Mortgage Market Update

This holiday-shortened week brings us the release of five relevant economic reports for the markets to digest. All of the week's mortgage-relevant events are being posted over just two days, partly due to the Thanksgiving holiday. Therefore, the middle days of the week should be the most interesting for mortgage shoppers. 

There is nothing of importance set for tomorrow. The week’s calendar starts early Tuesday morning with the release of October's Housing Starts. This report gives us an indication of housing sector strength but usually does not have a noticeable impact on mortgage rates. I don't expect this month's version to be any different unless it varies greatly from analysts' forecasts. It is expected to show an increase in starts of new homes, meaning the new home portion of the housing sector strengthened a little last month. 

Wednesday has the remaining four economic reports that we need to be concerned with. The first is October's Durable Goods Orders at 8:30 AM ET. This data helps us measure manufacturing strength by tracking orders for big-ticket items or products that are expected to last three or more years, such as airplanes, appliances and electronics. It is known to be quite volatile from month-to-month, so sizable swings from the previous month are fairly normal. It is expected to show a 2.6% decline in new orders. A larger than expected drop would be considered good news for the bond market and mortgage rates as it would indicate the manufacturing sector was not as strong as thought. We need to see a sizable variance from forecasts though for the markets to have a noticeable reaction due to the usual volatility in the data. It is worth mentioning though that this is the most important report of the week and one of the more important we get each month. 

Next up is October's Existing Home Sales data at 10:00 AM ET Wednesday. The National Association of Realtors will give us a measurement of housing sector strength and mortgage credit demand by tracking home resales in the U.S. This report is expected to show a rise in sales, meaning the housing sector strengthened slightly last month. That would be relatively bad news for the bond market and mortgage pricing, but unless it shows a significant surprise, it will likely not have a major impact. 

The third report of the day will be the revised University of Michigan Index of Consumer Sentiment for November. Current forecasts are calling for little change from the 98.3 preliminary reading two weeks ago, meaning surveyed consumers felt nearly the same about their own financial and employment situations as they did earlier in the month. 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. But as long as we don’t see a large upward move, the report will likely have a minimal impact on rates. 

The last report of the week will come from the Conference Board, also at 10:00 AM ET. They will release their Leading Economic Indicators (LEI) for October. This is a moderately important report that attempts to predict economic activity over the next three to six months. It is expected to show a 0.1% increase, meaning economic activity will likely rise modestly over the next couple of months. Generally speaking, this would be bad news for bonds. However, since this data is considered only moderately important, its results need to miss forecasts by a wide margin for it to affect mortgage rates. 

The financial markets will be closed Thursday in observance of the Thanksgiving Day holiday. There will not be an early close Wednesday ahead of the holiday, but the stock and bond markets will close early Friday and will reopen next Monday morning. I suspect that Friday will be a very light day in bond trading as many market participants will be home. The same can be said to some degree Wednesday afternoon also. 

Overall, I am expecting Wednesday to be the busiest day for the bond market and mortgage rates with four of the week's releases scheduled. The calmest day will most likely be Friday as many traders will be home for the long weekend rather than in the office working.