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Lake Tahoe Mortgage Rate Trends- October 29, 2014

This week’s FOMC meeting has adjourned with no change to key short-term interest rates and an announcement that the Fed’s QE bond buying program has concluded. Both were widely expected. The post-meeting statement made a couple interesting points but none were significantly surprising. The bigger ones were confirmation that the labor market has continued to improve and that long-term inflation will likely gain momentum towards their preferred benchmark.

Overall, after the initial knee-jerk reaction, the markets are not far off from their pre-adjournment levels. The stock markets are still showing moderate losses, which weakened somewhat between our morning update and the 2:00pm announcement. The Dow is currently down 46 points while the Nasdaq is down 27 points and the bond market is currently down 7/32 (2.32%). This may be enough of a move from morning levels to cause a slight increase in mortgage rates, but many lenders will likely opt to see which direction the markets head as the afternoon progresses and could wait until tomorrow to reflect any change in pricing.

Today’s 5-year Treasury Note auction did not go well at all. Several benchmarks we use to gauge investor demand showed poor interest in the securities. That news had a negative impact on bond trading but fortunately the reaction was minimal due to the FOMC results an hour later. It doesn’t give us much to be optimistic about though in tomorrow’s 7-year Note sale. We do have data being posted in the morning but nothing in the afternoon. Therefore, we may see more of a reaction to tomorrow’s auction results than we did in today’s sale.

There are two pieces of economic data set to be posted early tomorrow morning. However, one of them is much more important to the financial and mortgage markets than the other. The key release will be the preliminary reading of the 3rd Quarter Gross Domestic Product (GDP) at 8:30 AM tomorrow. 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 3.0% in the GDP, which would mean that the economy grew at a noticeably slower pace than the 2nd quarter’s 4.6% 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 morning is last week’s unemployment figures. They are expected to show that 284,000 new claims for unemployment benefits were filed last week, up slightly from the previous week’s 283,000 initial claims. The higher the number of claims, the better the news it is for mortgage rates because rising unemployment filings are a sign of a weakening employment sector. Although, since this is only weekly report, it usually takes a wide variance from forecasts for it to directly affect mortgage rates.

Lake Tahoe Mortgage Rate Trends- October 29, 2014

Wednesday’s bond market has opened down slightly as traders prepare for this afternoon’s events. The stock markets are mixed but fairly calm with the Dow up 13 points and the Nasdaq down 20 points. The bond market is currently down 3/32 (2.31%), which should push this morning’s mortgage rates higher by approximately .125 of a discount point over yesterday’s morning rates.

There is nothing of importance set for release this morning, but there are two events this afternoon that are worthy of our attention. The first isn’t highly important and at best may lead to a minor change in rates. That is the 5-year Treasury Note auction results at 1:00 PM ET. If it shows that the sale was met with a strong demand from investors, bond prices may rise early afternoon. This could lead to improvements to mortgage rates, but I suspect most lenders will wait for the second event of the afternoon before making much of a change.

The two-day FOMC meeting will adjourn at 2:00 PM ET today. There is little chance the Fed will change key short-term interest rates during this meeting, although it is expected to bring an end to their bond-buying program that was initiated to help stimulate economic growth. Market participants will be looking at the post-meeting statement for any indication of a change in Fed sentiment or possible further hints on when they will make their first rate increase. This could be a market mover if the statement reveals a significant change in verbiage.

We will update this report shortly after the markets have an opportunity to react to the FOMC results. There is important economic data set for release tomorrow (GDP), but it will be addressed in the afternoon revision.

Lake Tahoe Mortgage Rate Trends- October 28, 2014

Tuesday’s bond market has opened in negative territory following mixed economic news. Stocks are showing gains at the moment with the Dow up 52 points and the Nasdaq up 46 points. The bond market is currently down 7/32 (2.28%), but we likely won’t see much of a change in this morning’s mortgage rates if comparing to yesterday’s early pricing.

