Market Commentary for the Week of the 4th of July

This holiday-shortened week brings us the release of only four pieces of relevant economic data that may influence mortgage rates, but two of them are considered to be highly important. In addition to a speech by Fed Chair Janet Yellen, we also have the Independence Day holiday at the end of the week. There is nothing of importance set for Monday, so expected stock movement to be the biggest contributor of changes in bond prices and mortgage rates.

The Institute of Supply Management (ISM) will post their manufacturing index for June late Tuesday morning. This index measures manufacturer sentiment by surveying trade executives on current business conditions. May’s reading that was posted last month came in at 55.4. A reading below 50 means that more surveyed executives felt business worsened during the month than those who felt it had improved. Analysts are expecting a reading of 55.8, indicating slight improvement in manufacturer sentiment. Good news for the bond market and mortgage rates would be a decline in the index, signaling worsening conditions in the manufacturing sector. This is one of the week’s two key reports that are watched closely because it is the first piece of data that tracks the previous month’s activity.

Wednesday has two pieces of data that may influence rates. The first is the ADP Employment report before the markets open 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 is not a true reflection of the broader employment picture. It also is not very accurate in predicting results of the monthly government report that follows a couple days later. Still, because we sometimes see a noticeable reaction to the report, it is on this week’s calendar.

Also Wednesday is May’s Factory Orders that is similar to the Durable Goods Orders report that was released last week. The biggest difference is that this week’s report covers both durable and non-durable goods. It usually doesn’t have as much of an impact on the bond market as the durable goods data does, but can lead to changes in mortgage pricing if it varies greatly from forecasts. Current expectations are showing a 0.4% decline in new orders from April’s levels, pointing towards slight weakness in the sector. A larger decline in orders would be considered good news for the bond market and could help lower mortgage rates slightly Wednesday.

Fed Chair Janet Yellen will be speaking late Wednesday morning at an International Monetary Fund (IMF) conference in Washington D.C. The topic of the speech is listed as monetary policy, so there is a good possibility of her words causing volatility in the markets with a decent chance of them affecting mortgage rates. She is scheduled to speak at 11:00 AM ET.

The last data of the week is arguably the single most important report we see each month. The Labor Department will post June’s unemployment rate, number of new payrolls added or lost and average hourly earnings early Thursday morning. These are considered to be very important readings of the employment sector and can have a huge impact on the financial markets. The ideal scenario for the bond market is rising unemployment, a decline in payrolls and no change in earnings. Weaker than expected readings would raise concerns about sustainable economic growth and likely help boost bond prices, lowering mortgage rates Thursday. However, stronger than expected readings could be extremely detrimental to mortgage pricing as it would help support the theory that we will see good economic growth later this year. Analysts are expecting to see the unemployment rate remain at 6.3%, with 210,000 jobs added and a 0.2% rise in earnings.

The U.S. financial and mortgage markets will be closed Friday in observance of the Independence Day holiday. They will also close early Thursday afternoon ahead of the holiday and will reopen Monday morning for regular trading hours. We could see bond traders sell some holdings before the 2:00 PM ET close to protect themselves over the holiday, which raises the possibility of seeing an upward revision to mortgage rates Thursday afternoon. This is especially true if the Employment report shows significant surprises.

Overall, I am expecting to see another fairly active week for the financial markets and mortgage rates. The most important day of the week is Thursday due to the Employment data and early closing, but Tuesday and Wednesday may also bring a noticeable move in rates. The calmest day of the four will likely be Monday unless something unexpected happens. Due to the shortened week having two major reports, I strongly recommend maintaining contact with your mortgage professional if still floating an interest rate and closing in the near future.

Mortgage News Roundup - End in Sight for Millennials Struggling to Get on Property Ladder

Mortgage News Roundup

Mortgage interest rates are slowly ticking downwards, and sales of homes in certain areas are surging forwards. If you’re wondering if now is the time to either refinance or buy, contact a professional loan officer. They’ll be able to look at where you’re at, what mortgage options would be best for you, and help you start the documentation process.

End in sight for millennials struggling to get on property ladder

Young Americans who can’t afford a mortgage are holding back the housing recovery, with combined new and existing home sales this year set to drop for the first time since 2010, according to a June forecast by the Mortgage Bankers Association. Last year, about 22 percent of 30-year-olds who had student debt also had home loans, down from almost 34 percent in 2008, according to the Federal Reserve Bank of New York.

