Daily Mortgage Rate Lock Advisory

There are five relevant economic reports scheduled for release this week, but they are being posted over four days because the markets were closed today in observance of the Labor Day holiday.

The first piece of data this week comes tomorrow morning with the release of the Institute for Supply Management’s (ISM) manufacturing index at 10:00 AM ET. This index measures manufacturer sentiment and is expected to show a decline from last month’s reading of 50.0 to 49.5 in August. A reading above 50 means that more surveyed manufacturers felt business improved during the month than those who felt it worsened. An increase in the index would probably cause a rally in the stock markets and lead to mortgage rates rising tomorrow, while a reading below 49.5 should lead to lower rates.

The second report of the week is July’s Factory Orders data Wednesday morning. This report measures manufacturing sector strength and is similar to last wee k’s Durable Goods Orders, but includes orders for both durable and non-durable goods. This data is expected to show a 0.4% increase in new orders. A smaller than expected rise should lead to lower mortgage rates Wednesday.

Also scheduled for release is the Wednesday afternoon Federal Reserve release of its Beige Book report. This report details current economic conditions in the U.S. by region. It is believed to be a key source of data when the Fed meets for their FOMC meetings. It is usually released approximately two weeks prior to each FOMC meeting. If the 2:00 PM ET release reveals any significant surprises, we may see movement in the markets and mortgage pricing as analysts adjust their theories on the Fed’s next interest rate move. Most likely though, it will be a non-event and will not lead to a change in mortgage rates.

Thursday morning brings us the revision to the 2nd Quarter Productivity numbers, which measures employee productivity in the wo rkplace. It is expected to show an upward change from the previous estimate of a 2.2% annual pace. Forecasts are currently calling for a reading of 2.9%, which would be good news for the bond market and possibly lead to slightly lower mortgage rates Thursday morning.

The big news of the week comes Friday morning. The Labor Department will post the unemployment rate, number of new jobs added or lost and average hourly earnings for August early Friday. The ideal scenario for the bond market and mortgage rates is rising unemployment, a smaller than expected rise in new payrolls and earnings to remain unchanged. If we are that fortunate, I expect to see mortgage rates drop considerably Friday morning. Analysts are expecting to see the unemployment rate remain at 5.7% and 70,000 jobs lost in the month. Weaker then expected readings would be very good news for bonds and mortgage rates.

Overall, I expect to see the most movement in rates Friday, but Tuesday s hould also be fairly active. I am holding the short-term lock recommendations for the time being as there still seems to be plenty of profit taking opportunities for traders if they choose to do so. This could lead to a spike in mortgage rates if traders sell holdings to capture those gains. This does not mean that I think rates will necessarily move higher. It means that I feel the risk versus the potential reward of continuing to float an interest rate is leaning heavily towards the risky side. Accordingly, locking seems to be the prudent position at this time.

If I were considering financing/refinancing a home, I would…. Lock if my closing was taking place within 7 days… Lock if my closing was taking place between 8 and 20 days… Float if my closing was taking place between 21 and 60 days… Float if my closing was taking place over 60 days from now… This is only my opinion of what I would do if I were financing a home. It is only an opinion and cannot b e guaranteed to be in the best interest of all/any other borrowers.

Friday’s bond market has opened in negative territory despite sizable stock losses. The stock markets in selling mode with the Dow down 145 points and the Nasdaq down 40 points. The bond market is currently down 3/32, which will likely keep this morning’s mortgage rates at yesterday’s levels.

July’s Personal Income and Outlays was the first piece of economic data posted this morning. It showed that spending rose 0.2% as it was expected to, but a surprising drop of 0.7% in income was the largest decline in three years. This indicates that consumers have less income to spend than thought, which will likely translate into slower consumer spending. That is considered good news for bonds and mortgage rates.

August’s revision to the University of Michigan’s Index of Consumer Sentiment was also posted, showing a 63.0 reading. That was a full point higher than analysts had predicted, meaning that consumers were more optimistic about their own financia l situations than many had thought. This is considered bad news for bonds and mortgage pricing because increasing sentiment usually means consumers are more willing to make large purchases in the near future.

The bond market will close at 2:00 PM ET today ahead of the Labor Day holiday. It will remain closed Monday and reopen Tuesday morning. The stock markets will be closed Monday also. It does not appear that this early close is going to affect trading much, but I have extended the lock recommendation to short-term period closings as a precautionary move.

Next brings us the release of a couple of important reports, including Tuesday’s release of August’s ISM manufacturing index that measures manufacturer sentiment. We also will get August’s employment figures next week along with a couple of other relevant releases. Look for more details on next week’s events in Sunday’s weekly preview.

If I were considering financing/refinancing a hom e, I would…. Lock if my closing was taking place within 7 days… Lock if my closing was taking place between 8 and 20 days… Float if my closing was taking place between 21 and 60 days… Float if my closing was taking place over 60 days from now… This is only my opinion of what I would do if I were financing a home. It is only an opinion and cannot be guaranteed to be in the best interest of all/any other borrowers.

Friday’s bond market has opened down slightly following the release of this morning’s economic news that had mixed results but leaned more towards unfavorable to bonds. The stock markets are also in negative ground with the Dow down 74 points and the Nasdaq down 30 points. The bond market is currently down 3/32, which will likely have little impact on this morning’s mortgage rates. However, if bonds fall any further we likely will see mortgage rates revise higher later today.

The Labor Department gave us this morning’s big news with the release of July’s Employment figures. They said that the unemployment rate moved higher by 0.2% to a four year high of 5.7%. Analysts were expecting an increase but only to 5.6%. This was the part of the report that was favorable to bonds.

The negative portion came in the number of payrolls added or lost during the month. Analysts were expecting to see a loss of 75,000 jobs last month, but today’s report showe d a loss of 51,000 payrolls. It also revised June’s loss upward by 11,000 jobs. However, this was the seventh consecutive monthly decline in payrolls, which indicates that the employment sector remains soft. Generally speaking, that is good news for bonds even though its not as good as we had hoped for.

Today’s second release was the Institute for Supply Management’s (ISM) Manufacturing Index for July. It showed a stronger than expected reading of 50.0. Analysts were expecting to see a larger decline to a reading of 49.2. This means that more surveyed manufacturers felt business had improved during the month than was expected. That is also considered to be a negative for bonds, but was not enough to create much concern in the market.

Next week brings us a handful of relevant economic reports for the markets to digest, beginning with July’s Personal Income and Outlays early Monday morning. This report is considered to be moderate-to-high in import ance and can influence bond trading and mortgage rates. However, I would not expect to see a significant move in rates solely as a result of this report.

The rest of the week includes data on manufacturing and worker productivity along with another Federal Open Market Committee (FOMC) meeting. Look for more details on this meeting and next week’s events in Sunday’s weekly preview.

If I were considering financing/refinancing a home, I would…. Lock if my closing was taking place within 7 days… Float if my closing was taking place between 8 and 20 days… Float if my closing was taking place between 21 and 60 days… Float if my closing was taking place over 60 days from now… This is only my opinion of what I would do if I were financing a home. It is only an opinion and cannot be guaranteed to be in the best interest of all/any other borrowers.