Market Commentary for the Week of February 23rd

This week brings us the release of seven economic reports to be concerned with in addition to testimony from Fed Chairman Yellen and two potentially relevant Treasury auctions. A couple of the reports are considered to be highly important to the markets and mortgage rates. There is something scheduled each day that can move rates, so there is a strong chance of seeing an extremely active week for mortgage rates.

The first piece of data is January’s Existing Home Sales report by the National Association of Realtors late Monday 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.

February’s Consumer Confidence Index (CCI) will be posted 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 a decline in confidence from the 102.9 reading in January to 99.3 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 than many thought.

Fed Chairman Yellen will deliver the Fed’s semi-annual testimony on the status of the economy and monetary policy this week. She will be speaking to the Senate Banking Committee Tuesday and the House Financial Services Committee Wednesday. Both appearances are set to start at 10:00 AM ET. Her prepared statement on Tuesday will likely have the bigger influence on the markets but the Q&A session that follows may bring a surprise response also. Wednesday’s opening statement will probably mirror Tuesday’s so day two usually does not have the impact on the markets as day one does.

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 the 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. The larger the decline, the better the news it is for bonds and mortgage rates.

Thursday has a pair of monthly important reports scheduled for release, both at 8:30 AM ET. January’s Durable Goods Orders data will give 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. Analysts are expecting to see a 1.8% increase in new orders, hinting at manufacturing sector growth.

The second report of the day is January’s Consumer Price Index (CPI). It measures inflationary pressures at the consumer level of the economy. A significant surprise in this data can have a noticeable impact on the financial markets, especially long-term securities such as mortgage-related bonds. Inflation isn’t exactly a concern currently, but there are many that feel that rapid inflation down the road is a threat, so analysts still track the readings closely. The report is expected to show a 0.6% decline 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 will likely fall Thursday morning as long as long as the Durable Goods Orders data doesn’t offset.

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 2.1%, down from the initial estimate of 2.6% 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 larger 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 93.6. 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 GDP revision 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 translates into lower mortgage rates.

Overall, I think Tuesday is the most important day of the week due to Fed Chair Yellen’s congressional testimony although Thursday and Friday’s economic data can also cause a fair amount of volatility in the markets. The calmest could be Tuesday but we should still see some movement in rates that day also. If floating an interest rate, it would be extremely prudent to maintain contact with your mortgage professional this week.

The Case For The Open House

by Phoebe Chongchua

Buyers expect to see homes listed for sale up close and personal and often, that means through a private visit with their real estate agent. However, another popular and smart way to entice buyers to take a closer look is via the open house. Open house tours are a great way for sellers to showcase their home in its very best light. You know that the home will be on display for several hours rather than at a limited-time appointment.

So, this is the ideal time to make the most of your home’s features without any distractions. That means it’s time to take the pets with you for the day and let your agent host the open house. Getting the pets out of the house makes it so much easier to show off your home. Even the friendliest pet can be a distraction for buyers.

Next, be sure to stage your home before the open house. No dirty laundry lying around. Clear the counter tops. De-clutter the rooms by taking things off the floor and storing them in drawers, closets or on shelves. These are quick fixes you can do on your own to prepare for the open house but, ultimately, you may want to hire a professional to stage your home; it will make a huge impact. Professional stagers know exactly how to set the home up to make it the most attractive to the masses of buyers.

Open houses are generally the first-time look for buyers. This is when they’ll often decide to schedule a private showing if they’re impressed with your home.

For your agent, an open house is an excellent way to see how many and what type of buyers your home is attracting. This provides greater direction for marketing your home. The type of questions asked and how long buyers spend at your open house can reveal a lot and be an indication of the likelihood of getting offers on the home.

Some sellers might not want to do an open house because of the work that’s involved in preparing for it. However, if that’s your position, this will likely hurt you. Even though having masses of people traipse through your home may not be appealing, it is exactly what you need to sell it. And, yes, putting time and energy into cleaning it up and having it sparkle really will pay off.