The good news is that the end of this struggle is in sight within the next two to five years. won’t be long-term. Millennials will gain greater access to housing, lifted by higher levels of education and a stronger labor market, according to interviews with about a dozen economists and housing analysts.

“Given the Great Recession and the slow recovery, millennials have faced very difficult economic circumstances,” said Richard Fry, a senior economist at the Pew Research Center in Washington. “But they have a very significant tailwind. They are more educated than any generation before them. All of those college degrees will sooner or later pay dividends and they will buy homes.”

You can read more at Yahoo! Finance here.

5 Credit Card Myths Debunked

There are still some myths floating around about credit cards and we found them listed and debunked here.

We’ll list them here and you can read more at the link.

1. Cancelling a credit card improves your credit score
2. Applying for a credit card dramatically reduces your credit score
3. You give up all rewards earned when you cancel that card
4. You have to be in debt to use a credit card
5. Your credit card issuer doesn’t care about you

We hope you have a fun weekend planned!

Market Commentary for the Week of June 23rd

This week brings us the release of seven economic reports for the markets to digest in addition to two Treasury auctions that have the potential to come into play for mortgage rates. The first is May’s Existing Home Sales report from the National Association of Realtors at 10:00 AM ET Monday. This report tracks resales of existing homes, giving us a measurement of housing sector strength. It is considered to be moderately important to the markets, but can influence mortgage rates if it shows a sizable difference between forecasts and actual results. Analysts are currently expecting to see an increase in home sales, pointing towards a stable housing sector. That would be slightly negative news for the bond market and mortgage rates. A weaker housing sector makes overall economic growth more difficult, so a sizable decline would be ideal for bonds and mortgage shoppers.

Tuesday has May’s New Home Sales report, but during late morning trading. It helps us measure housing sector strength by tracking sales of newly constructed homes. This report is similar to the Existing Home Sales report, but covers a much smaller portion of sales than that report does. It is expected to show a small increase in sales, but will likely not have much of an impact on mortgage rates because this data gives such a small snapshot of the housing sector. I believe it will take a large rise in sales or a sizable decline for this data to influence mortgage rates.

June’s Consumer Confidence Index (CCI) is the second report of the day Tuesday. It will also be posted at 10:00 AM ET and is important to the financial markets because it measures consumer willingness to spend. If consumers are more confident about their own financial and employment situations, they are more apt to make large purchases in the near future, fueling economic growth. If it shows a sizable increase in confidence from last month, we can expect to see the bond market falter and mortgage rates rise slightly. Current forecasts are calling for a reading of 84.0, up from last month’s 83.0 reading. The lower the reading, the better the news it is for bonds and mortgage rates.

Wednesday has two pieces of data set for release May’s Durable Goods Orders is the first at 8:30 AM ET, giving us an indication of manufacturing sector strength. It tracks orders at U.S. factories for big-ticket items, or products that are expected to last three or more years such as electronics and appliances. This data is known to be quite volatile from month to month and is expected to show an increase of 0.4% in new orders from April to May. A large decline would be the ideal scenario for the bond market and would hopefully lead to a decline in mortgage pricing as it would indicate manufacturing sector weakness.

The final reading to the 1st Quarter Gross Domestic Product (GDP) will also be posted early Wednesday. The GDP is the sum of all products and services produced in the U.S. and is considered to be the best measurement of economic growth or contraction. However, this particular data is quite aged now (covers January through March) and will likely have little impact on the bond market or mortgage pricing unless it varies greatly from previous readings. Market participants are looking more towards next month’s release of this quarter’s initial GDP reading. Last month’s first revision showed a 1.0% decline in the GDP, but analysts are now expecting to see a 1.8% decline meaning the economy was weaker than previously thought. An upward revision would be considered negative for rates as it means stronger economic activity.

May’s Personal Income and Outlays data is scheduled for release Thursday at 8:30 AM ET. This report gives us an indication of consumer ability to spend and current spending activity. They are important because consumer spending makes up over two-thirds of the U.S. economy. If consumer income is rising, they have more money to spend each month. Analysts are expecting to see an increase of 0.4% in income and a 0.4% rise in the spending portion of the report. Smaller increases or declines in both of these readings would be good news for the bond market and mortgage rates.