The Commerce Department gave us the first of this morning’s two pieces of relevant economic data with September’s Durable Goods Orders. At 8:30 AM ET, they announced that new orders for big-ticket products such as airplanes, electronics and appliances fell 1.3% last month. This was weaker than the 0.7% increase that was forecasted, meaning manufacturing activity was softer than many had thought. Even the secondary reading that excludes more costly and volatile transportation-related orders showed weaker activity than expected (-0.2% vs +0.5%). That makes the data favorable for bonds and mortgage rates because weaker economic activity makes longer-term securities such as mortgage bonds more attractive to investors.

At 10:00 AM ET, the Conference Board reported that their Consumer Confidence Index (CCI) for October stood at 94.5. This was much stronger than analysts were predicting and its best reading in 7 years, meaning consumers were much more confident about their own financial and employment situations than traders had thought. That is bad news for bonds and mortgage rates because rising confidence is a sign that consumers are willing to spend money and make a large purchase in the near future, fueling economic growth.

Tomorrow has no economic data scheduled that is expected to affect mortgage rates, but we do have the adjournment of the FOMC meeting that begins today. There is little chance the Fed will change key short-term interest rates during this meeting, although it is expected to bring an end to their bond-buying program that was initiated to help stimulate economic growth. Market participants will be looking at the post-meeting statement for any indication of a change in Fed sentiment or possible further hints on when they will make their first rate increase. The meeting will adjourn at 2:00 PM ET tomorrow, so look for any reaction to the statement to come during afternoon hours.

Also worth mentioning is that this week has a couple of Treasury auctions that can influence bond trading enough to impact mortgage pricing. They are tomorrow’s 5-year and Thursday’s 7-year Note sales. If these sales are met with a strong demand from investors, 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.

Lake Tahoe Mortgage Rate Trends- October 27, 2014

Monday’s bond market has opened in positive territory even though there is no relevant economic news to drive trading this morning. The major stock indexes are starting the week in negative ground with the Dow down 66 points and the Nasdaq down 32 points. The bond market is currently up 6/32 (2.24%), which should improve this morning’s mortgage rates by approximately .125 of a discount point from Friday’s levels.

This week brings us the release of six economic reports and two Treasury auctions for the bond market to digest in addition to another FOMC meeting, but none of them are set for today. The data scheduled this week ranges from moderately to extremely important, so some reports will have a much bigger impact on trading than others. We also need to keep an eye on the stock markets as they can be heavily influential on bond market direction and mortgage rates.

There are two reports scheduled for release tomorrow, 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 an increase in new orders of approximately 0.7%. If we see a much larger increase in orders, mortgage rates will probably rise as bond prices fall. On the other hand, a significantly weaker than expected reading 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 impact 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 an increase in confidence from last month’s 86.0 reading. That would mean that consumers felt better about their own financial and employment situations than last month, indicating they are more likely to make large purchases in the near future. That would be bad news for the bond market because consumer spending makes up a significant part of our economy. Current forecasts are showing a reading of 87.2. 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 and today is the best candidate for calmest. The importance of tomorrow and Friday’s reports make 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 four of the remaining 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 26, 2014

This week brings us the release of six 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 except tomorrow, so we could see plenty of movement in rates this week. The data scheduled this week ranges from moderately to extremely important, so some reports will have a much bigger impact on trading than others. We also need to keep an eye on the stock markets as they can be heavily influential on bond market direction and mortgage rates.

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 an increase in new orders of approximately 0.7%. If we see a much larger increase in orders, mortgage rates will probably rise as bond prices fall. On the other hand, a significantly weaker than expected reading 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 impact 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 an increase in confidence from last month’s 86.0 reading. That would mean that consumers felt better about their own financial and employment situations than last month, indicating they are more likely to make large purchases in the near future. That would be bad news for the bond market because consumer spending makes up a significant part of our economy. Current forecasts are showing a reading of 87.2. 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. There really is no possibility of the Fed changing key short-term interest rates this week. But market participants will be looking at the post-meeting statement for any indication of a change in Fed sentiment or possible further hints on when they will make their first rate increase. The meeting will adjourn at 2:00 PM ET Wednesday, so look for any reaction to the statement to come during afternoon hours.

