Mortgage Commentary

[Adam in CO]

Tuesday’s bond market has opened in positive territory after both of this morning’s important reports showed weaker than expected results. The stock markets are showing modest gains after yesterday’s significant sell-off. The Dow is currently up 12 points while the Nasdaq has gained 2 points. The bond market is currently up 6/32, which should improve this morning’s mortgage rates by approximately .125 of a discount point.

The Commerce Department reported early this morning that new orders for big-ticket items fell 8.3% last month. This was much lower than the sizable decline of 5.0% that was expected and the biggest monthly drop in six years, indicating that the manufacturing sector was weaker than thought in October. This is great news for the bond market and mortgage rates.

The Conference Board posted their Consumer Confidence Index (CCI) for November late this morning. It showed a reading of 102.9, which was also well below forecasts. This index was expected to show a slight increase from October’s revised reading of 105.4, meaning consumers were less optimistic about their own financial situations than was thought. This is also good news for bonds and mortgage rates because weaker confidence usually means consumers are less willing to make large purchases in the near future. This translates to slower economic growth and less concern of inflationary pressures rising.

The third report of the day was October’s Existing Home Sales data. It showed a small increase in home resales last month when it was expected to show a sizable drop. This could be considered bad news for bonds, but this data usually does not have a major influence on bond trading or mortgage rates.

Tomorrow morning brings us the first revision to the 3rd Quarter Gross Domestic Product (GDP) reading. The GDP revision is expected to show a small upward change from last month’s preliminary reading of 1.6%. Current forecasts call for a reading of approximately 1.8%, meaning that there was more economic growth during the third quarter than previously thought. This is bad news for the bond market and mortgage rates, but current mortgage rates are reflective of the expected revision. If it happens to show a reading of less than 1.8%, we should see the bond market improve and mortgage rates fall slightly tomorrow.

Also tomorrow is the Fed Beige Book that will be released at 2:00 PM ET. The report itself probably will not show many surprises. It details economic activity throughout the U.S. by region. Signs of moderate economic strength should not come as a surprise to the markets and probably will not have much of an impact on rates. But, the Fed does rely heavily on this data during their FOMC meetings, so any significant surprises could affect afternoon bond trading and possibly lead to changes in mortgage pricing tomorrow afternoon.

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.