The University of Michigan will close out this week’s data when they update their Index of Consumer Sentiment for May late Friday morning. This index gives us a measurement of consumer willingness to spend. As with Tuesday’s CCI, if consumers are more comfortable with their own financial situations, they are more apt to make large purchases in the near future. Since consumer spending makes up such a large portion of our economy, any related data has the potential to affect bond trading and mortgage rates. A downward revision would be considered good news for bonds and rates, but forecasts are calling for an upward revision from this month’s preliminary reading of 81.2.

Also worth noting is the fact that the Fed will be selling more debt this week. These sales may influence broader bond trading enough to affect mortgage rates if they show strong or weak investor demand. There are sales every day except Friday but the two most likely to affect rates are Wednesday’s 5-year Note sale and Thursday’s 7-year Note auction. If they are met with a strong demand, we could see bond prices rise during afternoon trading. This could lead to afternoon improvements to mortgage rates also. But, if the sales draw a lackluster interest from investors, mortgage rates may move higher during afternoon trading those days.

Overall, it is difficult to label one particular day as the most important of the week. None of the data on the calendar is considered to be highly important, but Tuesday and Wednesday have two of the more important reports of the week. We saw some strength in bonds late Friday, so we are going into the week with a small improvement priced in Monday’s opening if your lender did not improve Friday afternoon. I believe we could see more afternoon volatility in the markets multiple days this week despite the lack of a key economic report or Fed-related events. Therefore, please keep an eye on the markets and maintain contact with your mortgage professional if still floating an interest rate and closing in the near future.

Mortgage News Roundup - 6 Reasons Credit Scores Aren't Always Fair

This week’s FOMC meeting has adjourned with no change to key short-term interest rates which was expected. The post meeting statement indicated that a strong majority of voting Fed members believe they will remain at current levels until sometime next year.

The surprises came in the updated economic projections, which indicated the Fed felt the economy was going to grow at a slower pace than previously thought. The biggest change came in the overall Gross Domestic Product (GDP) that was revised from a 2.8 – 3.0% annual rate of growth to only 2.1 – 2.3%. They also said that the employment rate will likely fall to 6.0% when previous forecasts predicted 6.1 – 6.3%. Furthermore, their confidence in the path the economy is heading showed in another $10 billion reduction in monthly bond purchases (now $35 billion).

Top 10 Real Estate Investor Mistakes

Real estate investing is never as easy as it seems. (Did you read our series on it?)

1. Tips for Avoiding Pitfalls in Owning Rental Property
2. Rental Property As Retirement Income
3. Real Estate Investment Secrets
4. Pro’s and Con’s of Flipping Homes

Zillow Blog provided their top ten real estate investor mistakes in no particular order.

1. Not penciling out your real estate deal
2. Not penciling out your deal with conservative numbers
3. Getting renovation costs wrong
4. Underestimating renovation time
5. Thinking something can only cost ‘that much’
6. Thinking that stocks, bonds and real estate are all comparable investments
7. Thinking it’s a “turn-key” real estate deal
8. Believing that flipping properties is investing
9. Thinking that real estate is low risk
10. Believing what others say about their “profitable” real estate investing acumen

6 Reasons Credit Scores Aren’t Always Fair

Your credit score is one of the most important numbers in your life. Generally, if it’s under 640 you may have difficulty qualifying for a mortgage loan. And if you do get a loan, you may pay higher interest rates.

Unfortunately, your score could be lower even if you appear to be doing everything correctly, and that’s not fair. Here’s some areas where it’s especially unfair.

• Not all on-time payments are considered equal. An example is if you always pay your utility bills on time. It doesn’t count towards increasing your score.
• Your score doesn’t care about your salary or job. When you get a raise, your ability to pay increases but doesn’t count for anything in your score.
• Scores care as much about your past as your present.
• Credit scores don’t like it when you don’t use credit cards.
• Your score doesn’t care if you lost your job.
• Your score doesn’t care if you are a good saver

Talk with a reputable loan officer to find out options for mortgages. They spend quite a bit of time each week staying on top of the latest market trends as well as options from multiple lending sources.

