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Mortgage Market Update


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This week has only three pieces of economic data scheduled for release that have the potential to influence mortgage rates. All of the week’s events are set to take place the latter days, so we could see the most movement in rates later in the week. We also need to watch stocks since we are still in corporate earnings season, especially after Friday’s stock sell-off. There is nothing of importance scheduled for tomorrow or Tuesday, meaning we can look towards stocks to help determine bond and mortgage rate direction early in the week. March's Existing Homes Sales numbers from the National Association of Realtors will be posted at 10:00 AM ET Wednesday. This report gives us an indication of housing sector strength and mortgage credit demand. It is considered to be moderately important to the markets, but can influence mortgage pricing if it shows a sizable variance from forecasts. Ideally, the bond market would like to see a drop in home resales because a soft housing sector makes broader economic growth more difficult. Analysts are expecting to see an increase in sales between February and March. The larger the increase, the worse the news it is for bonds and mortgage rates. The sister release to that report is March's New Home Sales late Thursday morning, but it tracks a much smaller portion of all home sales than Wednesday's report does. It also gives us an indication of housing sector strength and future mortgage credit demand, however, unless it varies greatly from analysts' forecasts I am not expecting the data to cause much movement in mortgage rates. Analysts are currently forecasting a decline in sales of newly constructed homes. Friday's only relevant data is March's Durable Goods Orders that will be released at 8:30 AM ET. This report gives us an indication of manufacturing sector strength by tracking orders for big-ticket items at U.S. factories. These are products that are expected to last three or more years, such as appliances, electronics and airplanes. Current forecasts are calling for an increase in new orders of 0.5%. This would be a sign of manufacturing sector strength, but this data can be quite volatile from month-to-month. Therefore, a small variance between forecasts and the actual results will not heavily influence the markets or mortgage rates. A large decline would be considered good news for bonds and mortgage pricing, while a large rise would indicate strength in the sector. A sign of solid manufacturing growth could lead to higher mortgage rates Friday. Overall, I believe Friday is the best candidate for most active day due to the importance of the Durable Goods report. However, no day is an obvious choice, so don’t be surprised to see movement in rates multiple days. The calmest day will likely be Tuesday unless something unexpected happens or stocks stage a strong rally or sell-off.

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