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Lake Tahe Home Loans and Lake Tahoe Mortgage Loan Rates – January 30, 2014

Lake Tahoe Home Loans, Lake Tahoe Home Loan Rates, Lake Tahoe Mortgage Loans, Lake Tahoe Mortgage Loan Rates, and Lake Tahoe Mortgage Rates:

Thursday’s bond market has opened in negative territory due to early stock strength and unfavorable economic news. The major stock indexes are recovering a good portion of yesterday’s losses of 189 points in the Dow and 46points for the Nasdaq. During early trading this morning, the Dow is currently up 84 points while the Nasdaq has gained 49 points. The bond market is currently down 10/32, which should erase yesterday’s afternoon improvement in mortgage rates. If your lender revised rates lower after the FOMC meeting yesterday, you will likely see a small increase in this morning’s pricing. If they chose to wait until this morning’s opening to reflect the post-FOMC movement, then there should be little change from yesterday’s morning rates.

There were two pieces of economic data posted early this morning. The major release was the initial 4th quarter Gross Domestic Product (GDP) reading that showed the economy grew at a 3.2% annual pace during the last three months of 2013. This was a bit stronger than the 3.0% that many analysts had expected to see. Since the news means the economy was stronger than thought and bonds tend to thrive in weaker economic conditions, we should consider this data negative for mortgage rates but not a crisis. There will be two revisions to this reading over the next two months that could easily put the GDP back to where analysts were predicting. That is why there is no major concern with today’s results.

Also posted this morning were last week’s unemployment figures. The Labor Department announced that 348,000 new claims for unemployment benefits were filed last week, up from the previous week’s revised total of 329,000. Since claims were higher than expected and more importantly, an increase from the previous week, the data is good news for the bond and mortgage markets. Unfortunately, this is just a weekly snapshot while the GDP is a major quarterly release. Therefore, the GDP is drawing much more attention this morning than last week’s unemployment claims.

Later today we will get the results of the two Treasury auctions that are taking place. The Fed is auctioning 5-year and 7-year Treasury Notes today. Results of the 5-year Note sale will be posted at 11:30 AM ET while data on the 7-year sale will go up at 1:00 PM ET. The second is the more important of the two because those securities are closer in term to mortgage bonds and will give us a better indication of demand for longer-term debt. If the sales were met with a strong interest from investors, the broader bond market may improve during early afternoon hours. On the other hand, a lackluster demand could lead to bond selling and an upward revision to mortgage rates during afternoon trading.

Tomorrow morning has three pieces of economic data scheduled for release that are relevant to mortgage rates. The first is the most important of the three. That would be December’s Personal Income and Outlays data 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 also expected to rise 0.2%, indicating consumers spent a slightly more last month than the previous month. Larger increases would be good news for the stock markets and could hurt bond prices, driving mortgage rates higher. Smaller 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 overall economic growth.
The second release of the day will be the 4th Quarter Employment Cost Index (ECI). 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 effect on the bond market than the stock markets. Current forecasts are showing an increase of 0.4%. A lower than expected reading would be favorable to bonds and mortgage rates tomorrow, but unless we see a large variance from forecasts I am not expecting this report to cause much movement in rates.

The final 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. If surveyed consumers are more confident in their own financial and employment situations, they are more likely to make a larger purchase in the near future. And because consumer spending makes up over two-thirds of our economy, any related data is watched fairly closely. I don’t see this data having a significant impact on the markets or mortgage rates unless we see a large revision from the preliminary reading of 80.4.