Thursday’s bond market has opened in negative territory even though this morning’s economic data gave us favorable results. Stocks are showing moderate gains of 67 points in the Dow and 15 points in the Nasdaq. The bond market is currently down 5/32 (1.93%), which should push this morning’s mortgage rates slightly higher.
30 yr - 1.93%
Indexes Affecting Rate Lock
Existing Home Sales from National Assoc of Realtors
The first of this morning’s two economic reports were November’s Existing Home Sales figures that revealed a 1.7% decline in home resales. Analysts were expecting to see little change from October’s sales, meaning the housing sector was softer than thought last month. That makes the data good news for bonds and mortgage rates because a weakening housing sector makes broader economic growth less likely. Unfortunately, it was a small variance in a moderately important report. Therefore, we have seen little reaction to the news.
Leading Economic Indicators (LEI) from the Conference Board
Also posted late this morning was November's Leading Economic Indicators (LEI). The Conference Board announced no change from October’s level. That indicates they are predicting flat economic activity over the next three to six months. Since forecasts were calling for a slight increase, we can also consider this report good news for rates.
Personal Income and Outlays
We have three relevant reports scheduled tomorrow morning, starting with November's Personal Income and Outlays data at 8:30 AM ET. It tracks consumer ability to spend and current spending habits. Since consumer spending makes up over two-thirds of the U.S. economy, any related data usually has a noticeable impact on the financial markets and mortgage rates. Current forecasts are calling for a 0.3% increase in income and a 0.4% increase in spending. This report also includes the Fed’s preferred inflation reading (PCE index), helping to elevate the report’s importance. If it reveals weaker than expected readings, we should see the bond market improve and mortgage rates drop tomorrow morning.
GDP Rev 2 (month after Rev 1)
The second report of the day will be the third estimate and second revision to the 3rd Quarter Gross Domestic Product (GDP). The GDP is the total of all goods and services produced in the U.S. and is the benchmark reading of economic growth. However, this data likely will not have an impact on mortgage rates unless it varies greatly from its expected reading. Last month's first revision showed that the economy expanded at a 2.1% annual pace during the quarter, up slightly from the initial estimate. This month’s update is expected to show the same 2.1% rate of growth. A revision higher would be considered bad news for bonds. But since this data is quite aged at this point and 4th quarter numbers will be posted next month this release likely will not affect mortgage rates.
University of Michigan Consumer Sentiment (Rev)
Lastly, the revised University of Michigan Index of Consumer Sentiment for December will be posted at 10:00 AM ET tomorrow. Current forecasts are calling for no change from the 99.2 that was announced earlier this month. This means surveyed consumers felt no better or worse about their own financial and employment situations than previously estimated. Bond traders would prefer to see a decline because waning confidence usually means consumers are less likely to make a large purchase in the near future, restricting economic growth. Therefore, the lower the reading, the better the news it is for mortgage rates.
Float / Lock Recommendation
If I were considering financing/refinancing a home, I would.... Lock if my closing was taking place within 7 days... Lock if my closing was taking place between 8 and 20 days... Float if my closing was taking place between 21 and 60 days... Float if my closing was taking place over 60 days from now... This is only my opinion of what I would do if I were financing a home. It is only an opinion and cannot be guaranteed to be in the best interest of all/any other borrowers.