Market Commentary for the Week of February 24th

This week brings us the release of five economic reports to be concerned with in addition to testimony from Fed Chairman Yellen and two potentially relevant Treasury auctions. None of the reports can be considered key or highly important to the markets, but a couple of them certainly carry enough significance to affect mortgage pricing. There is something scheduled four of the five days that can move rates, with Monday being the sole empty day of the week.

The first piece of data is February’s Consumer Confidence Index (CCI) at 10:00 AM ET Tuesday morning. This Conference Board index measures consumer confidence in their personal financial situations, giving us a measurement of consumer willingness to spend. If consumers are feeling good about their own financial and employment situations, they are more apt to make large purchases in the near future. Since consumer spending makes up over two-thirds of the economy, related data is considered important in terms of gauging economic activity. It is expected to show little change in confidence from the 80.7 reading in January to 80.8 this month. A lower reading would be considered good news for bonds and mortgage rates since it would indicate consumers are less likely to make a large purchase in the near future.

January’s New Home Sales report will be posted at 10:00 AM ET Wednesday morning. This is the least important report of the week, and is the sister report to last week’s Existing Home Sales data. They measure housing sector strength and mortgage credit demand, but usually do not have a significant impact on bond trading or mortgage rates unless they show significant surprises. Wednesday’s report is expected to show a decline in sales of newly constructed homes, hinting at weakness in the new home portion of the housing sector. Ideally, the bond market would prefer to see noticeable housing sector weakness because it makes broader economic growth more difficult and bonds tend to thrive during weaker economic conditions.

January’s Durable Goods Orders data will be released at 8:30 AM ET Thursday morning. This report gives us an important measurement of manufacturing sector strength by tracking orders at U.S. factories for items expected to last three or more years. Products such as electronics, refrigerators, airplanes and autos are examples of these big-ticket items. A larger decline than the 1.1% that is expected would be good news for the bond market and mortgage rates as it would point towards manufacturing sector weakness. This data is known to be quite volatile from month-to-month, so large swings are fairly normal. A small variance from forecasts would not cause much concern or joy in the markets.

Fed Chairman Yellen will deliver day two of the Fed’s semi-annual testimony on the status of the economy and monetary policy late Thursday morning. She will be speaking to the Senate Banking Committee, which was postponed from its originally scheduled date two weeks ago due to weather. Day one in front of the House Financial Services Committee was completed. Since the prepared statement by Chairman Yellen is expected to mirror her previous appearance, any noticeable reaction in the financial or mortgage markets will likely come as a result of a response during the Q&A portion of the proceeding. She will appear at 10:00 AM ET Thursday, so any reaction will probably come during late morning trading.

Friday has the remaining two relevant pieces of economic data. The first of two revisions to the 4th Quarter GDP reading is scheduled for release at 8:30 AM ET Friday morning. The GDP is considered the benchmark reading of economic growth or contraction because it is the total sum of all goods and services produced in the U.S. Analysts’ forecasts currently call for an annual rate of growth of 2.6%, down from the initial estimate of 3.2% that was posted last month. It will be interesting to see where this figure falls and what its impact on the markets will be. Generally speaking, higher levels of activity are bad news for the bond market, while a downward revision would be good news for bonds and could lead to improvements in mortgage pricing Friday.

The University of Michigan’s revision to their Index of Consumer Sentiment for February will close out the week’s calendar just before 10:00 AM ET Friday. Current forecasts show this index rising slightly from its preliminary estimate of 81.2. This index is fairly important because it helps us measure consumer confidence that translates into consumer willingness to spend, but is not considered to be a major market mover. This means it will probably not have a significant impact on mortgage rates, especially with other important data being released Friday morning.

In addition to this week’s economic reports, there are two relatively important Treasury auctions that may also influence bond trading enough to affect mortgage rates. There will be an auction of 5-year Notes Wednesday and 7-year Notes on Thursday. Neither of these sales will directly impact mortgage pricing, but they can influence general bond market sentiment. If the sales go poorly, we could see broader selling in the bond market that leads to upward revisions to mortgage rates. However, sales with higher levels of investor demand usually make bonds more attractive to investors and brings additional funds into the bond market. The buying of bonds that follows usually translates into lower mortgage rates.

Overall, Thursday is the best candidate for most active day of the week in terms of mortgage rate movement with the Durable Goods report, Chairman Yellen’s congressional appearance and a Treasury auction taking place. Monday is the only day with nothing of importance set, so we can label it the least important day. I suspect it will be a fairly active week for mortgage rates, but not a significantly volatile week unless something unexpected happens. Still, it would be prudent to maintain contact with your mortgage professional if still floating an interest rate and closing in the near future.

