Financing Homes in Lake Tahoe and Truckee since 1992.

Lake Tahoe Mortgage Rate Trends- January 6, 2015

Shortly after posting this morning’s commentary, the markets got extremely active. As mentioned in the initial posting, stocks and bonds were both in positive ground, but it did not take long for that to change. Stocks have gone back into yesterday’s selling mode where the Dow is now down 176 points while the Nasdaq has lost 65 points on the day. This is a significant reversal from where they were earlier this morning.

The bond market has extended its earlier gains, currently up 36/32 (1.91%), causing many lenders to improve rates by approximately .250 of a discount point from this morning’s levels. Coupled with the same improvement in this morning’s early pricing, we should be approximately .500 of a discount point better than yesterday’s morning rates, which should equate to .125 of a percent in rate. And we could see further losses in stocks and improvements in bonds and mortgage rates before the day is over. Therefore, I am reversing direction on the conservative stance towards rates because while this bond rally was unexpected, it certainly is strong and could continue the rest of the day.

The Commerce Department gave us November’s Factory Orders report at 10:00 AM ET this morning. They announced a decline of 0.7% in new orders at U.S. factories. That was weaker than expected, indicating the manufacturing sector was a bit softer than many had thought. Because bonds tend to thrive in weaker economic conditions, we can consider the data slightly favorable for the bond and mortgage markets.

Tomorrow morning has one piece of relevant economic data scheduled for release. That would be the ADP Employment report at 8:15 AM ET tomorrow. This release has the potential to cause 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 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 our calendar. Forecasts are calling for an increase of 232,000 new payrolls. Good news for mortgage rates would be a much smaller increase in payrolls.

Also tomorrow is the release of the minutes from the last FOMC meeting. They will give market participants insight to the Fed’s thinking and concerns regarding the economy, inflation and monetary policy. It is one of those pieces of information that may cause a great deal of volatility in the markets or be a non-factor, depending on what the minutes show. They will be released at 2:00 PM ET, so they won’t affect the markets or mortgage rates until afternoon hours. I don’t suspect this particular set of minutes will cause too much concern or excitement because the last FOMC meeting was followed by revised Fed forecasts and a press conference by Chairperson Yellen. Still, analysts will be looking for any tidbits that could help predict when the first short-term interest rate increase will be made.