Also, be sure you tell your agent important details about the home–its features, renovations, and even the reason you’re selling the home. Buyers will ask direct questions. They want to know the details and how motivated you are to sell.

Use the day to get out of the house with the pets and the kids and do something you enjoy. Leave the open house hosting to your real estate agent. Chances are, if have you advertised and have the home listed at the right price, a few weekends of open houses will be well worth it when the offers start coming in.

Growing Vegetables in Your Backyard

Believe it or not, it’s time to start planning your summer vegetable garden. If you’ve never thought of growing anything, or if you’re thinking you killed every plant you’ve owned since college, today’s post is for you. In future posts, we’ll go into the care of your crops.

What Should I Grow?

To start, figure out where you could grow. You’ll need to monitor how much sunlight the place gets. Some crops like lettuce and spinach don’t need much direct sunlight, whereas tomatoes need a lot. Also, if you have trees that block a lot of your sunlight, you’ll need to evaluate what you want to plant.

Second, you can find your USDA plant hardiness zone from the map. This is the standard by which gardeners and growers can determine which plants are most likely to thrive at a location. The map is based on the average annual minimum winter temperature, divided into 10-degree F zones.

However, we all know that there are micro climes. For example, if your zip code is the center of town, and it’s a flat, sunny area, it’s going to have a different growing season than if you live on a mountain slope.

The two best ways to figure out what to grow are:

1. Ask your neighbors if they grow vegetables and what they’ve found works.
2. Contact your local group of Master Gardeners. They know what works in your area, and often offer free classes. They’re committed to teaching others how to successfully grow fruits, vegetables, plants and flowers.

What If I Have No Backyard?

If you have a patio that gets some sun, you can grow vegetables in containers. Seed companies have been developing fruits and veggies that can be grown on balconies and patios in containers. Burpee has a cantaloupe, tomato, and a corn seed that can be grown in smaller containers.

Now if you really have very little room, grow herbs like basil, cilantro, chives and parsley. You’ll save money because you won’t be buying a large bunch from the market that turns into mush at the bottom of your vegetable drawer.

Also, consider buying a blueberry bush that will produce fruit every year. It can be trimmed to size, and there are shade varieties. Or you could look on Pinterest for ideas for growing walls of lettuce and strawberries.

Be cautious of mint and certain berries like blackberries and raspberries. They can jump their pots and take over everywhere else.

And the thing to remember is that these vegetables grow in the wild. They’re designed to grow and produce, so be patient with yourself. Start small and manageable. Keep a detailed notebook so you can track what worked well for you. And enjoy the results.

In the next post, we’ll talk about soil, compost, and containers.

Simple Ways to Fix A Hole In the Wall

There are a few types of holes that can get into a wall. Some are small, like nail holes, and others are larger where someone knocked something into the wall and left a bit of a gouge (like, say, a door handle or a child’s truck).

Repairing Small Holes

First let’s start with the small holes. Let’s say you want to repaint an entire room, and you’ve taken down the pictures, and aren’t sure you want to put them up in the same place. Or perhaps you were renting (take note of this, college students) and want to get your deposit back.

From DIYLife:

If the hole is smaller than 1/4 inch, the first weapon in your quick fix arsenal should be toothpaste — preferably the same shade as your wall. Simply squeeze the paste into the hole, and then use a putty knife (or playing card) to scrape off the excess. Try to get the paste as flush as possible with the wall. The toothpaste might shrink a bit when it dries, so a second application may be needed.
If the toothpaste trick doesn’t appeal to you, another quick fix is to crush up an aspirin into as fine a powder as you can manage, mix the powder with just enough water to form a paste, and then use that to fill the hole. It’ll work in a pinch, but the toothpaste method is a lot easier.

Or you could buy a small tube of spackling and use that in place of the toothpaste. Wait for the spackle to dry (this is important. Then use a putty knife to scrape away the extra. Use sandpaper to smooth everything, and use some touch up paint to make it invisible.

