This week brings us the release of only four monthly economic reports for the markets to digest. Only one of them is considered to be very important to mortgage rates and it comes at the end of the week. The biggest news of the week though will be the FOMC meeting and related events mid-week. The first couple days have nothing of importance in terms of relevant economic data, so we could see the week start off slowly.
The first report will come late Wednesday morning when February's Existing Home Sales report is posted by the National Association of Realtors. It will give us a measurement of housing sector strength and mortgage credit demand. It is expected to reveal an increase in home resales, meaning the housing sector strengthened last month. Ideally, bond traders would prefer to see a large decline in sales, pointing towards a rapidly weakening housing sector. Bad news would be a sizable increase in sales, indicating that the housing sector is gaining momentum. That could be troublesome for the bond market and mortgage rates because housing strength makes broader economic growth more likely.
Wednesday also has several Fed events scheduled. They start with the 2:00 PM ET adjournment of the two-day FOMC meeting that begins Tuesday. There is a pretty wide consensus that new Fed Chairman Jerome Powell and friends will raise key short-term rates by a quarter point at this meeting. Since the move won’t come as much of a surprise if they do act, market participants will be focused on the Fed’s timetable for future rate hikes. The markets are currently expecting them to make three bumps this year, including this week’s. If the post-meeting statement gives any hints of a fourth rate hike this year, expect the bond market to react negatively and mortgage rates to spike higher.
The FOMC meeting will adjourn at 2:00 PM ET, which is when the statement will be released. That is also when we will get the Fed's updated economic projections. Those events will be followed by a press conference by Chairman Powell, his first as head of the Fed. It is likely going to be a pretty active afternoon in the financial and mortgage markets.
Thursday's monthly report is Leading Economic Indicators (LEI) for February from the Conference Board. This index attempts to measure economic activity over the next three to six months. It is considered to be moderately important, but likely will not have a significant impact on mortgage rates. Current forecasts are calling for a 0.5% increase, meaning it is predicting that economic activity will likely expand moderately in the coming months. A smaller than forecasted rise, or better yet a decline would be considered good news for the bond market and mortgage rates.
Friday has the final two reports set for release, starting with February's Durable Goods Orders at 8:30 AM ET. This Commerce Department report gives us a measurement of manufacturing sector strength by tracking new orders for big-ticket items, or products that are expected to last three or more years such as electronics, appliances and airplanes. This data is known to be volatile from month to month but is still considered to be of high importance to the markets. Analysts are expecting it to show an increase in new orders of approximately 1.5%. A larger increase in orders would be considered negative for bonds as it would indicate strength in the manufacturing sector and could lead to higher mortgage rates Friday morning. Since these orders are volatile from month to month, it will take a wider variance from forecasts for it to move mortgage rates than other data requires.
The week’s calendar closes with February's New Home Sales figures at 10:00 AM ET. The Commerce Department is expected to announce an increase in sales of newly constructed homes. This report tracks a much smaller percentage of home sales than Wednesday's Existing Home Sales report covers, so it should have a much weaker influence on the markets and mortgage pricing. A large increase in sales would be negative for the bond market and mortgage pricing because it would point towards economic strength.
Overall, Wednesday is the key day of the week due to the afternoon Fed events. The calmest day is harder to predict but tomorrow or Tuesday are the best candidates. There is a strong likelihood that we will see plenty of movement in the markets and mortgage rates this week, most likely the latter days. Accordingly, it would be prudent to maintain contact with your mortgage professional if still floating an interest rate and closing in the near future.