Mortgage Market Watch Blog

Mortgage Market Watch

Today's Advisory - 12-22-2009

December 22nd, 2009 6:07 PM


Follow Me and when mortgage rates are headed up or down, I'll post a tweet so you can lock or float ahead of the change.

Tuesday's bond market was down again as yesterday's selling continued into today's trading. The stock markets gains contributed to the weakness in bonds. The Dow closed up 51 points while the Nasdaq gained 15 points. The bond market closed down 56 basis points which drove discounts up by 1/2%.

The first report of the week was the final revision to the 3rd Quarter GDP. It showed a downward revision to 2.2% form 2.8% that was announced last month. This means that the economy grew at a slower pace during the third quarter than previously thought. That can be considered good news for bonds and mortgage rates, but since this data is old at this point and we will get the initial reading of this quarter next month, its impact on trading and mortgage rates has been minimal. Had we seen this much of a variance in either the initial or first revision, mortgage rates likely would have moved lower as a result of the news.

November's Existing Home Sales report was released late this morning. The National Association of Realtors reported that home resales rose 7.4% last month, exceeding forecasts by a wide margin. This follows a 10% spike in October, indicating that the housing sector is stronger than many had thought. However, it is believed that the biggest force behind the sales is the first time homebuyer tax incentive. A one time credit such as that tends to temporarily boost home sales and is not a reliable indicator of underlying strength. In other words, where will sales be once the credit is no longer available? That remains to be seen, but stock traders are taking the news as positive, which has made bonds less attractive to investors.

Tomorrow brings us the release of three reports. The first is November's Personal Income and Outlays data. It will give us an important measurement of consumer ability to spend and current spending habits. Since consumer spending makes up two-thirds of the U.S. economy, any related data usually has a noticeable impact on the financial markets and mortgage rates. Current forecasts are calling for a 0.5% increase in income and a 0.7% increase in spending. If this report reveals weaker than expected readings, we should see the bond market improve and mortgage rates drop slightly tomorrow morning.

The second report of the day comes late morning when the revised University of Michigan Index of Consumer Sentiment for December is posted. Current forecasts are calling for a small upward revision from the preliminary reading of 73.4. This is fairly important because rising consumer confidence indicates that consumers may be more apt to make large purchases in the near future. An unexpected upward revision could lead to slightly higher mortgage rates tomorrow.

The last report of the day is November's New Home Sales. It is this week's least important report and is unlikely to influence mortgage rates. It is the sister report to today's Existing Home Sales report but tracks only approximately 15% of all home sales in the U.S. Accordingly, I don't believe its results will have much of an influence on tomorrow's mortgage rates.

If I were considering financing/refinancing a home, I would.... Lock if my closing was taking place within 7 days... Lock if my closing was taking place between 8 and 20 days... Float if my closing was taking place between 21 and 60 days... Float if my closing was taking place over 60 days from now... This is only my opinion of what I would do if I were financing a home. It is only an opinion and cannot be guaranteed to be in the best interest of all/any other borrowers.

Posted by Scott Shinn on December 22nd, 2009 6:07 PMPost a Comment (0)

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