This week has seven monthly and quarterly economic reports set for release that may influence mortgage rates. None are considered key pieces of data but several carry enough importance to cause changes to mortgage pricing if they show surprises. The first part of the week is light with little scheduled to drive trading tomorrow and Tuesday.
November's Existing Home Sales figures will start the week’s calendar at 10:00 AM ET Tuesday morning. The National Association of Realtors is expected to announce a small decline in home resales last month, indicating a slowing housing sector. This report will give us a measurement of housing sector strength and mortgage credit demand. A sizable decline in sales would be considered positive for bonds and mortgage rates because a softening housing market makes broader economic growth more difficult. But unless the actual sales figures vary greatly from forecasts, the results will probably have a minor impact on mortgage rates.
There are four pieces of economic data being posted Thursday morning. The day starts with November's Durable Goods Orders at 8:30 AM ET. This data gives us an important measurement of manufacturing sector strength by tracking orders for big-ticket items or products that are expected to last at least three years such as appliances, airplanes and electronics. Analysts are expecting the report to show a 4.5% decline in new orders. A larger drop in new orders would indicate that the manufacturing sector was weaker than many had thought. This would be good news for the bond market and should help push mortgage rates lower. However, a large jump in orders could lead to mortgage rates moving higher early Thursday morning. This data is known to be quite volatile from month-to-month though, so it is not unusual to see large headline numbers in this report.
The second release of the day is the final revision to the 3rd Quarter Gross Domestic Product (GDP). I don't think this data will 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 3.2% annual pace during the quarter and this month's final revision is expected to show a 3.3% growth rate. A revision higher than that 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, I am not expecting this release to affect rates Thursday.
Next up is November's Personal Income and Outlays data, at 10:00 AM ET. It will give us an important measurement of 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. If this report reveals weaker than expected readings, we could see the bond market improve and mortgage rates drop slightly Thursday morning, especially if the Durable Goods Orders report gives us favorable results also.
November's Leading Economic Indicators (LEI) from the Conference Board is the final report Thursday morning. This release attempts to measure or predict economic activity over the next three to six months. It is expected to show a 0.1% increase, meaning that it is predicting modest economic growth over the next several months. This probably will not have much influence on bond prices or affect mortgage rates unless it shows a much stronger reading than forecasts. The weaker the reading, the better the news it is for bonds and mortgage pricing.
Friday has two reports being posted, both at 10:00 AM ET. The first is the revised University of Michigan Index of Consumer Sentiment for December. Current forecasts are calling for a slight increase (98.2 from 98.0), meaning surveyed consumers felt a little better about their own financial and employment situations than they did in October. 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.
November's New Home Sales data is the final monthly economic report of the week. This report gives us another measurement of housing sector strength and mortgage credit demand. It is the sister report of Wednesday's Existing Home Sales report, but covers a much smaller portion of the housing market than that one does. A weakening housing sector is considered good news for the bond market and mortgage rates because broader economic growth is less likely in the immediate future. Since bonds tend to thrive in weaker economic conditions, a large decline would be considered favorable for bond prices and mortgage rates. Current forecasts are calling for an increase in sales of newly constructed homes. Ideally, we would like to see a large drop in sales.
We also have an early closing this week that sometimes can influence trading. The bond market will both close early Friday ahead of Sunday's Christmas Day holiday. All the financial markets will be close next Monday and will reopen for regular trading hours Next Tuesday. It is fairly common for some traders to sell small portions of their holdings before a holiday or long weekend to protect themselves from unforeseen events that may take place while U.S. markets are closed.
Overall, Thursday is the most important day with a majority of the week’s data coming then. Tuesday is likely to be the calmest day for rates. Fed Chair Janet Yellen does have a speaking engagement at the University of Baltimore tomorrow afternoon and the markets always listen closely when Fed members are speaking. This means we have to watch it although it is not too concerning. I suspect that we will see movement in rates multiple days, but this week will likely not be as active as the previous couple.