven economic reports and two Treasury auctions for the bond market to digest in addition to another FOMC meeting. We have data or other events that are expected to influence mortgage rates set every day, so we could see plenty of movement in rates this week. The data scheduled this week ranges from minor to extremely important, meaning some reports will have a much bigger impact on trading than others.

September’s New Home Sales starts the week at 10:00 AM ET tomorrow. This data covers the small percentage of home sales that last week’s Existing Home Sales report didn’t include. It is expected to show a slight decline in sales of newly constructed homes, but I don’t see this report having much of an impact on tomorrow’s mortgage rates. I believe the markets will be much more focused on events coming later in the week.

There are two reports scheduled for release Tuesday, starting with the Durable Goods Orders report for September at 8:30 AM ET. This report gives us a measurement of manufacturing sector strength by tracking orders at U.S. factories for big-ticket items, or products that are expected to last three or more years. Analysts are currently calling for a decline in new orders of approximately 1.3%. If we see a large increase in orders, mortgage rates will probably rise as bond prices fall. On the other hand, a significantly larger than expected decline should be good news for the bond market and mortgage rates, but this data can be quite volatile from month to month and is difficult to forecast. Therefore, a small variance from forecasts likely will have little effect on Tuesday’s bond trading or mortgage pricing.

October’s Consumer Confidence Index (CCI) will be released at 10:00 AM ET Tuesday. This Conference Board index gives us a measurement of consumer willingness to spend. It is expected to show a drop in confidence from last month’s 103.0 reading. That would mean that consumers did not feel as good about their own financial and employment situations as they did last month, indicating they are less likely to make large purchases in the near future. That would be good news for the bond market because consumer spending makes up over two-thirds of our economy. Current forecasts are showing a reading of 102.5. The lower the reading, the better the news it is for mortgage rates.

This week’s FOMC meeting is a two-day meeting that begins Tuesday and adjourns Wednesday afternoon. Some market participants feel this is when the Fed will make their first increase to key short-term interest rates since 2006. Since even the Fed has indicated they expect a rate hike before the end of the year, suspense is building that it will come this week. There is only one more meeting scheduled this year, so if it doesn’t come this week the odds rise sharply it will come at December’s meeting. It is my opinion that we will not see a move at this meeting. I think December is the earliest with a decent chance it will not come until early 2016. The meeting will adjourn at 2:00 PM ET Wednesday, so look for plenty of reaction and volatility to the post-meeting statement during mid-afternoon trading.

The preliminary reading of the 3rd Quarter Gross Domestic Product (GDP) will be released at 8:30 AM ET Thursday morning. The GDP is considered to be the benchmark measurement of economic growth because it is the total of all goods and services produced in the U.S. and therefore is likely to have a major impact on the financial markets and mortgage pricing. There are three versions of this report, each a month apart. Thursday’s release is the first and usually has the biggest influence on the markets. Current forecasts call for an increase of approximately 1.6% in the GDP, which would mean that the economy grew at a noticeably slower pace than the 2nd quarter’s 3.9% rate. If this report shows a much smaller increase, I am expecting to see the bond market rally and mortgage rates fall. However, a larger than expected rise could lead to a rally in stocks, bond selling and a sizable increase in mortgage pricing Thursday morning.

Friday has the remaining three reports scheduled that may affect mortgage rates. The 3rd Quarter Employment Cost Index (ECI) will be released at 8:30 AM ET. It is the least important of the day’s three reports. This data tracks employer costs for salaries and benefits, giving us an indication of wage inflation pressures. Rapidly rising costs raise wage inflation concerns and may hurt bond prices. It is expected to show an increase in costs of 0.5%. A smaller than expected increase would be good news for mortgage rates, but this is not one of the more important reports of the week. That means will take a large variance from forecasts for this report of have a noticeable influence on mortgage pricing.

September’s Personal Income and Outlays report will also be posted early Friday morning. This data gives us an indication of consumer ability to spend and current spending habits. It is important to the markets because consumer spending makes up such a large part of the U.S. economy. Rising income generally indicates that consumers have more money to spend, making economic growth more of a possibility. This is bad news for the bond market and mortgage rates because it raises inflation concerns, making long-term securities such as mortgage related bonds less attractive to investors. Analysts are expecting to see a 0.2% increase in income and a 0.2% rise in spending. Smaller than expected increases in both readings would be good news for the bond market and mortgage pricing.