Market Commentary for the Week of June 16th

This week brings us the release of only four pieces of economic data that is relevant to mortgage rates, but one of them is a key inflation reading that is very important to the bond market. However, the theme of the week will be Fed-related with an FOMC meeting, economic forecasts and a press conference with Fed Chairman Yellen. Also worth noting are the recent events in the geopolitical arena, particularly Iraq and Ukraine, that can easily come into play in the markets here.

Unlike many Mondays, today does have a piece data set for release. May’s Industrial Production data will be released at 9:15 AM ET Monday, giving us a measurement of manufacturing sector strength. It tracks output at U.S. factories, mines and utilities, but is considered to be only moderately important to mortgage rates. If it reveals that production is rapidly rising, concerns of manufacturing strength may come into play in the bond market and cause selling in bonds. A larger increase than the 0.5% that is expected would indicate the manufacturing sector is stronger than many had thought and would likely push mortgage rates slightly higher. A smaller than forecasted increase would be favorable news for the bond market and mortgage pricing.

May’s Consumer Price Index (CPI) will be posted early Tuesday morning. This index gives us a very important measurement of inflationary pressures at the consumer level of the economy. As with last week’s Producer Price Index (PPI), there are two readings that analysts watch. Forecasts are calling for 0.2% rise in the overall reading and a 0.2% increase in the core data. The core reading is the more important of the two because it excludes more volatile food and energy prices, leaving a more stable measure of inflation. Indexes like this are important to the bond market and mortgage rates because rising inflation makes long-term securities’ future interest payments less valuable to investors. That leads them to be sold at a discount, causing yields and mortgage rates to move higher. Therefore, we would like to see weaker than expected readings, indicating inflationary pressures are softer than analysts are thinking. The weaker the readings, the better the news it is for mortgage rates.

May’s Housing Starts will also be posted at 8:30 AM ET Tuesday. This data tracks construction starts of new home projects. It is one of the month’s least important reports and likely will not affect mortgage rates unless its results vary greatly from forecasts. It is expected to show that starts of new homes fell last month, indicating softness in the housing sector. That is good news for the bond market and mortgage rates because a weakening housing sector makes broader economic growth less likely. However, this data is not important enough to cause a noticeable change in mortgage rates unless the CPI matches forecasts and this report shows a significant surprise.

Wednesday’s only events are Fed related, but there are three of them. The first is the 2:00 PM adjournment of the FOMC meeting that began Tuesday. It is widely expected that Chairman Yellen and company will not change key short-term interest rates at this meeting, but market participants will be watching the post-meeting statement for any hints at when they expect to start raising rates or adjusting the pace of reducing their current bond-buying program (QE3). If there are any changes, look for an immediate reaction in the financial and mortgage markets.

Also at 2:00 PM ET Wednesday, the Fed will release their updated estimates for future economic growth. They will likely post their predictions on GDP growth, unemployment and inflation. These could be a market mover if they show even minor revisions to any of the key headline economic numbers. The larger the change, the more likely the markets will react. Revisions that point toward slower economic growth would be good news for the bond market and mortgage rates.

They will be followed by a press conference hosted by Fed Chairman Yellen at 2:30 PM ET. These press conferences with the media often lead to significant afternoon volatility in the markets and mortgage rates. Any surprises will probably cause a noticeable reaction in the markets. That means there is a high probability of seeing afternoon changes to mortgage rates Wednesday.

May’s Leading Economic Indicators (LEI) will be posted at 10:00 AM Thursday. The Conference Board, who is a New York-based business research group, will post this data. It attempts to predict economic activity over the next three to six months. Good news for mortgage rates would be a decline in this index, but it is expected to show a 0.5% increase from April’s reading. This means it is predicting an increase in economic growth over the next several months. Since this report is not considered to be of high importance, I don’t see it causing too much movement in rates regardless if it shows a strong or weak reading.

Overall, Wednesday is easily the best candidate as most active day for mortgage rates, but we will likely also see a fair amount of movement Tuesday. We also need to keep an eye on geopolitical events overseas that are in current events as they can heavily influence the global markets. Friday looks to be the least important day unless something unexpected happens. For the week, I would be surprised if we did not see plenty of movement in rates, although the biggest moves will probably take place the middle part. Please maintain contact with your mortgage professional if still floating an interest rate as the markets can become extremely volatile at any time.