Repairing Large Holes

You may want to look into purchasing a drywall repair kit from your local hardware store or home improvement center. They come in a variety of sizes and types.

I hear you asking “But, I’m not repairing drywall.” Well, yes, you are. That’s the sheet underneath the paint or wallpaper in most homes. You’ll sometimes hear it called “sheetrock” and that’s the same thing. Sheetrock is just a brand name, like Kleenex is a brand of tissues.

For some references in repairing larger holes:

• How Stuff Works – uses a tin can lid for repair
• eHow – using the simple cut out method
• Instructables – has a lot of great photographs
• This Old House – how can you not trust Bob Villa
• Cockeyed – Great tip about using a crayon to help

Repairing Cracks

Since we’re in Earthquake country, we get odd cracks here and there. You can repair them, but be aware that if they’re at a boundary between pieces of drywall, they will reappear as the house settles or as we get more quakes.

Their repair is very similar to small holes. You scrape or sand down the area, apply drywall compound or spackle smoothly. Lay down some special tape, and apply more compound or spackle, and then let dry. The Dummies site recommends adding an additional layer of compound.

When that’s all dry, sand down, prime and paint.

Will you be repairing any holes or cracks this weekend?

Choosing Your Ideal Neighborhood

by Carla Hill

Neighborhoods are as diverse and unique as the people who live in them. From close-knit communities to private and mature tree-lined streets — there’s a fit for every buyer.

Many young families seek communities brimming with amenities, such as pools and parks. Others place top priority on schools within a prestigious district. Still other buyers are more interested in neighborhoods within walking distance of restaurants, theaters, and other fun times!

It can be a tough map to navigate. Here are some tips for finding your perfect neighborhood!

School Districts: If you currently have, or plan on having children, it’s important to research what local school district you wish your children to attend. This becomes even more critical if you are moving and wish for your children to remain in their current school!

Noise Factor: You may love the house, but will you love the road noise from the adjacent highway? Visit your potential neighborhood during different times of the day and varied days of the week. Some otherwise quiet streets become raucous hubs during the wee hours of weekend nights. Also check for train tracks, subways, roads, and airports!

Walk/Driveability: How close will you be to restaurants, grocery stores, doctors’ offices, parks, and other recreational establishments? Many families want to be close to the action — so close that they can walk!

Favorite Activities: Do you love golf, boating, or spending your time at the gym? Research local amenities before deciding on which neighborhoods to search. It’s no fun driving for hours to make it to your favorite activity.

Safety: Ask your real estate agent or local law enforcement about the crime rate for a particular area. Some have higher levels of thefts and even violent crimes. A beautiful house can’t make up for feeling unsafe.

Resale: Discuss the resale potential of a certain neighborhood with your real estate agent. If you aren’t planning on staying in your home indefinitely, then it’s important to consider the long-term. Will you be able to sell a home in this neighborhood in 10, 15, or 20 years? Is it up-and-coming or has it come and went?

The neighborhood you choose will have an impact on your day-to-day life, so it’s important to make the right choice for your family. Be sure to consider these tips when you’re next in the market to buy!

Market Commentary for the Week of February 16th - President's Day

This week brings us the release of four 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 two days. The financial markets will be closed Monday 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 Tuesday. 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 a decline of 0.4% 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 decline in 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.

The third and final economic report of the day will be January’s Industrial Production data at 9:15 AM ET. 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 0.4% increase in production from December to January. A decline in output would be good news and should push bond prices higher, lowering mortgage rates Wednesday, assuming the PPI the doesn’t reveal any surprises.

Wednesday also brings us the release of the FOMC minutes. Traders will be looking for any indication of the Fed’s next move regarding monetary policy, particularly discussion about their first bump to key short-term interest rates. 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.

