This week brings us the release of five monthly and quarterly economic reports that may affect mortgage rates in addition to a couple of Treasury auctions. One of those reports is considered to be extremely important to the financial and mortgage markets and can cause a great deal of volatility. The week's calendar, along with corporate earnings reports, makes it very likely that this will be an active week for mortgage rates.
The first report of the week will be March's Existing Homes Sales numbers from the National Association of Realtors at 10:00 AM ET tomorrow. This report gives us an indication of housing sector strength and mortgage credit demand. It can influence mortgage pricing if it shows a sizable variance from forecasts. Ideally, the bond market would like to see a decline in home resales because a softening housing sector makes broader economic growth more difficult. Analysts are expecting to see a decline in sales between February and March. The larger the decline, the better the news it is for bonds and mortgage rates.
That will be followed by March's New Home Sales numbers late Tuesday morning. This Commerce Department report tracks a much smaller portion of all home sales than tomorrow's Existing Home Sales report does. It also gives us an indication of housing sector strength and future mortgage credit demand. However, unless it varies greatly from analysts' forecasts I am not expecting the data to cause much movement in mortgage rates. Analysts are also forecasting a decline in sales of newly constructed homes. Good news for mortgage rates would be a sizable drop in sales.
In addition to this week's economic reports, there are two relatively important Treasury auctions that may also influence bond trading enough to affect mortgage rates. There will be an auction of 5-year Treasury Notes Wednesday and 7-year Notes on Thursday. Neither of these sales will directly impact mortgage pricing, but they can influence general bond market sentiment. If the sales go poorly, we could see broader selling in the bond market that leads to upward revisions in mortgage rates. On the other hand, strong sales usually make government securities more attractive to investors and bring more funds into bonds. The buying of bonds that follows often translates into lower mortgage rates. Results of the sales will be posted at 1:00 PM ET each auction day, so look for any reaction to come during early afternoon hours.
Getting into the more important data of the week, March's Durable Goods Orders will be released early Thursday morning. This report gives us an indication of manufacturing sector strength by tracking orders for big-ticket items at U.S. factories. These are products that are expected to last three or more years, such as appliances, electronics and airplanes. Current forecasts are calling for an increase in new orders of 0.9%. This would be a sign of manufacturing sector strength, but this data can be quite volatile from month-to-month. Therefore, a small variance between forecasts and the actual results will not heavily influence the markets or mortgage rates. A large decline would be considered good news for mortgage pricing, while a large rise would indicate strength in the sector. A sign of solid manufacturing growth could lead to higher mortgage rates Thursday.
The big news of the week will come at 8:30 AM ET Friday when the preliminary version of the 1st Quarter Gross Domestic Product (GDP) will be released. There is a strong argument to be made that this is the single most important report that we see on a regular basis. The GDP is the sum of all products and services produced in the U.S. and is considered to be the best measure of economic growth or contraction. I expect this report to cause noticeable movement in the financial markets Friday along with mortgage rates. Market participants are expecting it to show that the economy grew at an annual rate of 1.9% during the first three months of this year. That would be a slower pace than the 2.2% pace of the final quarter of last year. A weaker rate of growth would be considered good news for mortgage rates. But a stronger than expected reading would almost certainly cause stock prices to rise and bond prices to fall, leading to higher mortgage rates Friday morning.
The week closes with the University of Michigan's revised Index of Consumer Sentiment for April just before 10:00 AM ET Friday. This report gives us an indication of consumer sentiment and their willingness to spend. Current forecasts are calling for little change from the preliminary reading of 96.9. This means that surveyed consumers were no more or less optimistic about their own financial situations as they were earlier this month. This data is relevant because rising confidence in their own financial situations usually means consumers are more apt to make a large purchase in the bear future. Since consumer spending makes up approximately 70% of the U.S. economy, related data is watched fairly closely. I don't expect this report to have a significant impact on bonds and mortgage pricing unless it shows a noticeable revision.
Overall, Friday is the most important day of the week due to the release of two reports, including the highly important GDP reading. Thursday may also be one of the more active days due to the Durable Goods Orders report. Wednesday is the best candidate for least important day. Throw in week two of corporate earnings season and we have plenty to watch this week. Accordingly, it is highly recommended that you maintain contact with your mortgage professional if closing in the near future and still floating an interest rate.