This week has six economic reports scheduled that we will be watching in addition to a couple of Treasury auctions. The most important data will come late in the week, but the earlier events can still lead to minor changes in mortgage rates. There is nothing of importance set for tomorrow that is expected to influence mortgage pricing.
Starting the week’s calendar will be December's Existing Home Sales from the National Association of Realtors late Tuesday morning. This data will give us a measurement of housing sector strength and mortgage demand by tracking home resales in the U.S. It is expected to show a decline in sales from November's level, meaning the housing sector softened last month. Ideally, bond traders would like to see a large decline in sales that would point toward sector weakness because a weaker housing makes broader economic growth more difficult. However, as long we don't see a significant surprise in its results, it shouldn't have a noticeable impact on Tuesday's mortgage rates.
Wednesday has no relevant economic data being released, but it does bring us the first of this week’s two relatively important Treasury auctions. The Treasury will auction 5-year and 7-year Notes Wednesday and Thursday respectively. If the sales are met with a strong demand from investors, the broader bond market may improve during afternoon hours. If they draw a lackluster interest, they could lead to bond selling and higher mortgage rates mid-afternoon Wednesday and/or Thursday.
There are two monthly reports set for release late Thursday morning. The first is December's New Home Sales that is considered to be the sister release to Tuesday's Existing Home Sales report. This report will also give us insight into the housing sector, but tracks a much smaller portion of home sales. Current forecasts are calling for a small decline in sales of newly constructed homes. However, this data is not important enough to heavily influence mortgage pricing unless it varies greatly from forecasts.
December's Leading Economic Indicators (LEI) will also be released at 10:00 AM ET Thursday. The Conference Board, who is a New York-based business research group, compiles the data and releases this report. It attempts to predict economic activity over the next several months, but since it is posted by a non-governmental agency, it is not considered to be of high importance to the financial and mortgage markets. Thursday's release is expected to show a 0.4% increase, meaning the indicators are predicting growth in economic activity over the next several months. As long as we don't see a much stronger than predicted increase, I don't think this data will have much of an influence on mortgage pricing either.
Friday has the remaining three reports, including two of the week’s most important releases. The day will start with what is arguably the single most important economic report that we see regularly. This would be the initial quarterly Gross Domestic Product (GDP) reading. Friday's release is the first of three we will get for the 4th quarter. This data is so important because it is considered to be the best measurement of economic activity. The GDP itself is the total sum of all goods and services produced in the United States. Its results usually have a major impact on the financial markets and can cause significant changes in mortgage rates. This initial reading will be followed by two revisions, each released approximately one month apart. Last quarter's first reading, which usually carries the most significance, is expected to show the economy grew at an annual rate of 2.2%. A noticeably weaker reading would be great news for the bond market, questioning the strength of our economy. That would likely fuel stock selling and a rally in bonds that should push mortgage rates lower Friday morning. However, a larger than expected increase, indicating the economy was stronger than thought, will probably fuel bond selling and lead to higher mortgage rates.
Next is December's Durable Goods Orders, also at 8:30 AM ET. It helps us measure manufacturing strength by tracking new orders at U.S. factories for products that are expected to last three or more years. These are also known as big-ticket items and include things such appliances, electronics and airplanes. The data is known to be quite volatile from month-to-month, so a large headline number isn’t necessarily a concern. It is expected to show a rise in orders of 3.0%. A large drop in orders would be considered good news for bonds and mortgage rates. Even though this an important report, a slight variance likely will have little impact on Friday's mortgage pricing because of the large swings that are common in the data. The large decline that would indicate weakness in the manufacturing sector and be good news for mortgage rates.
The final economic report of the week is the revised reading to the University of Michigan's Index of Consumer Sentiment just before 10:00 AM ET Friday. This index is another measurement of consumer confidence that is thought to indicate consumer willingness to spend. I don't see this data having much of an influence on the markets or mortgage rates because of the importance of the first two releases. Analysts are expecting to see little change from the preliminary reading of 98.1. A large increase would mean consumers are more likely to make a large purchase in the near future, fueling economic growth.
Overall, Friday is likely to be the most active day for mortgage rates. The rest of the week has little to be concerned with or excited about. Stocks may play a heavy role in bond direction if they make a move higher or lower the next few days. It appears that we may have a fairly calm week in the bond and mortgage markets, but it is strongly recommended that you maintain contact with your mortgage professional if still floating an interest rate and closing in the near future as the markets can get active at any moment.