Mortgage News Roundup

The consumer price index report will be released this morning. It will be interesting to see how the numbers have changed over the previous period.

So today, we have a few interesting stories for you ranging from “You know you’re really really ready to sell your home” to “the first steps to being a homeowner.” We hope you enjoy them.

Credit Issuers Making It Easier to Know Your Score

It’s now fairly easy to obtain your credit report every year for free. Some credit card companies like Discover are offering free FICO scores to help their members. Darlene Goins, senior director of scores at FICO, said the company began allowing firms that purchase scores to make them available free to consumers through an “open access” program, as part of an effort to “take the mystery out of credit scores,” she said. “We felt like there was a need in the marketplace, and this was the right thing to do to help educate consumers,” she added.

The first step to becoming a homeowner

USA Today partnered with the National Foundation for Credit Counseling to host six weekly Twitter chats answering the financial questions of Millennials. February 19th was Becoming a Homeowner with John Berry of Money Management International.

Here were some of the questions and answers:

Q: Should you look at more than one lender? How do you choose a lender?

A: Yes, you want to compare rates and terms to make sure you are getting the best deal. A good place to start is your local bank where you already have a relationship.

Q: What does someone need to take with them when they apply for a mortgage?

A: You can apply for a mortgage with just your information (name, date, Social Security number, place of employment). To get pre-approved, you may need more, such as proof of income, pay stubs, tax returns and proof of down payment.

Q: At what point do you “lock in” your mortgage rate?

A: Locking your rate allows you a certain amount of time to find a home without fear of increased rates. Rates are typically locked for periods of 30 or 90 days, but determined by the lender.

The next chat is Feb. 26 on Finance in your relationship: How to handle debt and credit with your significant other with Soneyet Muhammad of Clarifi.

Freddie Mac Offers Up Cash Incentives to Agents

The mortgage giants are adding more incentives for real estate professionals and buyers of foreclosed homes to kick off the spring-selling season. The latest one announced: Freddie Mac is offering cash incentives to real estate agents who list or sell a foreclosed home owned by Freddie Mac’s HomeSteps sales division in 23 states.

“HomeSteps’ 2014 winter sales promotion is focused on firing up sales in ‘cold weather’ states and condominium deals everywhere,” says Chris Bowden, HomeSteps’ senior vice president.“With mortgage rates still low and home inventories tightening, the 2014 HomeSteps Winter Sales Promotion is a great opportunity for families ready to buy and real estate agents ready to sell.”

The incentive isn’t available in all states. If you’re looking to invest in one of the states, it could be a great opportunity to find a motivated real estate agent.

You Know You’re Ready to Sell Your Home When …

You’re ready to sell and start a new adventure somewhere especially with lower mortgage rates and home prices still below average. But you hesitate. How do you know you’re really ready to sell?

1. You have a game plan. You know when you want to sell, where you want to move, how much you can afford, etc.
2. You’re no longer emotionally attached to the house. Sellers have to view their home as a product, no longer their home,
3. You’re financially ready to make the leap.
4. You’re ready to make changes. Everyone has different reasons. Some people love buying houses and fixing them up. Once it’s done, they’re ready to tackle the next house. Others are ready for a smaller or larger home. You need to be clear what you’re doing, and why.

I hope you enjoyed the news blurbs. Let me know what you enjoyed the most in the comments.

Market Commentary for the Week of President's Day

This week brings us the release of five pieces of economic data for the bond market to digest along with the minutes from the most recent FOMC meeting. Making things a little more interesting is the fact that all of the week’s events take place over only three days. The financial markets will be closed today in observance of the President’s Day holiday, so don’t expect to see new mortgage pricing until Tuesday morning.

There is nothing of relevance scheduled to be posted tomorrow. The Labor Department will release their Producer Price Index (PPI) for January early Wednesday morning. It measures inflationary pressures at the producer level of the economy and is considered to be one of the key measures of inflation we see each month. There are two portions of the report that analysts watch- the overall reading and the core data reading. The core data is more important to market participants because it excludes more volatile food and energy prices. It is expected to show an increase of 0.2% in the overall reading and a 0.1% rise in the core data. Good news for bonds would be a decline in both readings, particularly the core data as it would ease concerns about future inflation that make long-term securities less attractive to investors.

January’s Housing Starts will also be posted early Wednesday morning, giving us an indication of housing sector strength and mortgage credit demand by tracking new housing construction starts. It usually does not affect rates unless the results vary greatly from forecasts. Current forecasts are calling for a small decline in construction starts of new housing. That would be favorable news for the bond market and mortgage rates because it would point towards economic weakness. A weak housing sector makes broader economic growth less likely in the near future, which makes bonds more attractive to investors.

