This week brings us the release of seven economic reports for the markets to digest in addition to the last FOMC meeting of the year. There are no key pieces of economic data scheduled this week, but some of the reports do carry enough importance to cause movement in mortgage rates. Tomorrow has nothing scheduled, the only day of the week without something happening.
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 to 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 little change in new home starts, indicating the new home portion of the housing sector was flat. 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.
Wednesday is likely going to be an active day for the markets. Existing Home Sales figures for November will start the day at 10:00 AM ET. The National Association of Realtors is expected to announce a small decline in home resales last month, indicating housing sector weakness. 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 rates.
There are also some significant FOMC events Wednesday that can be highly influential on the financial and mortgage markets. The two-day FOMC meeting that begins Tuesday will adjourn at 2:00 PM ET Wednesday. There is a wide consensus that expects Fed Chairman Powell and friends to make a quarter point upward bump to key short-term interest rates. At the same time their post-meeting statement is made, they will also release revised economic projections. That will be followed by a press conference with Chairman Powell at 2:30 PM ET. What is uncertain is if the Fed’s plans for hikes next year has changed. It is expected that this topic will be addressed one way or another. Accordingly, expect a very active afternoon in the financial and mortgage markets Wednesday.
November's Leading Economic Indicators (LEI) from the Conference Board is Thursday’s sole monthly release. 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 minor economic growth over the next several months. This probably will not have much of an impact 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 1.7% 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 from 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 0.3% increase in income and a 0.3% 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 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 3.5% 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 Friday.
Lastly, the revised University of Michigan Index of Consumer Sentiment for December will be posted at 10:00 AM ET Friday. Current forecasts are calling for no change from the 95.7 that was announced earlier this month. This means surveyed consumers felt no better or worse about their own financial and employment situations than previously estimated. 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. Therefore, the lower the reading, the better the news it is for mortgage rates.
Overall, the calmest day for rates could be tomorrow or Tuesday. Wednesday is the best candidate for most active day of the week, but Friday could also bring a noticeable move in rates if the day’s data is overwhelmingly favorable or unfavorable. Also worth noting about Friday is the midnight deadline for a spending bill to be passed in Washington DC to avoid a partial government shutdown. The impact of this shutdown would not be nearly as significant as previous ones because many governmental agencies are funded through September of next year and won’t be affected this time. Still, it is an issue that could come into play as the deadline nears. With so much going on this week, it would be prudent to maintain contact with your mortgage professional if still floating an interest rate.