This Week’s Market Commentary

There are six pieces of economic news that may affect mortgage rates this week.

Some of the data is considered highly important to the financial and mortgage markets, so it will likely be an active week for mortgage rates. As the week progresses, the data gets more important.

Unlike most Mondays, there is data being posted this morning with the release of October’s New Home Sales report. It will give us an indication of housing sector strength, but is the week’s least important release. Analysts are expecting to see little change between September’s and October’s sales of newly constructed homes. It will take a large change in sales for this data to influence mortgage rates.

November’s Consumer Confidence Index (CCI) will be released late Tuesday morning by the Conference Board. It gives us a measurement of consumer willingness to spend. If consumer confidence is rising, analysts believe that consumers are more apt to make larger purchases, essentially fueling economic growth. This makes long-term securities such as mortgage-related bonds less attractive to investors and usually leads to higher mortgage rates. Analysts are expecting to see a sizable increase in confidence from last month’s level, meaning consumers were more optimistic about their own financial situations this month than they were last month. A weaker reading than the 44.0 that is expected would be good news for mortgage rates, while a stronger reading could push mortgage rates higher Tuesday.

The next piece of data that we need to be concerned with comes early Wednesday morning when revised 3rd Quarter Productivity numbers are posted. This index is expected to show an upward revision from the preliminary reading of worker productivity. Higher levels of productivity are thought to allow the economy to expand without inflationary pressures rising. This is good news for the bond market because economic growth itself isn’t necessarily bad for the bond market. It’s the conditions around an expanding economy, such as inflation, that hurt bond prices and mortgage rates. Current forecasts are calling for an annual rate of 2.6%, down from the previous estimate of 3.1%.

Also Wednesday, the Federal Reserve will release their Beige Book at 2:00 PM ET. This report, which is named simply after the color of its cover, details economic conditions by region. That information is relied on heavily during the FOMC meetings when determining monetary policy, so its results can influence bond trading and mortgage rates if it shows any significant surprises. More times than not, this report will not influence the markets enough to cause intra-day changes to mortgage rates, but the potential to do so does exist.

November’s manufacturing index from the Institute for Supply Management (ISM) will be posted at 10:00 AM ET Thursday. This index measures manufacturer sentiment and can have a considerable impact on the financial markets and mortgage rates. Current forecasts call for a small decline in sentiment from October to November. October’s reading was previously announced as 50.8. A weaker reading than the expected 51.0 would be good news for the bond market and mortgage rates. A reading above 50 means that more surveyed trade executives felt business improved during the month than those who felt it had worsened. The lower the reading the better the news for bonds because waning sentiment indicates a slowing manufacturing sector and makes a broader economic recovery less likely.

The biggest news of the week comes Friday morning when the Labor Department posts November’s Employment figures. This is arguably the most important monthly report we see. It is comprised of many statistics and readings, but the most watched ones are the unemployment rate, the number of news jobs added or lost during the month and average hourly earnings. Current forecasts call for no change in the unemployment rate of 9.0% while 117,000 new jobs were added to the economy. The income reading is forecasted to show an increase of 0.2%. An ideal scenario for mortgage shoppers would be a higher unemployment rate than 9.0%, a smaller increase in payrolls and no change in the earnings reading. If we are fortunate enough to hit the trifecta with all three, we should see the stock markets fall, bond prices rise and mortgage rates move lower Friday. However, stronger than expected readings would likely fuel a stock rally and bond sell-off that would lead to higher mortgage rates.

Overall, the most important day of the week is Friday with the employment figures being released, but we may also see sizable movement in rates Thursday. Friday’s employment data could cause a significant change in rates, but Thursday’s ISM index is also one of the more important reports we see each month. If Friday’s data reveals stronger than expected results we may see rates spike higher after its release, possibly erasing any gains from the week. It will probably be the key to rates moving lower or higher for the week. I suspect it will be a fairly active week for the markets and mortgage pricing, especially the latter part, so it would be prudent to maintain contact with your mortgage professional if still floating an interest rate.

Four Fireplace Safety Tips for the Winter

November 10, 2011

With fireplaces and chimneys involved in 42% of home-heating fires, it is important to maintain your fireplace and use it properly during the cold winter months.
Follow these four tips to make sure your fireplace is safe and won’t turn into a fire-starter:

1. Get your chimney professionally cleaned
Hire a chimney sweep to clean out the soot and debris in your chimney. The National Fire Protection Association recommends you do this once a year.

2. Burn the right kind of wood
Burn seasoned hardwoods that are dense, such as oak, that have been split and stored in a dry, high-up place. According to an MSN article, “green wood and resinous softwoods such as pine produce more creosote, a flammable byproduct of combustion that can build up in the chimney.”

3. Don’t overdo it with too many logs
A fire that is too big or too hot can cause a chimney to crack. Small fires create less smoke, and less creosote buildup as a result.