Wednesday also brings us the release of the minutes from the most recent FOMC meeting. Traders will be looking for any indication of the Fed’s next move regarding monetary policy, particularly any discussion about the pace of reducing the Fed’s current bond buying programs and concerns about economic growth. They will be released at 2:00 PM ET, therefore, any reaction will come during afternoon trading. These minutes may lead to afternoon volatility Wednesday, or they may be a non-factor. However, they do carry the potential to influence mortgage rates so they should be watched.

The sister report to Wednesday’s PPI will be posted early Thursday morning when January’s Consumer Price Index (CPI) is released. The difference between the two is that the CPI measures inflationary pressures at the more important consumer level of the economy. With exception to maybe the Employment report, the CPI is the single most important report that we see each month. Its results can have a significant impact on the financial markets, especially on long-term securities such as mortgage-related bonds. Inflation isn’t exactly a concern currently, but there are many that feel the Fed’s stimulus programs are going to fuel rapid inflation down the road, so analysts still track the readings closely. The report is expected to show a 0.1% increase in the overall index and a 0.1% rise in the more important core data that excludes food and energy costs. If we see weaker than expected readings, bond prices should rise and mortgage rates would likely fall Thursday morning.

Late Thursday morning will be the release of the Leading Economic Indicators (LEI) for January. This Conference Board report attempts to predict economic activity over the next three to six months. It is expected to show a 0.4% increase, meaning that economic activity may rise in the near future. A smaller than expected increase would be good news for the bond market and mortgage rates, but the CPI draws much more attention than the LEI. Therefore, for this report to influence mortgage pricing, it will have to show a sizable variance from forecasts and the CPI will have to match estimates.

The final report of the week will be January’s Existing Home Sales report by the National Association of Realtors late Friday morning. This data tracks home resales throughout the country, giving us a measurement of housing sector strength. It is expected to show a decline in sales of existing homes, meaning the housing sector softened last month. Ideally, the bond market would like to see a sizable decline in sales because weak housing makes broader economic growth more difficult. Since long-term securities such as mortgage bonds tend to thrive during weaker economic conditions, weak housing numbers would be good news for mortgage rates.

Overall, I am expecting Wednesday to be the most active day for mortgage rates, but Thursday’s data is also enough to cause noticeable movement. Just because Tuesday has nothing scheduled for release does not necessarily mean we will have a calm day in terms of mortgage rate movement. Following the three day weekend, we could see the U.S. markets react to Monday’s overseas trading that is not affected by our holiday closures. Still, we will likely see the most movement in rates the middle trading days and the least amount either Tuesday or Friday. With a busy schedule the last three days, I recommend maintaining contact with your mortgage professional if still floating an interest rate as the threat of rates moving higher remains elevated in my opinion.

Market Commentary for the Week of February 10th

This week brings us the release of three pieces of monthly economic data that is relevant to mortgage rates in addition to two Treasury auctions and semi-annual Fed testimony. All of the economic data is set for release the latter part of the week while the other events will take place during the middle days. One of the economic reports is considered highly important to the markets, but the others are not likely to be market movers. Even with a lack of factual data the first half of the week though, we have other events that are likely to cause a fair amount of volatility in the markets and mortgage rates.

There is nothing of concern due Monday, leaving bond trading to be driven by the stock markets. If the major stock indexes move noticeably higher, we will probably see funds move away from bonds and into stocks. This would lead to higher mortgage rates as bond prices and yields move in opposite directions. Mortgage rates tend to follow bond yields, so we prefer to see bond prices go up, pushing yields and rates lower. On the other hand, stock selling could drive yields lower Monday, leading to a downward move in rates.

Newly appointed Fed Chairman Yellen will deliver the Fed’s semi-annual testimony on the status of the economy late Tuesday and Thursday mornings. She will be speaking to the House Financial Services Committee Tuesday morning and the Senate Banking Committee Thursday. Market participants will watch her words very closely. The Fed is required to deliver this testimony twice a year, which is considered to be of extreme importance to the financial markets. We almost always see the markets move as a result of what is said during this testimony. Look for her to address our employment situation, inflation, global financial issues and possibly the Fed’s tapering of QE3 and their impact on the overall economy. Her testimony begins at 10:00 AM ET with a prepared statement which is then followed by Q & A with committee members. Her prepared words are expected to be released at 8:30 AM Tuesday, so we could see a reaction early Tuesday morning. I am expecting to see the markets fluctuate Tuesday morning, possibly affecting mortgage rates also. The first day of testimony usually causes the most volatility because the prepared statement made by the Chairman on the second day often differs little from that of the first day.