Thursday has the last piece of data with January’s Leading Economic Indicators (LEI) being posted at 10:00 AM ET. This Conference Board report attempts to predict economic activity over the next three to six months. It is expected to show a 0.3% 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.

Overall, I am expecting Wednesday to be the most active day for mortgage rates. The least important day is probably Friday as we could see changes to rates Tuesday morning after the long weekend. We will likely see a bit calmer of a week than recent as long as the FOMC doesn’t drop a bomb. Still, I recommend maintaining contact with your mortgage professional if still floating an interest rate as the threat of rates moving is a possibility.

Current Kitchen Trends

by Carla Hill

It’s the busiest room of the house, where families eat, entertain, and play. This is why today’s kitchen is getting a facelift. According to the latest release from Pulte Homes, one of America’s largest home builders, good kitchen design can sell a home. That’s why they’re putting their design efforts into model homes all across the nation.

“The kitchen is the center of activity for families,” said Janice Jones, vice president of merchandising for national homebuilder PulteGroup. With the popularity of open floor plan designs, Jones said the kitchen – more than ever before – has evolved into the most important part of the family’s communal space. “In the past, home design was driven by practicality, but now homeowners want function and design to meet – and it starts in the kitchen.”

Here are some of the latest trends:

Islands: These multi-functional spaces are perfect for informal meals, working on homework, and even family craft and art projects. In order to keep these spaces looking their best, for both personal enjoyment and resale, it’s important to keep them clutter free.

Color & Appliances: Kitchen design has gone two-tone! The newest emerging trend is for two-tone and contrasting colors on cabinets, counters, and even appliances. PulteGroup is rolling out new Black Ice and White Ice appliances offered by national partner Whirlpool. The new appliance designs are the outcome of extensive consumer research showing kitchens are trending toward more timeless, contemporary styling.

“This is the biggest visible news in the appliance world in years,” Jones said, adding that the new look was inspired by popular cutting edge high tech gadgets like Smartphones.

Storage: Can you ever have enough storage? For most families the answer is no. That’s why its important to maximize the use of all storage areas. Adding larger, deeper drawers, pop-up cabinets for heavier kitchen appliances (e.g. mixers), vertical pull-out drawers for large trays, and even shallow storage compartments in previously wasted areas under the sink or stovetop are great suggestions.

“Right now, it’s all about style and selections meeting convenience and multi-functionality in the kitchen,” Jones said.

Finishes: Every few years, it seems, finish trends change in homes and kitchens across the nation. What was once in is now passe. Just consider the avocado appliances or country blue counters of yesterday!

Today’s trends lend themselves to old world vintage charm. Oil rubbed bronze fixtures reign supreme. In addition you’ll find:

• Tile with natural-looking materials and larger formatted designs
• Glazed cream colored cabinets
• Painted cabinetry in grey tones
• Contrasting wood floors
• Larger islands that serve as nook spaces
• Contemporary cabinet hardware

Quartz solid surface manufactured surfaces – “they are becoming favored as much as granite and are expected to continue to gain popularity”
“Only 20% of homebuyers have the confidence to visualize and colorize the space. Most homebuyers we talk with tell us they want help in designing their home because going through all the options themselves is a lot of work and stress,” Jones said. “This is why showing the latest trends and demonstrating what’s possible is so important.”

Images on pulte.com allow users to visualize a custom kitchen space by selecting from a variety of colors and finishes – from flooring to wall color.

Happy Birthday, President Lincoln

Happy Birthday today to our 16th president!

A Bit of History

He was born in 1809 in the backwoods of Kentucky. He had very limited access to books, and so he spent a lot of time studying the books he did have, and mastered them.

He served in the Illinois Militia and achieved the rank of Captain during the Black Hawk war.

We know he became a lawyer, but what you don’t know is his first positions were as New Salem’s postmaster and later as county surveyor, all the while reading voraciously. He then decided to become a lawyer and began teaching himself law by reading.