4. Use a spark-guard
Set up a spark guard to prevent embers and sparks from igniting something outside the fireplace. This is especially important when the room the fireplace is in is unoccupied. Glass fireplace doors or a mesh metal screen will do the trick.

More Adult Children Moving Back Home

The number of young adults who move back in with their parents, often after college, has risen dramatically over the past few years. This is in part due to the current economy as well as high unemployment rates for young people. The trend of moving back in with ones parents, however, is having an effect on the housing market.

According to a recent CNN Money article, 19% of males age 25 to 34 live with their parents today, a 5 percentage point increase from 2005. 10% of women in that age group live at home, up from 8% six years ago.

The numbers are much higher for 18- to 24-year-olds, with 59% of males and 50% of females living with their parents, up from 53% and 46%.

This has caused a decrease in the number of new households being formed, and a decrease in demand, which in turn lowers home prices. If these young adults were renting, rents would rise, leading to more people deciding to buy.

On the other hand, by living back home, young adults are saving thousands of dollars in a tough economy. This savings could be put towards a home purchase later on.

What are your thoughts on this “boomerang generation” and its effect on the market?

This Week’s Market Commentary

This week brings us the release of only two relevant monthly economic reports but neither of them is considered to be highly important. There are two important Treasury auctions this week that may influence mortgage rates more than the minor economic data that is scheduled.

It is also a holiday-shortened week with the bond market closed Friday in observance of the Veterans Day holiday. The stock markets will be open Friday, but bonds will not be traded meaning that many lenders will be closed.

Neither of this week’s monthly economic reports is expected to lead to noticeable changes in mortgage rates. This means that the stock markets will likely be a significant influence on bond trading and mortgage rates in addition to the two particular Treasury auctions. If the stock markets rally, we could see funds shift from bonds into stocks that potentially offer better returns, leading to higher mortgage rates. If stocks fall from current levels early in the week, bonds and mortgage shoppers should benefit.

The two important Treasury auctions come Wednesday and Thursday when 10-year Notes and 30-year Bonds are sold. The 10-year sale is the more important of the two as it will give us a better indication of demand for mortgage-related securities. If the sales are met with a strong demand from investors, we should see the bond market move higher during afternoon trading the days of the auctions. But a lackluster interest from buyers, particularly international investors, would indicate a waning appetite for longer-term U.S. securities and lead to broader bond selling. The selling in bonds would probably result in upward revisions to mortgage rates.

The first monthly data of the week is September’s Goods and Services Trade Balance report early Thursday morning. It helps us measure the size of the U.S. trade deficit, but usually is not a major influence on bond trading or mortgage pricing. It does affect the value of the U.S. dollar, which makes U.S. securities more attractive to international investors when the dollar is strong. This is because the securities’ proceeds are worth more when sold and converted to the investor’s domestic currency. However, its results will not likely directly lead to changes in mortgage rates. Analysts are expecting to see a $45.8 billion trade deficit.

November’s preliminary reading of the University of Michigan’s Index of Consumer Sentiment will be released late Friday morning. This index measures consumer confidence, which gives us an indication of consumer willingness to spend. It is expected to show a reading of 61.5, up from October’s final reading of 60.9. That would be considered negative news for bonds because rising sentiment means consumers are more optimistic about their own financial situations and are more likely to make large purchases in the near future. Since consumer spending makes up two-thirds of the U.S. economy, any related data is watched closely.

Overall, it is difficult to predict just how active this week will be for mortgage rates. As expected, last week brought us quite a bit of volatility in rates. This week could be very calm or could be just as active as last week was. I don’t believe the economic data on tap will be a catalyst. I think the key will be the stock markets and Wednesday’s Treasury auction. If they give us favorable results, mortgage rates will likely close the week lower than today’s opening levels.

Home Improvement Projects that Pay Off

In a competitive market for sellers, many are turning to home improvement projects. However, some projects are far more likely to increase your home’s value, and can also make your home sell faster.

According to Trulia, five projects are nearly guaranteed to pay off in the long run:

1. Painting – A fresh coat of white paint or a neutral color helps lighten the rooms.

2. Landscaping – Curb appeal always matters. A yard that is clean, charming, and inviting helps.

3. De-cluttering and cleaning – A deep clean and getting rid of knick-knacks makes homes more appealing to prospective buyers.

4. Plumbing repairs – Ensure that all plumbing is in great shape, and take care of any water stains or water damage.

5. Staging – Hiring a professional to stage your home can up the value, or you can do it yourself. It can make a dramatic difference in the price your home sells for. According to Trulia, good staging is both “removing your personal belongings and replacing it with more artwork, decor and cleaner-looking furniture,” as well as “tweaking the home’s paint, wall coverings and even landscaping to show the place in its very best light. “