Mortgage Rates Continue to Fluctuate as Economic Data Shows Improvement
Mortgage rates tenuously hold new levels, average rises to 4.40%; GDP growth revised higher; Jobless claims down sharply; Preliminary “Black Friday” data suggests strong growth in Consumer Spending; Employment data looms
Mortgage pricing was poised to close last week on its first weekly gain since the impact of QEII was felt in markets when a sharp selloff on thin volume took place on Wednesday. The underlying reason: economic growth just might be coming faster than expected.
Last Tuesday, the Commerce Department reported on 3rd quarter GDP growth, revising results higher from 2.0% growth to 2.5%. While this is still too slow a pace to rapidly change the unemployment rate, it was sufficient to send ripples through economic markets, and it suggests that the US economy could be more resilient than recent comments from Federal Reserve officials suggest.
Wednesday turned Tuesday’s gains on their head. The key announcement was new claims for unemployment: only 407,000 Americans applied for unemployment benefits in the prior week, the smallest number since July 2008 when the financial crisis was only beginning to emerge. This came as a bit of a shock to markets expecting a significantly higher level of claims, as it suggested that the economy could be turning a corner. Mortgages sold off heavily, with the cost of some rates increasing by as much as 1 point, or 1% of the loan amount.
Mortgage prices may have oversold on Wednesday, as they saw some recovery in Friday’s holiday session. It is not uncommon to see an overreaction such as this on a holiday-shortened week when many traders go home very early, if they sign into markets at all. Also affecting markets was continued fallout from the Irish debt crisis and bailout. Borrowing costs for European governments have been increasing lately as problems in Ireland have come to a head. This produces results quite similar to the “flight-to-safety” seen earlier this year in the face of the Greek debt crisis, as traders bought safer debt, usually US government securities, on fears that other assets will struggle to hold value.
Mortgage pricing has improved at the open this morning on further Irish concerns, as well as on the return of many traders in for the full week who had sat out the holiday. This week contains too much data to suggest that mortgage pricing will hold current levels though. It is quite likely with the huge volume of highly influential employment and manufacturing data to be released that mortgage rates will rise significantly this week. Here’s a look at what’s in store:
Monday:
- no significant data
Tuesday:
- Consumer confidence
- S&P Case-Schiller Home Price Index
- Bernanke speaks
Wednesday:
- ADP Employment Report
- ISM Manufacturing index
- Construction Spending
- Productivity and Costs
Thursday:
- Jobless claims
- Pending home sales
Friday:
- Employment Situation
- Factory orders
Clearly, data on jobs dominate this week’s news. If the employment situation is better than expected, mortgage rates will jump sharply. It appears likely that the employment situation could be quite a bit better than anticipated. Recent unemployment claims have been declining sharply, and consumer spending and sentiment have been rising, all suggestive of an improvement to the situation. Analysts are currently expecting an increase in payrolls by 168,000 jobs for November, but it is likely to be significantly more than that, with perhaps as many as 225,000 jobs added by private employers. The unemployment rate may rise; analysts are predicting 9.7% over the current 9.5%, but that rise will be due to the return of many discouraged workers to their job search.
This is a very risky week to float mortgage rates. I would suggest locking in whenever possible. If you have questions regarding Rhode Island Refinance Rates, or whether or not to lock your loan, please don’t hesitate to contact me by cell at (401) 263-8655. Have a great week!
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Dan Hartman is a Senior Mortgage Advisor with Province Mortgage Associates, and serves as an Adjunct Professor of Finance and Economics at Roger Williams University and the University of New Haven. He has been helping homeowners and homebuyers with their mortgage questions for over 10 years.
November 29, 2010 by Dan Hartman · Leave a Comment
Dan Hartman is a founding Senior Mortgage Advisor with Province Mortgage Associates, a Rhode Island Mortgage Lender, and a Massachusetts, Connecticut and New Hampshire Mortgage Broker. Dan has worked in the mortgage industry for more than 10 years, and holds an MBA in Finance from Clark University. Every day, Dan helps homeowners and home buyers in southern New England with their mortgage and refinance questions. He also serves as an Adjunct Professor at Roger Williams University and the University of New Haven. NMLS #13507.