He finally succeeded in getting elected to the Illinois Assembly in 1834 on his second try, and served four terms.

In 1846, Lincoln was elected to the U.S. House of Representatives, and then the President in 1860 and took office March 4, 1861.

Fun Trivia

(With thanks to this trivia site)

In 1842, Lincoln accepted a challenge to a duel from James Shields, the Democratic State auditor. Shields was furious over a satiric letter in a local paper. Actually, the letter had been written by Lincoln’s fiancee, Mary Todd, but Lincoln willingly took responsibility. Since he was given the choice of weapons, Lincoln, chose broadswords–with his 6’4″ frame and his enormous arms, Lincoln had an considerable advantage over his diminutive opponent when it came to dueling with swords. Shields wisely decided to make up his differences with Lincoln and the scheduled duel failed to take place.

Lincoln was the only President ever to obtain a patent. In 1849 he invented a complicated device for lifting ships over dangerous shoals by means of “buoyant air chambers.” Unfortunately, U.S. Patent No. 6,469 was never put into practical use.

The clutter in Lincoln’s law office was notorious, and a continual source of irritation to his partner, William Herndon. On his desk, Lincoln kept one envelope marked “When you can’t find it anywhere else, look into this.”

After the death of his son Willie, Lincoln was persuaded by his wife to participate in several seances held in the White House. Lincoln was deeply interested in psychic phenomena and wanted to communicate with his dead son. Once the President reported that he had attended a seance in which a piano was raised and moved around the room. It was the professional opinion of the mediums who had worked with him that Lincoln was definitely the possessor of extraordinary psychic powers.

And in addition to that, Lincoln took his dreams seriously. On one occasion he wrote to his wife to be watchful with their son Tad because Lincoln had experienced an “unpleasant” dream. On the day of his assassination, April 14, 1865, he was so troubled by a dream that he actually discussed it at a Cabinet meeting. He told his colleagues that he had seen himself sailing “in an indescribable vessel and moving rapidly toward an indistinct shore.” Even more explicit was a dream that he discussed just a week before he was shot. In his dream, Lincoln awoke, and walked through the silent White House, following the sound of sobbing. When he came to the East Room, he saw a catafalque draped in black. “Who is dead?” Lincoln asked. A military guard replied that it was the President.

Lincoln was the 1st major leader in our history to favor extending the vote to women. In 1836–a full 12 years before the 1st woman’s rights convention had even convened–State legislator Lincoln gave an Illinois paper a statement endorsing “female suffrage.”

When an 1860 campaign document boasted that the self-educated Lincoln spent his spare time reading Plutarch, Honest Abe sat down immediately to validate the claim by reading the Lives for the 1st time.

Why Mortgage Rates Change So Much

Did you ever wonder why mortgage rates fluctuate so much and you’re encouraged to lock in a rate? Why can’t they just stay the same for a few weeks or a few months.

Interest rates are a little like stock prices in that they change based upon supply and demand, and the rates are affected by inflation rates. Additionally, they are impacted by the secondary mortgage market.

Every Monday, we post the Weekly Market Commentary that reviews the economic reports being released that week. They detail what the report is, when it’s being released, and how it might affect interest rates.

What Is the Secondary Mortgage Market?

The secondary mortgage market is where loans and servicing rights are sold by market leaders Fannie Mae and Freddie Mac, and also purchased by investors such as mutual fund companies, banks, hedge funds, and teacher and municipal pension funds. (see more information in this Yahoo! Homes blog post)

What are the other things that impact the rates?

From Homeguides in the San Francisco Chronicle:

Growth

The economy naturally grows and shrinks and is very sensitive to events within the economy as well as outside the economy. When the economy is on a growth path the demand for money increases and interest rates are pushed upward. The opposite is true when economic growth slows or stops.

Inflation

A key concern during periods of economic growth is inflation. Inflation increases prices and deteriorates spending power in the economy, which slows growth. The implication for future homeowners is that inflation pushes mortgage rates higher as lenders increase interest rates to hedge against the effects of inflation on profits, making home buying more expensive.