Mortgage News Roundup - Is Sububia Fading as Buyers Yearn for City Life?

Having a good week? It has been for the housing market as well. Foreclosures are now at an eight year low according to RealtyTrac. Zillow is reporting a very slight uptick to interest rates, and the overall market is very stable. “Mortgage rates were flat last week as two highly anticipated announcements, the European Central Bank’s stimulus plan and the latest U.S. employment report, confirmed the outcomes the markets were expecting,” said Erin Lantz, vice president of mortgages at Zillow. “Next week there is a limited number of market-moving news or events scheduled, so we expect rates to remain stable.” Talk to a professional loan officer to find out what rates you qualify for, and any other questions on mortgages.

Home sales are brisk. In fact, March inventories of unsold new homes hit the highest since Autumn of 2011. Economists polled by The Wall Street Journal see new-home sales in April bouncing back to 420,000 when the data are released Friday. That still would be off by nearly 6% year over year, though. Unfortunately, new homes that were built in some geographic areas are still not selling. The chief culprit in the recent slowdown is affordability, with median new-home prices up by over 11% year over year and 30-year mortgage rates a full percentage point higher than in March 2013. Put the two together and monthly mortgage payments are about 25% higher. And in areas where there is a lack of homes for purchase or for lease, new homes are getting snapped up fairly quickly.

Suburbia fading as buyers yearn for city life

USA Today posted a video on how an increasing number of people want a more urban lifestyle rather than rural. IF you pause the video, you can read the transcript below. People want to be able to walk rather than drive. They want the amenities that a big city can offer like plays, restaurants, shopping, and sporting events. The video also mentions that the successful homebuilders are creating row style homes in the cities, and that there is an abundance of homes in suburbia that aren’t selling because people no longer want to live that far away.

8 Surprise Expenses for New Homeowners

Yes, even more surprise expenses for new homeowners. These costs aren’t all large but it’s good to plan for them.

1. Changing the locks
2. Maintaining the yard. Do you need to buy a lawnmower? Hire a gardener?
3. Multiple appliances repair and replacement costs
4. Cosmetic upgrades
5. Furnishing the house (and as we said before, don’t go crazy. Live in the house for a little bit to see what furniture and remodeling you end up wanting.
6. Window treatments and replacements
7. Rising property taxes
8. Tree trimming

Hope you have some fun plans for this weekend. Let us know what you’re up to in the comments.

Market Commentary for the Week of June 9th

This week has three pieces of economic data that are relevant to mortgage rates in addition to two Treasury auctions that can also be influential. None of the relevant data is scheduled until Thursday, so look for the stock markets to influence bond trading and mortgage rates the first couple of days.

The two relevant Treasury auctions will take place Wednesday and Thursday. 10-year Treasury Notes will be sold Wednesday while 30-year Bonds will be sold Thursday. Results of both auctions will be posted at 1:00 PM ET on the sale days. If investor demand was high for these securities, we may see bonds rally during afternoon trading. However, weak interest in these sales could lead to bond selling and an increase in mortgage rates. It is common to see some pressure in bonds right before these sales as investors prepare for them, but as long as the sales are not weak those pre-auction losses are usually recovered once they are completed.

The first economic data of the week comes Thursday when the Commerce Department posts May’s Retail Sales data at 8:30 AM ET. This report gives us a very important measurement of consumer spending, which is highly relevant to the bond market because consumer spending makes up over two-thirds of the U.S. economy. Analysts are expecting to see that retail-level sales rose 0.7% last month. A small increase or better yet a decline in sales, signaling a slowing economy, would be negative for stocks, good news for the bond market and would likely lead to lower mortgage rates Thursday morning. On the other hand, a stronger level of sales will likely equate push stocks higher and lead to an increase in rates.

