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Lake Tahoe Mortgage Rate Trends- February 5, 2016

Friday’s bond market has opened in negative territory following conflicting economic news. The stock markets are also showing losses with the Dow down 126 points and the Nasdaq down 82 points. The bond market is currently down 11/32 (1.88%), but the increase we see in this morning’s mortgage rates should be limited to just .125 of a discount point if comparing to Thursday’s early pricing.

Today’s only relevant economic data was the almighty monthly Employment report for January at 8:30 AM ET. It gave us several key readings on employment sector strength. Those readings gave us mixed results, hence the relatively muted response to the data initially before slipping into negative territory. The first headline number was the 4.9% unemployment rate that was lower than the 5.0% that was expected. Next up on the bad news chart was average hourly earnings that rose a surprising 0.5% when analysts were expecting to see only 0.3%. Rising wages concern traders because workers have more money to spend and the products/services businesses produce are likely to cost more to offset that increase.

The good news in the data was actually very good news. The report showed that only 151,000 jobs were added to the economy, falling well short of the 188,000 that was forecasted. It was also a sizable decline from December’s revised 262,000 payrolls. In some ways, this is the most important of the three headline numbers. So the fact it gave us really favorable results is preventing a sell-off in bonds that would lead to a spike in mortgage rates. At least during early morning trading.

Next week brings us the release of only a couple of economic reports that may influence mortgage rates. One of them is a key consumer-spending report though. It also has two days of semi-annual Fed testimony before the House Financial Services and Senate Banking Committees. None of the week’s relevant events take place until Wednesday, so we can expect Monday’s trading to be driven by weekend news and possibly momentum from this afternoon. Look for details on next week’s calendar in Sunday evening’s weekly preview.

Lake Tahoe Mortgage Rate Trends- February 4, 2016

Thursday’s bond market has opened flat following mixed economic news. Stocks are showing noticeable gains with the Dow up 93 points and the Nasdaq up 14 points. The bond market is currently down 1/32 (1.88%), but we will likely still see an increase of approximately .125 of a discount point in this morning’s rates due to weakness late yesterday.

The first of today’s three pieces of data was last week’s unemployment figures at 8:30 AM ET. They showed that 285,000 new claims for unemployment benefits were filed last week, up from the previous week’s revised total of 277,000. Analysts were expecting to see a slight decline in initial claims, not an increase. Therefore, we can consider this data to be good news for bonds and mortgage rates.

Employee Productivity and Costs data for the 4th quarter was also posted at 8:30 AM ET. It revealed a 3.0% decline in worker productivity and a larger than expected increase in labor costs. Bond traders would have preferred to see strong productivity and a softer labor cost reading, so the data is also negative news for bonds.

December’s Factory Orders report data was posted at 10:00 AM ET by the Commerce Department. They announced a 2.9% decrease in new orders for durable and non-durable goods at U.S. factories. A decline of 2.6% was predicted, meaning the larger drop is technically good news but it wasn’t enough of a variance to cause much of a reaction in the bond or mortgage markets.

Tomorrow brings us the big news of the week. The Labor Department will release the almighty Employment report for January at 8:30 AM ET tomorrow. Some of the important portions of the report will give us the unemployment rate, number of new jobs added or lost and the average hourly earnings reading. The best combination for the bond market and mortgage rates would be an increase in the unemployment rate, a much smaller increase in payrolls than expected and little or no rise in earnings. Current forecasts are calling for no change in the unemployment rate of 5.0% and approximately 188,000 new jobs added to the economy. Stronger than expected readings will likely fuel a stock market rally and selling in bonds that would cause a sizable upward revision to mortgage rates. On the other hand, disappointing numbers would raise concerns about the strength of economy and would likely lead to a sizable improvement in mortgage pricing.

Lake Tahoe Mortgage Rate Trends- February 3, 2016

Wednesday’s bond market has opened down slightly following stronger than predicted economic news. The major stock indexes are mixed with the Dow up 39 points and the Nasdaq down 15 points. The bond market is currently down 3/32 (1.86%), which should keep this morning’s mortgage rates close to yesterday’s morning pricing.

January’s ADP Employment report was today’s only relevant economic data. The 8:15 AM ET release showed an increase of 205,000 private sector jobs. This was higher than the 190,000 that was expected, hinting at a stronger than thought employment sector. While that is bad news for the bond and mortgage markets, the real measurement of sector strength will come Friday morning when the government-issued Employment report is released.