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 3.0% in the GDP, which would mean that the economy grew at a noticeably slower pace than the 2nd quarter’s 4.6% 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 raises 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. Therefore, it will likely 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 over two-thirds 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 0.3% increase in income and a 0.1% 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 remaining at its preliminary reading of 86.4. 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 Tuesday’s 5-year and Wednesday’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 four of the 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 24, 2014

Friday’s bond market has opened in positive territory even though stocks are showing minor gains. The Dow is up 38 points while the Nasdaq has gained 13 points. The bond market is currently up 4/32 (2.26%), but I don’t believe we will see much of a change in this morning’s mortgage rates due to a little weakness late yesterday.

September’s New Home Sales report at 10:00 AM was today’s only relevant economic data. The Commerce Department reported that sales of newly constructed homes rose 0.2% last month. This was a stronger monthly move than the decline that was expected. However, that difference is due to a sizable downward revision in August’s sales that allowed for the small increase from August to September. The number of sales fell short of analysts’ forecasts, making the data slightly positive for the bond and mortgage markets. Unfortunately, this data is not important enough to affect rates with that size of a variance.

If we see an intraday revision to mortgage rates, it will likely be a result of a noticeable move in stocks. If the major stock indexes extend their current gains, bonds could come under pressure, leading to an upward revision to rates later today. On the other hand, stock weakness should favor bonds and possibly cause rates to improve slightly this afternoon.

Next week is very busy with several important economic releases, including the preliminary GDP reading for the 3rd quarter. In addition to the data and a couple of Treasury auctions, there is another FOMC meeting taking place. There is nothing of relevance set for Monday, but we still may see movement in the markets and rates as investors prepare for the week’s activities. Look for details on those events in Sunday evening’s weekly preview.

Lake Tahoe Mortgage Rate Trends- October 23, 2014

Thursday’s bond market has opened in negative territory with stocks rallying and no major economic data to offset that stock influence. The major stock indexes are reacting positively to some corporate earnings news, pushing the Dow higher by 230 points and the Nasdaq higher by 64 points. The bond market is currently down 13/32 (2.26%), which should push this morning’s mortgage rates higher by approximately .125 – .250 of a discount point.

Today’s two economic reports gave us mixed results but hasn’t had much of an impact on this morning’s pricing. The first report came at 8:30 AM ET when last week’s unemployment figures were posted. It showed that 283,000 new claims for unemployment benefits were filed last week, up from the previous week’s revised total of 266,000 initial claims. The increase in claims indicates the employment sector weakened some last week, but the fact that it fell just short of expectations makes the news neutral to slightly positive for the bond and mortgage markets.

September’s Leading Economic Indicators (LEI) was also posted this morning. The Conference Board announced at 10:00 AM ET that September’s LEI rose 0.8%, exceeding forecasts of a 0.5% increase. That is negative news for bonds and mortgage rates because it is predicting stronger than expected economic growth over the next several months.

Tomorrow closes the week with September’s New Home Sales report at 10:00 AM ET. This data covers the small percentage of home sales that Tuesday’s Existing Home Sales report didn’t include. It is expected to show a decline in sales of newly constructed homes, but regardless of its results I am not expecting it to have a significant impact on tomorrow’s mortgage rates.

Lake Tahoe Mortgage Rate Trends- October 22, 2014

Wednesday’s bond market has opened flat as stocks have done also. The Dow and Nasdaq are both up a couple points from yesterday’s close while the bond market is nearly unchanged also at 2.22%. This should keep this morning’s mortgage rates at yesterday’s levels.

This morning’s only economic data was September’s Consumer Price Index (CPI) at 8:30 AM ET. It gave us mixed results but no big surprises. The overall reading rose 0.1% when it was expected to be unchanged and the core reading that excludes more volatile food and energy costs rose 0.1%, falling just short of the 0.2% forecast. The increase in the overall reading was a bit negative for bonds but the weaker core reading offsets that. Both readings indicate inflationary pressures at the consumer level of the economy remain subdued. That is generally good news for the bond market and mortgage rates. However, since both were close to expectations, we have seen little impact on this morning’s trading.