Friday has the remaining two pieces of economic data that we will be watching. The first of those is one of the two key measurements of inflation that we get each month. May’s Producer Price Index (PPI) will be released early Friday morning, helping us measure inflationary pressures at the producer level of the economy. There are two readings of this index, the overall and the core data. The core data is considered to be the more important one because it excludes more volatile food and energy prices. A large increase could raise concerns about inflation rising as the Fed starts raising key short-term interest rates. This would not be good news for bond prices or mortgage rates since inflation erodes the value of a bond’s future fixed interest payments. Rising inflation causes investors to sell bonds, driving bond prices lower, pushing their yields upward and bringing mortgage rates higher. Analysts are expecting to see increases of 0.2% in the overall index and 0.1% in the core reading, signaling inflation was subdued at the manufacturing level of the economy last month.

June’s preliminary reading to the University of Michigan’s Index of Consumer Sentiment will be posted late Friday morning. This index measures consumer willingness to spend and usually has a minor to moderate impact on the financial markets. It is expected to show a reading of 82.9, which would be an increase from May’s 81.9. A smaller than expected reading would be considered good news for bonds because it would mean that surveyed consumers were less optimistic about their own financial and employment situations than thought. That often means they are less likely to make large purchases in the near future, but since this report is only moderately important it likely will not influence mortgage rates considerably unless it shows a significant variance from forecasts.

Overall, look for Thursday or Friday to be the biggest day of the week with both having important economic data scheduled. The least important day of the week will probably be Tuesday. We saw plenty of movement in the markets and mortgage pricing again last week and it is quite likely that this week will also be active. However, I suspect that it will be to a less degree than last week was. The stock markets will also influence bond trading and mortgage rates, so watch the major indexes in addition to the economic reports. It is highly recommended that you maintain contact with your mortgage professional this week if still floating an interest rate.

Mortgage News Roundup - Millennisal vs Baby Boomers: What Do They Want?

We hope you’re surviving the end of the school year and graduation season. Commute traffic always seems lighter now as you have fewer people on the roads going to school so commute times can shift. And people are taking off time for vacations. Enjoy it while you can.

Mortgage rates seem to be holding steady for the second week in a row. Contact your professional loan officer to find out more information.

And we’re working on a blog post on what it means to lock in a rate. If you have specific questions you want answered, please leave them in the comments.

And now, on to the round up.

6 Quick Ways to Get Your Home Looking Good Enough to Sell

For whatever reason, you are selling your home, and you want to get a quick sale. You also don’t want to spend a lot of money doing major fix ups. So here are six simple things you can do to get your house ready to sell.

1. Deep clean your carpets. Look into deodorizing them as well especially if you had pets or smoke.
2. Pressure wash walkways and exterior walls.
3. Paint with neutral colors. They don’t call it Realtor Beige for nothing.
4. Toss anything broken or damaged. You may have turned a blind eye to that cracked planter in the front but a savvy buyer will see it immediately. Also, ensure all your light fixtures work and have working bulbs.
5. Display the manuals, warranties and purchase information next to the appliances.
6. Repair the small stuff like a leaking faucet or missing tile on the floor.

Millennials vs. Baby Boomers: What Do They Want?

Millennials aren’t the only ones flocking to popular cities such as New York, Boston, Miami and San Francisco. Some boomers are, too. After all, they want the theater, arts, culture and fine dining! The difference is that Millennials, if they’re not still living with mom and dad, are moving into expensive rental units. Boomers are purchasing smaller homes but they’re more expensive than their old house in the suburbs.

When it comes to style, Millenials want large open areas to act as a social hub. Boomers want a private retreat full of luxury. Both want clean and either new or very updated focusing on amenities over square footage. Reliable high speed Internet is also at the top of the must-have list.

So if you’re trying to sell to this target demographic, ensure you have remodeled and upgraded your kitchens and bathrooms. Also see if you can build in a large walk-in closet.

5 Things Buyers Do That Drive Agents Nuts

The process of buying a home can be long and challenging. It can be stressful for both buyers and their real estate agents especially when there is a lack of homes on the market, affordable and otherwise.

So if you’re a potential buyer, here are five things to avoid doing so you don’t increase the stress of your agent.

1. Request additional showings, bring an entourage, etc, but never make an offer.
2. Make unjustifiable lowball offers.
3. Plan to negotiate the price down during escrow but don’t tell your agent.
4. Make big demands on the agent’s time but are nowhere near ready to be serious about purchasing yet.
5. Keep changing your mind about what you want.

And we’ll add in another one: Using one real estate agent to look for houses, and then use a family friend to put in the offer.

