MARKET COMMENT Mortgage bond prices ended slightly lower last week, which pushed mortgage interest rates higher. Weak stocks and continued Euro debt concerns helped rates improve early in the week. The data generally helped rates as well. Q3 GDP disappointed with 2% increase compared to the expected 2.5% mark. The Treasury auctions had strong demand and also helped the overall bond market. The shortened and thin trading conditions fortunately did not result in any extreme whipsaw trading that is often common. Mortgage bonds ended the week worse by approximately 1/8 of a discount point.
Look for the employment report to gain the most attention this week.
• New Home Sales; Nov. 28; Consensus Estimate 295k; Important. An indication of economic strength and credit demand. Weakness may lead to lower rates.
• Consumer Confidence; Nov. 29; Consensus Estimate 39; Important. An indication of consumers’ willingness to spend. Weakness may lead to lower mortgage rates.
• ADP Employment; Nov. 30; Consensus Estimate 105k; Important. An indication of employment. Weakness may bring lower rates.
• Revised Q3 Productivity; Nov. 30; Consensus Estimate Up 2.9%; Important. A measure of output per hour. Improvement may lead to lower mortgage rates.
• Fed “Beige Book”; Nov. 30; Important. This Fed report details current economic conditions across the US. Signs of weakness may lead to lower rates.
• Weekly Jobless Claims; Dec. 1; Consensus Estimate 385k; Important. An indication of employment. Higher claims may result in lower rates.
• ISM Index; Dec. 1; Consensus Estimate 50.7; Important. A measure of manufacturer sentiment. Weakness may lead to lower mortgage rates.
• Construction Spending; Dec. 1; Consensus Estimate Up 0.2%; Low importance. An indication of economic strength. Significant weakness may lead to lower rates.
• Employment Friday; Dec. 2; Consensus Estimate 9%, Payrolls +101k; Very important. An increase in unemployment or weakness in payrolls may bring lower rates.
WHY DATA IS IMPORTANT One of the easiest and most important things to do when making a decision whether to float or lock a loan is knowing what data is going to be released. Economic releases are important because they provide a snapshot of a portion of the economy. Data is even more important in that it is often the cause of market volatility. Upcoming data events are readily available and there is no excuse not knowing what data will be released in the week ahead.
While an in depth understanding of an economic event can help a person make informed decisions, it is more important to have a rudimentary understanding of when an important piece of data will be released and what basic effect that data can have on the market. Understanding the nuances of a release does very little for a person if they are blindsided by not knowing when the release will occur. Accurately predicting how each and every release will come in is impossible.
Floating into important economic data can be very risky and can expose a person to huge market swings. Keep that in mind this week, as there is an abundance of significant data heading our way.
Source: F&M Mortgage, Todd Kabel; MMIS, Rate Link; Blog distribution provided by Kenneth Bargers and Bargers Solutions, a proud member of Pilkerton Realtors, residential real estate services located in Nashville,Tennessee