Financing Homes in Lake Tahoe and Truckee since 1992.

Lake Tahoe Mortgage Rate Trends- December 1, 2015

Tuesday’s bond market has opened in positive territory following weaker than expected results from a pretty important economic report. The stock markets are reacting similarly with the Dow up 80 points and the Nasdaq up 17 points. The bond market is currently up 8/32 (2.18%), which should improve this morning’s mortgage rates by approximately .125 – .250 of a discount point.

November’s manufacturing index from the Institute for Supply Management (ISM) was today’s only relevant economic data. This important release showed a reading of 48.6 when analysts were expecting to see 50.4. The decline from October’s 50.1 is good news in itself. The better news is the fact that we have a reading below 50 for the first time in three years. That threshold indicates that more surveyed manufacturing executives felt business worsened during the month than those who said it had improved. A sub-50 reading is considered recessionary and makes long term securities such as mortgage-related bonds more attractive to investors. It also is a fairly significant sign of economic weakness that could affect the Fed’s expected rate hike later this month.

There are three reports scheduled for tomorrow that have the potential to influence mortgage rates. The first is the ADP Employment report at 8:15 AM ET that tracks changes in private-sector jobs of the company’s clients that use them for payroll processing. While this report does draw attention, it is my opinion that it is overrated and is not a true reflection of the broader employment picture. It also is not very accurate in predicting results of the monthly government report that follows a couple days later. Still, because we sometimes see a noticeable reaction to the report, it is on this week’s calendar. Analysts are expecting to see 185,000 new private-sector payrolls for November. The smaller the number of jobs, the better the news it is for bonds and mortgage shoppers.

Next up is the revised 3rd Quarter Productivity numbers at 8:30 AM ET. This index is expected to show a upward revision from the preliminary reading of worker productivity. Higher levels of productivity are thought to allow the economy to expand without inflationary pressures rising. This is good news for the bond market because economic growth itself isn’t necessarily bad for the bond market. It’s the conditions around an expanding economy, such as inflation, that hurt bond prices and mortgage rates. Current forecasts are calling for an annual rate of 2.2%, up from the previous estimate of 1.6%. The higher the reading, the better the news for the bond market. Although, this report generally does not have a noticeable impact on mortgage pricing, so it will take a wide variance to draw much attention.

Lastly, the Federal Reserve will release their Beige Book at 2:00 PM ET tomorrow. It is named simply after the color of its cover and details economic conditions by Fed region. That information is relied upon heavily during the FOMC meetings when determining monetary policy, so its results can influence bond trading and mortgage rates if it shows any noticeable changes from the last update. More times than not though, this report will not influence the markets enough to cause intra-day changes to mortgage rates, but the potential to do so does exist.