The week’s last report comes just before 10:00 AM ET Friday when the University of Michigan updates their Index of Consumer Sentiment for this month. This report is moderately important because it helps us measure consumer confidence, which is believed to indicate consumers’ willingness to spend. Current forecasts show this index rising from its preliminary reading of 92.1 to 92.6. Good news for mortgage rates would be a sizable decline in the index.

This week also has Treasury auctions scheduled the first three days. The only two that have the potential to influence mortgage rates are Wednesday’s 5-year and Thursday’s 7-year Note sales. If those sales are met with a strong demand from investors, particularly Wednesday’s auction, bond prices may rise during afternoon trading. This could lead to improvements to mortgage rates shortly after the results of the sales are posted at 1:00 PM ET each day. But a lackluster investor interest may create selling in the broader bond market and lead to slight upward revisions to mortgage rates.

Overall, it appears Wednesday or Thursday could be the most active day for mortgage rates and tomorrow is the best candidate for lightest. The importance of Tuesday and Friday’s reports makes them likely to be active day also, although I suspect the most movement in rates will take place the middle days due to the FOMC meeting and GDP report. With data or other events relevant to mortgage rates scheduled all five days, it would be prudent to maintain contact with your mortgage professional if still floating an interest rate and closing in the near future.

Lake Tahoe Mortgage Rate Trends- October 23, 2015

Friday’s bond market has opened in negative territory with stocks showing sizable gains. The Dow is up 104 points while the Nasdaq has gained 90 points. The bond market is currently down 14/32 (2.07%), which should push this morning’s mortgage rates higher by approximately .125 of a discount point.

There is nothing of importance scheduled for release today, so as expected, we are seeing bonds react to stock movement. If the major stock indexes extend their morning gains, we could see more pressure in bonds that lead to an upward revision in mortgage pricing later today.

Next week is going to be very interesting and active. We have a good handful of reports scheduled for to be posted, including the extremely important initial reading of the 3rd Quarter Gross Domestic Product (GDP). But what is going to draw even more attention is the FOMC meeting taking place that some analysts think will bring the first rate increase to key short-term interest rates in over 9 years. I am not so convinced it will come next week, although I admit it is a possibility. We should see plenty of movement in the markets leading up to the announcement as investors prepare for it.

There is relevant data scheduled for Monday when September’s New Home Sales report is released. This is generally considered to be of low importance to the markets so its results likely will have little impact on mortgage rates. Look for details on it and the rest of the week’s calendar in Sunday evening’s weekly preview.

Lake Tahoe Mortgage Rate Trends- October 22, 2015

Thursday’s bond market has opened relatively flat despite unfavorable economic data and early stock gains. The Dow is currently up 180 points while the Nasdaq has gained 56 points. The bond market is currently down 1/32 (2.03%), which should keep this morning’s mortgage rates close to yesterday’s levels.

The first of today’s three economic releases was last week’s unemployment figures at 8:30 AM ET. They revealed that 259,000 new claims for unemployment benefits were filed last week, up from the previous week’s revised total of 256,000 initial claims. However, this was a little short of the 265,000 that was expected, indicating that the employment sector may have been stronger than many had thought last week. Therefore, we need to consider the news negative for bonds and mortgage rates. Fortunately though, this is only a weekly snapshot, so it has had little impact on today’s trading.

September’s Existing Home Sales data was posted at 10:00 AM ET. The National Association of Realtors of announced that home resales rose 4.7% last month, exceeding forecasts of a 1.5% increase. Because a strengthening housing sector makes broader economic growth more likely, this is also bad news for mortgage rates.

Lastly, September’s Leading Economic Indicators (LEI) was also released at 10:00 AM ET. The Conference Board said their LEI slipped 0.2% last month. Analysts were expecting to see a 0.1% decline. This is the bit of good news in today’s data because this index attempts to measure economic activity over the next several months. The decline means they are expecting to see little growth, which makes bonds more appealing to investors. However, this is a minor report and the variance was not enough to draw much attention.

Tomorrow doesn’t have anything scheduled that we need to be concerned about. Accordingly, the most likely influence on bond trading and mortgage rates will be stock movement. Generally speaking, stock gains usually pressure bonds and lead to higher mortgage rates. On the other hand, stock weakness often draws funds away from equities and into bonds. But it will probably be a fairly calm day for the mortgage market tomorrow.

Lake Tahoe Mortgage Rate Trends- October 21, 2015

Wednesday’s bond market has opened in positive territory despite a calm open in stocks and no relevant news or data to drive trading today. Stocks are mixed during early trading with the Dow up 21 points and the Nasdaq down 4 points. The bond market is currently up 9/32 (2.03%), which should improve this morning’s mortgage rates slightly.