The two important Treasury auctions come Wednesday and Thursday when 10-year Notes and 30-year Bonds are sold. The 10-year sale is the more important of the two as it will give us a better indication for demand of mortgage-related securities. If the sales are met with a strong demand from investors, we should see the bond market move higher during afternoon trading the days of the auctions. But a lackluster interest from buyers, particularly international investors, would indicate a waning appetite for longer-term U.S. securities and lead to broader bond selling. The selling in bonds would likely result in upward afternoon revisions to mortgage rates.

This week’s first release is one of the more important ones we get each month. The Commerce Department will post January’s Retail Sales data early Thursday morning. This report is very important to the financial markets because it measures consumer spending. Since consumer spending makes up over two-thirds of the U.S. economy, any related data is watched quite closely. If Thursday’s report reveals weaker than expected retail-level sales, the bond market should thrive and mortgage rates will fall since it would be a sign that the economy is not as strong as many had thought. However, a stronger reading could lead to higher mortgage rates Thursday. Analysts are currently expecting to see no change from December’s level of spending.

Friday has the remaining two reports scheduled. January’s Industrial Production data will be released mid-morning Friday. It gives us a measurement of manufacturing sector strength by tracking output at U.S. factories, mines and utilities and can have a moderate impact on the financial markets. Analysts are expecting to see a 0.3% increase in production from December to January. A decline in output would be good news and should push bond prices higher, lowering mortgage rates Friday.

February’s preliminary reading to the University of Michigan’s Index of Consumer Sentiment will be released late Friday morning. This index measures consumer willingness to spend and also usually has a moderate impact on the financial markets. If it shows an increase in consumer confidence, the stock markets may move higher and bond prices could fall. It is currently expected to come in at 80.2, down from January’s final reading of 81.2. That would indicate consumers were a little less optimistic about their own financial situations than last month and are less likely to make large a purchase in the near future. Since consumer spending makes up over two-thirds of the U.S. economy, this would be considered slightly favorable news for bonds and mortgage pricing.

Overall, Tuesday or Thursday are likely to be the most important days for mortgage rates this week. The calmest will probably be Monday with it being the only day without something of relevance scheduled. The afternoon auctions and late morning starting times for the Fed testimony means there is a good likelihood of seeing intraday revisions to mortgage rates multiple days as the markets react to those events. Therefore, it would be a good idea to maintain contact with your mortgage professional if still floating an interest rate and closing in the near future.

Mortgage News Roundup

We hope you’re having a great week. In this roundup, we’ll look at when you should sell your home when you retire, why you need a good mortgage broker, and what are pocket listings.

When Should Retirees Downsize Homes

For most of us, our home is our biggest asset, but it’s also the biggest expense. When it comes to retirement planning, a house often falls to the bottom of the list of priorities for change.

Mostly, it’s difficult to think about getting rid of your home. And moving itself is quite a hassle.
And many new retirees don’t want to think about what it would be like to live in a house with three flights of stairs if they develop health problems.

But the truth is that it makes sense to sell sooner rather than later if you intend to downsize your home. The financial benefits may not seem huge at first, but over time they can make a meaningful difference in extending the life of a nest egg. As retirees age, there are lifestyle issues to consider, such as being in a community with other older adults.

Also, if you think the home won’t be an expense because you’ve paid off the mortgage, think again. There will always be major costs involving maintenance such as roofs, hot water heaters, landscaping, and general repairs. Even with a mortgage that has been paid off, housing often accounts for 30% of retirement expenses, says Steven Sass, an associate director at the Boston College Center for Retirement Research.

Some people want to hold onto the home for the sake of the children. The best way to handle this is to talk with the kids. They may not want the home but would rather see you settled and comfortable.

This is Why You Need a Good Mortgage Broker

A good mortgage broker can save you a lot of money while a poor one can make the home-financing process a nightmare, which is why experts recommend shopping around to find the best fit.
The best brokers have relationships with multiple lenders to have access to a slew of loan products, says Richard Bettencourt, Jr., branch manager at Mortgage Network.

“Mortgage brokers have the ability to actually work with a variety of different wholesale lenders. It’s not uncommon for a mortgage broker to have as many as 30 or more wholesale investors at their disposal” says Bettencourt. “Not every wholesale lender will be able to close every transaction, so it’s important for the mortgage broker to have program diversity.”

Watch out for mortgage brokers who make promises before they understand your financial situation.
Ask about the average time it takes for loans to close, appraisal timelines, if there’s a loan processor on staff and how many lenders they work with.