There are three pieces of economic data scheduled for release tomorrow morning, none of which are considered to be highly important. We start with last week’s unemployment figures at 8:30 AM ET. They are being forecasted to show that 275,000 new claims for unemployment benefits were filed last week. This would be a small decline from the previous week’s total of 278,000. Since rising claims is a sign of a weakening employment sector, a large increase in new claims would be good news for mortgage shoppers.

Employee Productivity and Costs data for the 4th quarter will also be released early tomorrow morning. It can cause some movement in the bond market, but should have a minimal impact on mortgage pricing. If the productivity reading varies greatly from analysts’ forecasts of a 1.7% decline, we may see some movement in mortgage rates. Higher levels of worker productivity is good news for the bond market because it allows the economy to expand while keeping inflation subdued.

December’s Factory Orders data is also scheduled to be posted in the morning but at 10:00 AM ET. It is similar to last week’s Durable Goods Orders release in giving us a measurement of manufacturing sector strength, but this data includes new orders for both durable and non-durable goods. It is not one of the more important reports we get each month, however, it can influence mortgage pricing if it varies greatly from forecasts. Analysts are expecting a 2.6% decline in new orders, indicating a softening manufacturing sector. The bond market would like to see a larger decline, meaning that manufacturing activity was even weaker than many had thought.

Lake Tahoe Mortgage Rate Trends- February 2, 2016

Tuesday’s bond market has opened up sharply following heavy selling in stocks. The major stock indexes are showing another round of sizable losses during early trading, pushing the Dow lower by 260 points and the Nasdaq down 59 points. The bond market is currently up 22/32 (1.87%), but due to weakness late yesterday we should see an improvement in this morning’s mortgage rates of only .125 – .250 of a discount point if comparing to Monday’s morning pricing.

There is nothing of importance scheduled for release today. I would not be surprised to see the bond market give back some of its early gains before the end of the day. The question is whether or not we can remain below 1.89% on the benchmark 10-year Treasury Note yield. Stocks are being influenced by falling oil prices, creating a flight to safety move into bonds. If oil prices stabilize, it is a safe bet to expect stocks to react by recovering losses. That could pull away funds that shifted into bonds, causing bond prices to fall and yields to rise. Since mortgage rates tend to follow bond yields, we would prefer to see weaker oil prices that will keep the stock market in negative territory. But please be careful, as these flight to safety moves usually unwind very quickly.

Tomorrow has only one report that we will be watching. That is January’s ADP Employment report at 8:15 AM ET. This release has the potential to cause some movement in the markets if it shows much stronger or weaker numbers. It tracks changes in private-sector jobs of the company’s clients that use them for payroll processing. While it does draw attention, it is my opinion that it is overrated and also is not a true reflection of the broader employment picture. It also is not accurate in predicting results of the monthly government report that usually follows a couple days later. Still, because we see a reaction to its results, it is included in this week’s calendar. Analysts are expecting to see 190,000 new jobs. Good news would be a much smaller number of jobs.

Lake Tahoe Mortgage Rate Trends- February 1, 2016

Monday’s bond market has opened in negative territory despite early stock selling and somewhat favorable economic news. The major stock indexes are showing fairly sizable losses with the Dow down 112 points and the Nasdaq down 32 points. The bond market is currently down 7/32 (1.94%), which should push this morning’s mortgage rates higher than Friday’s early pricing by approximately .125 of a discount point.

December’s Personal Income and Outlays data kicked off this week’s calendar at 8:30 AM ET today. It showed that personal income rose 0.3% in December while spending levels were unchanged. Analysts were expecting to see a 0.2% increase in both readings. The stronger income number means consumers had more to spend than thought, making it unfavorable for mortgage rates. However, offsetting that news and then some is the fact that they spent less than expected.

At 10:00 AM ET, the Institute of Supply Management (ISM) posted their manufacturing index for January. It came in at 48.2, just under the 48.3 that was expected. A downward revision to December’s reading (48.2 to 48.0) means we saw a slight increase in manufacturer sentiment about business conditions. Still, the 48.2 reading indicates that more surveyed executives felt business worsened in the month than those who felt it had improved. That indicates sector weakness and makes report good news for the bond and mortgage markets.

We have four more monthly and quarterly economic reports scheduled the rest of the week that are likely to influence mortgage rates. There is nothing of importance scheduled for tomorrow, so unless stocks stage a major rally or sell-off, we can expect to see a relatively calm day for mortgage rates.