Tomorrow has three pieces of data scheduled for release, but none of them are expected to draw too much attention. The first is last week’s unemployment figures at 8:30 AM ET. They are expected to show that 265,000 new claims for unemployment benefits were filed last week. This would be an increase from the previous week’s 255,000 initial filings, indicating that the employment sector softened last week. Because rising claims hints at a weakening employment sector, the higher the number of new filings the better the news it is for mortgage rates. However, since this is only a weekly snapshot it usually takes a wide variance from forecasts for the report to cause a noticeable move in mortgage pricing.

The National Association of Realtors will post September’s Existing Home Sales data at 10:00 AM ET tomorrow. This report gives us an indication of housing sector strength and mortgage credit demand by tracking home resales in the U.S. I don’t see it having much of an influence on the bond market or mortgage rates, but a reading that varies greatly from analysts’ forecasts could lead to a slight change in mortgage pricing. It is expected to show a small increase in sales from August to September, meaning the housing sector strengthened slightly. That would be bad news for the bond market since a strengthening housing sector makes broader economic growth more likely and bonds less appealing to investors.

September’s Leading Economic Indicators (LEI) will be released by the Conference Board at 10:00 AM ET tomorrow. This index attempts to measure future economic activity, particularly during the next three to six months. Current forecasts are calling for a decline of 0.1% from August’s reading. This would indicate that economic activity is likely to remain fairly flat over the next couple of months. That would be relatively favorable news for the bond market and mortgage rates, but this report is considered to be only moderately important. Therefore, a small increase or decline would not be of much concern to the bond and mortgage markets. Ideally, we would like to see a sizable decline though.

Lake Tahoe Mortgage Rate Trends- October 20, 2015

Tuesday’s bond market has opened in negative territory following stronger than expected economic news. The stock market is in negative ground also with the Dow down 24 points and the Nasdaq down 1 point. The bond market is currently down 13/32 (2.06%), but due to strength late yesterday we should see only a slight increase in this morning’s mortgage rates if there is one at all.

The Commerce Department gave us today’s only economic data with the release of September’s Housing Starts at 8:30 AM ET. They announced a 6.5% increase in new housing groundbreakings last month, exceeding forecasts. Most of the increase is being attributed to multi-unit properties such as apartment complexes and not single-family homes. Still, the data should be considered slightly negative for the bond and mortgage markets because it points towards economic strength.

Tomorrow has nothing of importance scheduled for release. If we see a noticeable movement in mortgage rates it likely will be a result of either a stock rally or sell-off. The markets seem to be somewhat content thought until we get closer to next week’s FOMC meeting. There are a couple reports scheduled for Thursday morning, but none are considered highly important or carry the potential to be a market mover.

Lake Tahoe Mortgage Rate Trends- October 19, 2015

Monday’s bond market has opened slightly in positive territory with stocks showing minor losses during early trading. The major stock indexes are starting the week in negative territory, pushing the Dow lower by 38 points and the Nasdaq down 3 points. The bond market is currently up 2/32 (2.03%), which should keep this morning’s mortgage rates at Friday’s early levels.

There is nothing of importance scheduled for release today, so if we get an intraday revision to mortgage rates it will likely be the result of stock movement. The rest of the week brings us the release of only three pieces of economic data that are likely to affect mortgage rates. None of them are considered to be highly important to the markets and all of the data will come over just two days.

September’s Housing Starts will start the week’s activities at 8:30 AM ET tomorrow. This Commerce Department report will probably not have much of an impact on the bond market or mortgage rates. It gives us a measurement of housing sector strength and mortgage credit demand by tracking construction starts of new homes, but is usually considered to be of low importance to the financial and mortgage markets. It is expected to show an increase in new home starts between August and September. I believe we need to see a significant surprise in this data for it to have an impact on tomorrow’s mortgage rates.

Overall, Thursday is the best candidate for most active day in rates because it has the most important report of the week. Although, the week’s most important report isn’t exactly considered an important report in the markets. Unless the Existing Home Sales data shows some significantly strong or weak results, it should only have a minor impact on this week’s rates. The calmest day will likely be Wednesday or Friday. However, unexpected geopolitical or financial news can significantly influence bond pricing and mortgage rates at any time as can a sizable move in stocks. Therefore, it would be prudent to maintain contact with your mortgage professional if still floating an interest rate.