Choose a brokerage firm that also employs experienced loan originators. You can verify the credentials of loan originators at the NAMB website and find out their work history and if there is any enforce actions against them.

Why some homes have a secret ‘For Sale’ sign

One of the worst things a home seller can do when listing a home is price it too high. Anyone researching on the MLS site can see how long the house has been on the market, and how many times the price has dropped. This gives buyers leverage.

That’s why some sellers are asking their agents to market the home by word-of-mouth among colleagues and brokers, before the home ever is entered into MLS.

This also allows the seller and their real estate agent to determine if the price is appropriate. And it also allows buyers to purchase the home before it gets on the market and open to bidding wars.
The downside is that the buyer risks overpaying when home sellers test the market. And seller risk losing out if they underprice their property.

While pocket listing is a strategy that can be used at any price point, it often has particular appeal to luxury buyers. Sometimes, as in cases of high-profile sellers who don’t want many people walking through their home, sellers never intend to list.

Market Commentary for the Week of February 3rd

This week brings us the release of five monthly or quarterly economic reports that are likely to influence mortgage rates. The week opens and closes with key reports for the markets to digest and in between is some moderately important data. With relevant data scheduled four of five days though, we should see another active week for mortgage rates.

The first report comes late Monday morning when the Institute of Supply Management (ISM) posts their manufacturing index for January. This index tracks manufacturer sentiment by rating surveyed trade executives’ opinions of business conditions. It is usually the first economic data released each month and is one of the very important reports we get monthly. Current forecasts are calling for a reading in the neighborhood of 56.3, which would be a decline from December’s reading of 57.0. The lower the reading, the better the news for the bond market and mortgage rates because weak sentiment indicates a slowing manufacturing sector.

December’s Factory Orders data is scheduled to be posted at 10:00 AM ET Tuesday. It is similar to last week’s Durable Goods Orders release in giving us a measurement of manufacturing sector strength, but this data includes new orders for both durable and non-durable goods. It is not one of the more important reports we get each month, however, it can influence mortgage pricing if it varies greatly from forecasts. Analysts are expecting a 1.7% decline in new orders, indicating a softening manufacturing sector. The bond market would like to see a larger decline, meaning that manufacturing activity was weaker than many had thought.

Wednesday is the only day of the week without a report that is clearly worth watching. The ADP Employment report is set for release early Wednesday morning, which has the potential to cause some movement in the markets if it shows much stronger or weaker numbers. This report 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 also, as we saw last month, is not a true reflection of the broader employment picture. It also is not accurate in predicting results of the monthly government report that usually follows a couple days later. Still, because we saw a noticeable reaction to the report last month, I am adding it to this week’s calendar.

Employee Productivity and Costs data for the 4th quarter will be released early Thursday morning. It can cause some movement in the bond market, but should have a minimal impact on mortgage pricing. If the productivity reading varies greatly from analysts’ forecasts of a 2.4% increase, we may see some movement in mortgage rates. Higher levels of worker productivity is good news for the bond market because it allows the economy to expand while keeping inflation subdued. Also worth noting is the labor cost reading that bond traders would prefer to see decline in to limit wage inflation concerns.

The least important report of the week is December’s Goods and Services Trade Balance data, also early Thursday morning. This report measures the U.S. trade deficit and can affect the value of the U.S. dollar versus other currencies, but it usually does not cause enough movement in bond prices to directly affect mortgage rates. It is expected to show a $36 billion trade deficit, up from November’s $34.3 billion.

Friday has the big news of the week. The Labor Department will release the almighty Employment report for January at 8:30 AM ET Friday. Some of the important portions of the report will give us the unemployment rate, number of new jobs added or lost and the average hourly earnings reading. The best combination for the bond market and mortgage rates would be an increase in the unemployment rate, a much smaller increase in payrolls than expected and little or no increase in earnings. Current forecasts are calling for no change in the unemployment rate of 6.7% and approximately 175,000 new jobs added to the economy. Stronger than expected readings will likely fuel a stock market rally and selling in bonds that would cause a sizable upward revision to mortgage rates. On the other hand, disappointing numbers would raise concerns about the strength of economy and would likely lead to a sizable improvement in mortgage pricing.

Overall, Friday is the best candidate for most important day of the week although we could see plenty of movement in the markets and mortgage rates Monday also. The calmest day will probably be Wednesday unless the ADP report takes headlines with a surprisingly weak or strong payroll number, causing a knee-jerk reaction in the financial and mortgage markets. I am fully expecting to see a very active week for mortgage rates, so please maintain contact with your mortgage professional if still floating an interest rate and closing in the near future.