Financing Homes in Lake Tahoe and Truckee since 1992.

Lake Tahoe Mortgage Rate Trends- November 26, 2014

Wednesday’s bond market has opened in positive territory following a round of favorable economic reports. The stock markets are mixed but fairly calm with the Dow down 12 points and the Nasdaq up 13 points. The bond market is currently up 7/32 (2.23%), which should improve this morning’s mortgage rates by approximately .125 – .250 of a discount point over Tuesday’s morning pricing.

Part of this morning’s improvement in rates comes as a result of strength in bonds late yesterday. The bond market strengthened after the results of yesterday’s 5-year Treasury Note sale were posted. Most of the benchmarks that we use to gauge investor demand in the sale showed a high level of interest. The strong auction in those securities helped boost the broader bond market during afternoon trading and caused a few lenders to improve rates. That helps us to be optimistic about today’s 7-year Note sale. If we see similar demand levels in this auction, we could see bonds extend this morning’s gains and mortgage rates revise slightly lower later today. Results will be posted at 1:00 PM ET, so any reaction should come during early and mid-afternoon hours.

This morning had four monthly economic reports and last week’s unemployment figures released. The most important of the bunch was October’s Durable Goods Orders at 8:30 AM ET. The Commerce Department announced that new orders for big-ticket products rose 0.4% last month, exceeding forecasts of a 0.6% decline. The headline number appears to be bad news for bonds and mortgage rates, but this data is known to be volatile, so the variance from forecasts was not as much of a surprise as it would have been in other reports. Also, a secondary reading that excludes more volatile and pricey orders for transportation-related products such as airplanes showed a decline of 0.9% when analysts were expecting to see a 0.5% increase. This means the more reliable data indicated a much weaker manufacturing sector than many had thought. Accordingly, even though the headline number was bad news, we can consider the data favorable for mortgage rates.

Also early this morning was October’s Personal Income and Outlays data that showed a 0.2% increase in both the income and spending readings. Both were slightly softer than predictions, meaning consumers had less money to spend than expected and actually spent less than thought. Because consumer spending makes up such a significant part of our economy, we can consider the data good news for the bond and mortgage markets.

Last week’s unemployment figures revealed that 313,000 new claims for unemployment benefits were filed last week. This was an unexpected increase from the previous week’s revised 292,000 initial claims. Analysts were predicting a small decline in the number of new claims, meaning the employment sector was a little softer last week than the previous week. That makes the report slightly good news for mortgage rates. Unfortunately, this is only a weekly snapshot, so its impact on rates is usually minimal.

There were two reports released late this morning. The first was the revised November reading to the University of Michigan’s Index of Consumer Sentiment just before 10:00 AM ET. It came in at 88.8, which was a decline from the preliminary reading of 89.4. Market participants were calling for a small increase in sentiment, meaning consumers were more optimistic about their financial situations than previously estimated. The unexpected decline is good news because waning confidence usually means consumer spending will slow in the near future, limiting economic growth.

October’s New Home Sales report finished this week’s economic calendar at 10:00 AM ET today. It revealed that sales of newly constructed homes rose slightly last month. The slight increase from September’s sales was in line with forecasts, although a downward revision to the number of sales in September means the new home portion of the housing sector was not as strong as many had thought. And that allows us to consider the data slightly favorable for mortgage rates.

The financial and mortgage markets will be closed tomorrow in observance of the Thanksgiving Day holiday. There will not be an early close today, but the stock and bond markets will close early Friday and will reopen next Monday morning. I suspect that Friday will be a very light day in bond trading as many market participants will be home and there is nothing of importance scheduled to be released. Banks have to be open Friday, but we will likely see little change to mortgage rates that day.

We would like to take this opportunity to wish you and yours a safe and wonderful holiday!