Remember to respect that the real estate agent is a professional, and this is their livelihood.

So what will you be doing this weekend?

Market Commentary for the Week of June 2nd

There are six economic reports scheduled for release this week that have the potential to affect mortgage rates. We have monthly reports set for every day except Thursday with a couple of those reports considered to be highly important. Therefore, I believe it will be another active week for mortgage rates.

The Institute for Supply Management’s (ISM) manufacturing index will be posted late Monday morning. This highly important index measures manufacturer sentiment. One reason why it is considered so important is the fact that it is the first piece of economic data posted every month that covers the preceding month. In other words, it is the first look into the previous month’s economic conditions. That differs from many reports that aren’t released until mid or late month. A reading above 50 means that more surveyed manufacturing executives felt that business improved during the month than those who felt it had worsened. Analysts are expecting to see a 55.6 reading in this month’s release, meaning that sentiment rose a little during May. A smaller reading will be good news for the bond market and mortgage shoppers while a larger than expected increase could contribute to higher mortgage rates Monday.

Tuesday’s only release will come from the Commerce Department, who will post April’s Factory Orders data during late morning trading. This manufacturing sector report is similar to last week’s Durable Goods Orders release, but also includes orders for non-durable goods. It can cause some movement in the financial markets if it varies from forecasts by a wide margin, but it isn’t expected to cause much of a change in rates this month. Current forecasts are calling for an increase in orders of 0.5%.

Wednesday has three reports worth watching. The ADP Employment report is first, set for release before the markets open. It has the potential to cause some movement in the markets if it shows much stronger or weaker numbers than expected. This report tracks changes in private-sector jobs of ADP’s clients that use them for payroll processing. While it does draw attention, it is my opinion that it is overrated and is not a true reflection of the broader employment picture. It also is not accurate in predicting results of the monthly government report that follows a couple days later. Still, because we have seen reaction to the report recently, we should be watching it. Analysts are expecting it to show that 200,000 new payrolls were added. The lower the number of jobs, the better the news it is for mortgage rates.

The revised 1st Quarter Productivity and Costs data is the second that will be released Wednesday. This data measures employee output and employer costs for wages and benefits. It is considered to be a measurement of wage inflation. Many analysts believe that the economy can grow with low inflationary pressures when productivity is high. Last month’s preliminary reading revealed a 1.7% decline in productivity and a 4.2% increase in labor costs. Wednesday’s update is predicted to show that productivity fell at a 2.5% annual rate while labor costs rose 4.8%. I don’t think this piece of data will have much of an impact on the bond market or mortgage pricing either unless it varies greatly from expectations.

Wednesday’s final relevant report is the Federal Reserve’s Beige Book, which is named simply after the color of its cover. This report details economic conditions throughout the U.S. by Federal Reserve region. It is relied upon heavily by the Fed to determine monetary policy during their FOMC meetings. If it shows surprisingly softer economic activity since the last report, the bond market may thrive and mortgage rates could drop shortly after the 2:00 PM ET release. If it reveals signs of inflation growing or rapidly expanding economic activity in many regions, we could see mortgage rates revise higher Wednesday afternoon.

Thursday doesn’t have any monthly or quarterly economic data for us to be concerned with but Friday’s sole report is arguably the single most important report that we see each month. The Labor Department will post May’s Employment data early Friday morning, giving us key employment readings such as the U.S. unemployment rate and the number of jobs added or lost during the month. Analysts are expecting to see the unemployment rate move from 6.3% to 6.4% with approximately 220,000 jobs added to the economy during the month. A higher than expected unemployment rate and a much smaller number than the 164,000 new payrolls would be great news for the bond market. It would probably create a sizable rally in bonds, leading to lower mortgage rates Friday. However, stronger than expected numbers should cause a stock rally and a spike in mortgage rates.

Overall, it appears that Friday is the key day of the week with regards to mortgage rate movement. However, Monday or Wednesday could also be active days for mortgage pricing. Tuesday or Thursday will probably be the lightest day unless something totally unexpected happens with stocks. Although, as we have seen many times over the past couple weeks, we don’t necessarily have to have a significant event or economic report released for the bond market and mortgage rates to become volatile. Therefore, it would be prudent to continue to maintain contact with your mortgage professional if still floating an interest rate and closing in the near future.