Overall, Friday is easily the best candidate for most important day of the week although today’s data was considered highly important also. The calmest day will probably be tomorrow unless something unexpected happens. I am fully expecting to see another very active week for mortgage rates, so please maintain contact with your mortgage professional if still floating an interest rate and closing in the near future.

Lake Tahoe Mortgage Rate Trends- January 31, 2016

This week brings us the release of six monthly or quarterly economic reports that are likely to influence mortgage rates. The week opens and closes with key reports for the markets to digest and in between is some moderately important data. With relevant data scheduled for release four of the five days, we should see another active week for mortgage rates.

The first report comes early tomorrow morning when December’s Personal Income and Outlays data is posted at 8:30 AM ET. It gives us an indication of consumer ability to spend and current spending habits, making it relevant to the bond market and mortgage rates. Current forecasts call for an increase in income of 0.2% meaning consumers had a little more money to spend in December than they did in November. The spending reading is expected to also rise 0.2%, indicating consumers spent more. Stronger readings would be good news for the stock markets and could hurt bond prices, driving mortgage rates higher. Weaker than expected increases or declines would be considered good news for the bond market and mortgage rates as it would hint that consumer spending is weaker than thought, limiting economic growth.

Also set for release tomorrow is the Institute of Supply Management’s (ISM) manufacturing index for January. This index tracks manufacturer sentiment by rating surveyed trade executives’ opinions of business conditions. It is usually the first economic data released each month and is one of the very important reports we get monthly. Current forecasts are calling for a reading in the neighborhood of 48.3, which would be a slight change from December’s reading of 48.2. The lower the reading, the better the news for the bond market and mortgage rates because weaker sentiment indicates a slowing manufacturing sector.

Next up is Wednesday’s ADP Employment report at 8:15 AM ET. This release has the potential to cause some movement in the markets if it shows much stronger or weaker numbers. It tracks changes in private-sector jobs of the company’s clients that use them for payroll processing. While it does draw attention, it is my opinion that it is overrated and also is not a true reflection of the broader employment picture. It also is not accurate in predicting results of the monthly government report that usually follows a couple days later. Still, because we see a reaction to its results, it is included in this week’s calendar. Analysts are expecting to see 190,000 new jobs. Good news would be a much smaller number of jobs.

Employee Productivity and Costs data for the 4th quarter will be released early Thursday morning. It can cause some movement in the bond market, but should have a minimal impact on mortgage pricing. If the productivity reading varies greatly from analysts’ forecasts of a 1.7% decline, we may see some movement in mortgage rates. Higher levels of worker productivity is good news for the bond market because it allows the economy to expand while keeping inflation subdued.

December’s Factory Orders data is also scheduled to be posted Thursday morning but at 10:00 AM ET. It is similar to last week’s Durable Goods Orders release in giving us a measurement of manufacturing sector strength, but this data includes new orders for both durable and non-durable goods. It is not one of the more important reports we get each month, however, it can influence mortgage pricing if it varies greatly from forecasts. Analysts are expecting a 2.6% decline in new orders, indicating a softening manufacturing sector. The bond market would like to see a larger decline, meaning that manufacturing activity was even weaker than many had thought.

Friday has the big news of the week. The Labor Department will release the almighty Employment report for January at 8:30 AM ET Friday. Some of the important portions of the report will give us the unemployment rate, number of new jobs added or lost and the average hourly earnings reading. The best combination for the bond market and mortgage rates would be an increase in the unemployment rate, a much smaller increase in payrolls than expected and little or no increase in earnings. Current forecasts are calling for no change in the unemployment rate of 5.0% and approximately 188,000 new jobs added to the economy. Stronger than expected readings will likely fuel a stock market rally and selling in bonds that would cause a sizable upward revision to mortgage rates. On the other hand, disappointing numbers would raise concerns about the strength of economy and would likely lead to a sizable improvement in mortgage pricing.

Overall, Friday is easily the best candidate for most important day of the week although we could see plenty of movement in the markets and mortgage rates tomorrow also. The calmest day will probably be Tuesday. I am fully expecting to see another very active week for mortgage rates, so please maintain contact with your mortgage professional if still floating an interest rate and closing in the near future.

Lake Tahoe Mortgage Rate Trends- January 29, 2016

Friday’s bond market has opened in positive territory following mostly favorable economic data. The stock markets are showing pretty strong gains also with the Dow up 180 points and the Nasdaq up 42 points. The bond market is currently up 13/32 (1.93%), which should improve this morning’s mortgage rates by approximately .250 of a discount point.