Tomorrow has two pieces of data but neither are considered to be highly important. The first will be last week’s unemployment figures at 8:30 AM ET. They are expected to show that 285,000 new claims for unemployment benefits were filed last week, up noticeably from the previous week’s 264,000 initial claims. The higher the number of new claims, the better the news it is for mortgage rates because rising claims hints at a softening employment sector. It is worth noting though that because this is only a weekly report, it usually takes a surprisingly weak or strong number for the data to affect mortgage rates.

September’s Leading Economic Indicators (LEI) will be released by the Conference Board at 10:00 AM ET tomorrow morning. This index attempts to measure future economic activity, particularly during the next three to six months. Current forecasts are calling for an increase of 0.5% from August’s reading. This would indicate that economic activity is likely to increase over the next couple of months. That would be relatively bad news for the bond market and mortgage rates, but this report is considered to be only moderately important. Therefore, a small increase would not be of much concern to the bond and mortgage markets. Ideally, we would like to see a decline though.

Lake Tahoe Mortgage Rate Trends- October 21, 2014

Tuesday’s bond market has opened in negative territory due to early stock strength and stronger than expected housing news. The stock markets are showing noticeable gains with the Dow up 80 points and the Nasdaq up 62 points. The bond market is currently down 7/32 (2.21%), which will likely push this morning’s mortgage rates higher by approximately .125 of a discount point.

Today’s only relevant economic data came from the National Association of Realtors late this morning. They released their Existing Home Sales report for September that showed a 2.4% increase in home resales last month, exceeding forecasts. That increase pushed sales to their best levels in a year, indicating housing sector strength.

Stocks are reacting favorably to some overnight earnings news, particularly earnings from Apple that beat analysts’ expectations. I suspect any move in bonds or an intraday change in mortgage rates will be a result of stocks either extending their current gains or giving them up. If the major stock indexes remain near current levels, mortgage rates should follow suit today.

Tomorrow brings us the release of a key inflation reading that is important to the bond market. September’s Consumer Price Index (CPI) will be posted at 8:30 AM ET tomorrow, giving us a measurement of inflationary pressures at the very important consumer level of the economy. Analysts are expecting to see no change in the overall index and an increase of 0.2% in the core data. A larger than expected increase in the core reading could raise inflation concerns, pushing bond prices lower and mortgage rates higher tomorrow morning. Inflation is the number one nemesis of the bond market because it erodes the value of a bond’s future fixed interest payments. When inflation is a threat, even down the road, bonds sell for discounted prices that push their yields higher. And since mortgage rates tend to follow bond yields, this leads to higher rates for mortgage borrowers.

Lake Tahoe Mortgage Rate Trends- October 20, 2014

Monday’s bond market has opened in positive territory following a mixed open in stocks. The Dow is starting the week with a 65 point loss while the Nasdaq is up 17 points. The bond market is currently up 8/32 (2.17%), which should improve this morning’s mortgage rates by approximately .125 of a discount point over Friday’s morning pricing.

There is nothing of relevance being posted this morning, leaving bonds to trade with stocks. Bonds have started the week favorably for mortgage shoppers, but as we saw last week they can change direction very quickly so keep an eye on the markets. The rest of the week brings us the release of four pieces of economic data that are likely to affect mortgage rates. Only one is considered to be very important and even it fails to move the markets or mortgage pricing many months.

The National Association of Realtors will start the week’s activities with the release September’s Existing Home Sales data at 10:00 AM ET tomorrow morning. This report gives us an indication of housing sector strength and mortgage credit demand by tracking home resales. 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 an increase in sales from August to September, meaning the housing sector strengthened. 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.

Overall, Wednesday has the most important report but unless it shows some significantly strong or weak results, it should only have a minor impact on this week’s rates. Tomorrow is the only day with nothing scheduled, so by default we can label it the best candidate for calmest day. However, if we see last week’s volatility carry into this week’s trading, all bets are off as any day could be extremely active for bonds and mortgage pricing. After what we saw last week, it would be extremely prudent to maintain contact with your mortgage professional if still floating an interest rate.