Daily mortgage commentary

Predictions on residential mortgage interest rate movement

Through his daily mortgage commentary, Al Bowman provides his predictions on residential mortgage interest rate movement and a brief on the economic, geopolitical, financial, and other events that affect mortgage rates.

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Daily Mortgage Commentary:

Daily mortgage commentary By Al Bowman

Tuesday’s bond market initially opened in negative territory following unfavorable economic news but has since clawed back into positive ground. Stocks are ignoring the stronger data here, reacting to news from overseas. This has the Dow down 304 points and the Nasdaq down 118 points and may be contributing to this morning’s bond strength. The bond market is currently up 9/32 (4.16%), which should improve this morning’s mortgage rates by approximately .125 of a discount point.

July's Retail Sales report showed consumers spent much more than expected last month, fueling economic growth. The overall sales figure rose 0.7% when 0.4% was predicted. A secondary reading that excludes more volatile and costly auto transactions hurt even more. It came in with a 1.0% increase, exceeding forecasts of a 0.4% rise by a wider margin than the overall reading. These figures indicate consumers are not afraid to spend, denting the theory an economic recession is still possible in the near future. Since consumer spending makes up over two-thirds of the U.S. economy and bonds tend to thrive in weaker economic conditions, today’s report was very bad news for mortgage rates. Fortunately, after the knee-jerk reaction to the headlines, traders have backtracked the early selling.

Tomorrow has three events scheduled that may have an impact on mortgage rates. The first is July's Housing Starts at 8:30 AM ET. This data gives us an idea of housing sector strength and future mortgage credit demand. It usually doesn't cause a noticeable move in mortgage rates unless it varies greatly from forecasts. Tomorrow’s release is expected to show a small increase in new home groundbreakings last month. The lower the number of starts, the better the news for the bond market, as it would hint at a weaker than expected new home portion of the housing sector.

Next up is July's Industrial Production data at 9:15 AM ET that tracks output at U.S. factories, mines and utilities. Analysts are predicting a 0.3% increase from June, signaling modest growth in the manufacturing sector. A larger increase would be negative news for bonds and mortgage rates, while a weaker than expected figure would be considered favorable. It will also take a sizable variance from expectations for mortgage rates to have a sizable reaction to this report.

The third release of the day will be the Federal Reserve's Beige Book report at 2:00 PM ET. The name of the report simply refers to the color of its cover, but details economic activity through the eyes of business contacts within each Fed region. Fed members rely heavily on this data during their FOMC meetings when making monetary policy decisions, so look for a potential reaction during mid-afternoon afternoon trading. It probably will not cause a major sell-off in the stock or bond markets. However, the release is still worth watching as it could draw enough of a reaction to change rates slightly.

If I were considering financing/refinancing a home, I would.... Lock if my closing was taking place within 7 days... Lock if my closing was taking place between 8 and 20 days... Lock if my closing was taking place between 21 and 60 days... Float if my closing was taking place over 60 days from now... This is only my opinion of what I would do if I were financing a home. It is only an opinion and cannot be guaranteed to be in the best interest of all/any other borrowers.

Plunk blogs are for informational and educational purposes only, and in no way is any of the data contained herein to be construed as financial, investment, or legal advice.