There were three pieces of economic news posted this morning, one of which is considered to be key data. The key report was the initial Gross Domestic Product (GDP) reading for the 4th quarter. It revealed that the economy grew at an annual rate of 0.7% during the last three months of the year. This was a little softer than the 0.9% that was expected, making the report good news for bonds and mortgage rates. Bonds tend to thrive in weaker economic conditions, so the softer reading makes mortgage-related bonds more attractive to investors.

The 4th Quarter Employment Cost Index (ECI) was also released at 8:30 AM ET. It showed a 0.6% rise, matching forecasts. Since this was a minor report that did not show a surprise in the results, it has been a non-factor in this morning’s bond trading and mortgage pricing.

Closing out the day’s activities and this week’s schedule was January’s revised reading to the University of Michigan’s Index of Consumer Sentiment just before 10:00 AM ET. It came in at 92.0, falling short of the 93.2 that was expected. That means surveyed consumers were less optimistic about their own financial conditions than thought and are less likely to make a large purchase in the near future. Because consumer spending makes up over two-thirds of our economy, we can consider this data favorable for bonds and mortgage rates.

Next week does not have a significant number of economic reports scheduled for release, but a good portion of what is being posted is considered to be highly important. There are two reports set for Monday- Personal Income and Outlays along with the ISM manufacturing index. Both can affect mortgage rates noticeably. Look for details on those releases and the rest of the week’s activities in Sunday evening’s weekly preview.

Lake Tahoe Mortgage Rate Trends- January 28, 2016

Thursday’s bond market has opened slightly in positive territory following weaker than expected economic news. Stocks have been active this morning but are currently showing gains of 10 points in the Dow and 3 points in the Nasdaq. The bond market is currently up 3/32 (1.99%), which with the post-FOMC gains yesterday should improve this morning’s mortgage rates by approximately .125 of a discount point if comparing to Wednesday’s morning pricing.

The Commerce Department announced at 8:30 AM ET this morning that new Durable Goods Orders fell 5.1% last month, falling well short of the 0.5% decline that was expected. A secondary reading that tracks new orders excluding more volatile and costly transportation-related products, such as new airplanes, slid 1.2% when analysts were calling for a 0.1% decrease. These are good readings for bonds and mortgage rates because they indicate weaker conditions in the manufacturing sector, at least for big-ticket items. This data is known to be quite volatile from month to month, but this was a wide enough margin to positively affect bond trading and mortgage pricing.

Also posted early this morning was last week’s unemployment figures. They showed that 278,000 new claims for unemployment benefits were made last week, down from the previous week’s revised total of 294,000. Since 285,000 is what was forecasted, we should consider the news negative for bonds as the softer number of initial claims hints that the employment sector was a bit stronger last week than many had thought.

We also have today’s 7-year Treasury Note auction to watch. Yesterday’s 5-year Treasury Note auction did not go very well, preventing us from getting too optimistic about today’s sale. If there is a strong demand in today’s auction, we could see bond prices improve during afternoon trading. Results will be posted at 1:00 PM ET, so any reaction will come during early afternoon hours.

Tomorrow has the remaining three reports, starting with what is arguably the single most important economic report that we see regularly. This would be the initial quarterly Gross Domestic Product (GDP) reading. Tomorrow’s release is the first of three versions we will get for the 4th quarter. This data is so important because it is considered to be the best measurement of economic activity. The GDP itself is the total sum of all goods and services produced in the United States. Its results usually have a major impact on the financial markets and can cause significant changes in mortgage rates. This initial reading will be followed by two revisions, each released approximately one month apart. Last quarter’s first reading, which usually carries the most significance, is expected to show the economy grew at an annual rate of only 0.9%. A noticeably weaker reading would be great news for the bond market, questioning the strength of our economy. That would likely fuel stock selling and a rally in bonds that should push mortgage rates lower. However, a larger than expected increase, indicating the economy was stronger than thought, will probably fuel bond selling and lead to higher mortgage rates.

