This holiday-shortened week has eight 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.
November's Housing Starts will start the week’s calendar at 8:30 AM ET Tuesday morning. This data isn't known to be highly influential on bonds or mortgage pricing, but it does give us an indication of housing sector strength by tracking new home groundbreakings. Analysts are expecting to see a small drop in new home starts, indicating weakness in the new home portion of the housing sector. Slowing starts would be favorable for the bond market, although a wide variance is likely needed for the data to cause noticeable movement in the markets or mortgage rates Tuesday morning.
Existing Home Sales figures for November will be posted at 10:00 AM ET Wednesday morning. The National Association of Realtors is expected to announce an increase in home resales last month, indicating housing sector growth. 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.
Thursday has a monthly and a quarterly report that are relevant to mortgage rates. The quarterly release is the 2nd 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, 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 3.3% annual pace during the quarter and this month's final revision is expected to show the same. 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, I am not expecting this release to affect rates Thursday.
November's Leading Economic Indicators (LEI) from the Conference Board is the second 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 0.4% increase, meaning that it is predicting 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.
The week’s calendar closes with four pieces of economic data Friday 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 2.1% rise in new orders. A decline 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 Friday 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.
Next up is November's Personal Income and Outlays data, also at 8:30 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 0.4% 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 Friday morning, especially if the Durable Goods Orders report gives us favorable results also.
The third report of the day will be the revised University of Michigan Index of Consumer Sentiment for December. Current forecasts are calling for a slight increase (97.1 from 96.8), meaning surveyed consumers felt a little better about their own financial and employment situations than they did in November. 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 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 in sales would be considered favorable for bond prices and mortgage rates. Current forecasts are calling for a decline in sales of newly constructed homes. Ideally, we would like to see a large drop in sales.
Overall, it is likely going to be another very active week for the financial and mortgage markets. The week starts off slow but picks up momentum quickly. Besides the couple of economic reports set for release the first half, we also have the tax reform vote that may come into play. The markets are expecting it to pass, so a vote in favor of it shouldn’t have too much of an impact on rates. However, any hint of a possible problem getting enough Senate votes in favor should fuel a bond rally. The week’s most important data comes late in the week, so we should get the most movement in rates those days. It is worth noting that the bond market will close early Friday afternoon ahead of next Monday’s Christmas Day holiday and will reopen Tuesday morning. With so much going on this week, it is strongly recommended that you maintain contact with your mortgage professional if still floating an interest rate and closing in the near future.