Federal Reserve Board

Economic activity is measured nationally to determine the appropriate interest rate.

Money Supply

Although the Federal Reserve is unable to directly set interest rates, the agency can influence rates indirectly by increasing or decreasing the supply of money in the economy. By increasing the money supply, the Federal Reserve puts downward pressure on interest rates. Decreasing the money supply puts upward pressure on interest rates. Consequently, if the Federal Reserve decreases interest rates, mortgage rates come down and borrowing for a home purchase is cheaper and encourages home buying.

We’ve written posts on how this is going to impact not only mortgage rates but fees that are charged. With all of these factors, rates can change frequently.

So What’s This Mean For You?

Work with a reputable mortgage loan officer. A good loan officer will diligently monitor interest rates for their clients, and advise them of opportunities to manage their mortgage debt at a better rate. They will also let you know up front about industry trends that may impact your rate, and offer recommendations as to the best time to lock in a rate during the process.

Market Commentary for the Week of February 9th

This week brings us the release of only two pieces of monthly economic data that are relevant to mortgage rates in addition to two Treasury auctions. One of the economic reports is considered highly important to the markets, but the other is not likely to be a market mover. We still could see a fair amount of movement in mortgage rates though, especially if stocks make a sizable move upward or downward.

Nothing of concern is due Monday, Tuesday or Wednesday morning, leaving bond trading to be driven by the stock markets and overseas financial news the first half of the week. If the major stock indexes move 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.

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 an 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 result in upward afternoon revisions to mortgage rates.

The 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 than the 0.5% decline that is expected could lead to higher mortgage rates Thursday.

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 98.5, up a little from January’s final reading of 98.1. That would indicate consumers were a little more optimistic about their own financial situations than last month and are more 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 negative news for bonds and mortgage pricing. Ideally, we would prefer to see a large decline in confidence.

Overall, I believe we will see the most movement in rates the latter part of the week. Friday’s Employment report caused a strong sell-off in bonds that picked up pace as the day progressed. That caused most lenders to revise pricing higher during afternoon trading, but bonds continued to slide after many of those increases were posted. That could leave many lenders heading into the new week with a small increase waiting to be built into Monday’s rates. This means Monday may also be active for mortgage rates despite the release of any relevant economic data. I see Thursday as the best candidate for the most important day and Tuesday being the least active, assuming stocks remain calm most of the week. However, despite it being a relatively light week in terms of economic releases, I still recommend maintaining contact with your mortgage professional of still floating an interest rate.

Market Commentary for the Week of February 2nd

This week brings us the release of six 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 for release all five days though, we should see another active week for mortgage rates.

The first report comes early Monday morning when December’s Personal Income and Outlays data is posted at 8:30 AM ET. It gives us an indication of consumer ability to spend and current spending habits, making it relevant to the bond market and mortgage rates. Current forecasts call for an increase in income of 0.3% meaning consumers had a little more money to spend in December than they did in November. The spending reading is expected to fall 0.2%, indicating consumers spent less last month than the previous month. Stronger readings would be good news for the stock markets and could hurt bond prices, driving mortgage rates higher. Weaker than expected increases or declines would be considered good news for the bond market and mortgage rates as it would hint that consumer spending is weaker than thought, limiting economic growth.

Also set for release Monday is the Institute of Supply Management’s (ISM) 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 54.7, which would be a decline from December’s reading of 55.5. The lower the reading, the better the news for the bond market and mortgage rates because weaker 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 2.0% 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’s only report worth watching is the ADP Employment report at is set for release at 8:15 AM ET. This release has the potential to cause some movement in the markets if it shows much stronger or weaker numbers. It 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 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 see a reaction to its results, it is included in 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 0.2% 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.

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 5.6% and approximately 235,000 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 easily 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 Thursday. I am fully expecting to see another 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.