The second release of the day will be the 4th Quarter Employment Cost Index (ECI), also at 8:30 AM ET. This index measures employer costs for employee wages and benefits, giving us an indication of the threat of wage inflation. If wages are rising, consumers have more money to spend and businesses usually need to charge more for their products and services. The report is considered moderately important and usually has more of an impact on the bond market than the stock markets. Current forecasts are showing an increase of 0.6%. A lower than expected reading would be favorable to bonds and mortgage rates tomorrow, but unless we see a large variance from forecasts and no surprises in the GDP, I am not expecting this report to have much of an influence on rates.

The final economic report of the week is the revised reading to the University of Michigan’s Index of Consumer Sentiment just before 10:00 AM ET. This index is another measurement of consumer confidence that is thought to indicate consumer willingness to spend. I don’t see this data having much of an influence on the markets or mortgage rates unless we see a large revision from the preliminary reading of 92.6. Currents forecasts are showing a 93.2 reading.

Lake Tahoe Mortgage Rate Trends- January 27, 2016

Wednesday’s bond market has opened in negative territory following stronger than expected economic news. The major stock indexes aren’t the cause of the bond weakness because they are showing noticeable losses themselves. The Dow is currently down 109 points while the Nasdaq has lost 50 points. The bond market is currently down 7/32 (2.02%), but we will likely see little change in this morning’s mortgage rates due to strength late yesterday.

December’s New Home Sales report was posted at 10:00 AM ET this morning, revealing a surprising 10.8% rise in sales of newly constructed homes. This was a larger increase than what was expected, indicating strength in the new home portion of the housing sector. That makes the data bad news for bonds and mortgage rates. However, I believe that this morning’s softness in bonds is more a result of anxiety over this afternoon’s events then it is this data.

There are two afternoon events taking place today. The first is the relatively important 5-year Treasury Note auction. The Fed will auction 5-year Notes today and 7-year Notes tomorrow. If these sales are met with a strong demand from investors, the broader bond market may improve during afternoon hours. If they draw a lackluster interest, they could lead to bond selling and higher mortgage rates during early afternoon trading.

Next up is this year’s first FOMC meeting that will adjourn at 2:00 PM ET. There was a decent chance of this meeting yielding another quarter point increase to key short-term interest rates before the recent sell-off in stocks and oil costs. But now I believe the significant selling in stocks recently may alter the Fed’s monetary policy plans, at least temporarily. A rate hike is still possible though, so we need to be prepared in case it does happen. Afternoon volatility in the markets today is a strong possibility following the post-meeting statement release. Look for an update to this report shortly after the markets have an opportunity to react to the statement.

Lake Tahoe Mortgage Rate Trends- January 26, 2016

Tuesday’s bond market has opened in negative territory following early stock strength and much stronger than expected economic news. Stocks are in rally mode with the Dow up 240 points and the Nasdaq up 23 points. The bond market is currently down 3/32 (2.01%), which should keep this morning’s mortgage rates close to yesterday’s levels.

January’s Consumer Confidence Index (CCI) was posted at 10:00 AM ET this morning, revealing a reading of 98.1 that was almost two points higher than December’s revised reading. It also exceeded forecasts of 96.8, indicating surveyed consumers were more optimistic about their own financial and employment situations than many had thought. That is considered bad news for bonds and mortgage rates because rising confidence usually translates into more consumer spending, making for a stronger economy.

Tomorrow has one economic report we will be watching but it will likely be one of the afternoon events that will be the center of attention. December’s New Home Sales will be released at 10:00 AM ET tomorrow morning. It is considered to be the sister release to last week’s Existing Home Sales, giving us a small snapshot of housing sector strength. It tracks a much smaller portion of home sales than last week’s report did and is forecasted to show an increase in sales of newly constructed homes. However, this data is not important enough to heavily influence mortgage pricing unless it varies greatly from forecasts.

This year’s first FOMC meeting that began today will adjourn at 2:00 PM ET tomorrow. There was a decent chance of this meeting yielding another quarter point increase to key short-term interest rates before the recent sell-off in stocks and oil costs. But now I believe the significant selling in stocks recently may alter the Fed’s monetary policy plans, at least temporarily. A rate hike is still possible though, so we need to be prepared in case it does happen. Afternoon volatility in the markets tomorrow is a strong possibility following the post-meeting statement release. This statement will not precede a press conference like last meeting did.

Also worth noting is tomorrow’s 5-year Treasury Note auction. If the sale is met with a strong demand from investors, the broader bond market may improve after results are posted at 1:00 PM ET. If they draw a lackluster interest, they could lead to bond selling and higher mortgage rates until we get to the FOMC statement. A strong interest in the securities could help boost bond prices.