What Will Move Mortgage Rates In The Week Ahead?

By: Victor Burek •

Mortgage rates capped off a great week in sour fashion last Friday. After four days of stock selling induced rate rallying, lenders were finally forced to reprice for the worse on Friday. While mortgage rates did rise more than they have on average, the best 30 year conventional fixed loan rate was still seen near the best levels of the year.

The week ahead offers and entire menu of mortgage rate influential events including two gauges of consumer spending and sentiment, three Treasury debt auctions, and a full foursome of housing releases. On top of that we will contend with investor sentiment surrounding the ongoing European debt crisis (contagion), hopefully the Federal Reserve will use one it's scheduled speech events as an opportunity to calm the concerns in the market.

Today

  • Sales of Existing Homes Inventory rose in April as the homebuyer tax credit came to a close (completed transactions on single-family, townhomes, condominiums and co-ops)
  • Existing-home sales:  +7.6 percent to an annual rate of 5.77 million units from 5.36 million in March (upwardly revised from 5.35 million). This is a 22.8 percent increase from one year earlier (April 2009).
  • Home prices rose in 18 of 20 metro regions according to the NAR
  • Inventory increased 11.5 percent. This represents 8.4 months of supply at the current pace of sales
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Tuesday

 See Rates from Lenders in Your Area
  • Influential Housing Data: The S&P/Case Shiller Home Price Index. This data tracks the monthly change in the value of residential real estate across the United States.
  • Rising Consumer Confidence: An optimistic consumer is more likely to spend money in the economy. Stocks benefit from increased Consumer Confidence readings. Economists expect that Consumer Confidence rose in May.
  • First Treasury Auction of the Week: $42 billion 2 Year Treasury notes. This debt sale will likely be met with high demand as investors continue to seek out safe investments. This is the least important Treasury auction of the week.

Wednesday

  • Mortgage Bankers Association Applications Index. Normally this data is paid little attention by market participants, however the housing market is under a great deal of scrutiny at the moment because of the expiration of the tax credit. If housing continues to trend downward, this data release could become a blip on the radar of traders.
  • Durable Goods Orders. How many new orders were placed for the immediate and future delivery of factory produced goods that are intended to lastrt longer than three years. Basically this report tells us how busy factories will be in the months ahead. A busy factory means there is demand for durable goods, which implies the engines of American economic growth are running. 
  • Another Housing Barometer: New Home Sales.  Everyone is looking for housing to fall flat on its face now that the tax credit has expired. New data will either confirm this sentiment or prove it wrong. Every release means a little more nowadays.
  • Treasury Auction #2: $40 billion 5 Year Treasury notes. Strong demand for our nation’s debt can help mortgage rates hold at present levels while weak demand would pressure mortgage rates higher. Barring a major move up in stocks, this second most important debt auction of the week will likely go well just as the 2 year note auction will go on Tuesday.

Thursday

  • Gross Domestic Product. Revisions to the first estimate of U.S. Economic Output: Preliminary First Quarter GDP. The "advance" print was +6.5%. Should be a tad weaker on the first revision. Medium impact potential.
  • Jobless Claims. April is looking to have been a better month for the labor market than May. Recent Jobless Claims releases have been at stubbornly high levels. The market might shrug this off depending on what else is going on in the headlines on Thursday morning. 
  • Last Treasury Auction of the Week: $31 billion 7 Year Treasury notes. This is the most mortgage rate influential auction of the week. Again, all these auctions should go well as the flight to safety is still in place. 

Friday

  • Bond Market closes at 2pm so investors can get to the pool for Memorial Day weekend!!!
  • Consumer Spending drives our economy. Personal Income and Outlays will be released at 8:30 on Friday morning. This report is expected to make a splash. A healthy consumer is a major part of a healthy economy.
  • Consumer Sentiment rounds out the busy week. Friday is about you and what you've been and what you plan to be doing with the money in your wallet (or lack thereof).

HERE is a full calendar with expectations and the full range of consensus estimates.

Reports from fellow mortgage professionals indicate lender rate sheets to be worse when compared to loan pricing issued on Friday.  The par 30 year conventional mortgage rate does however remain in the 4.625% to 4.875% range for well qualified consumers.  To secure a par interest rate on a conventional mortgage you must have a FICO credit score of 740 or higher, a loan to value at 80% or less and pay all closing costs including an estimated one point loan origination/discount/broker fee.  You can elect to pay less in closing costs but you will have to accept a higher interest rate.

I continue to favor locking all loans closing within 30 days and encourage you to consider 45 and 60 day locks for longer term closings.  I see very little to gain by floating. READ MORE ABOUT OUR LOCK/FLOAT STANCE