Rate Lock Advisory

Sunday, January 4th

This week brings us the release of seven monthly and quarterly economic reports for the markets to digest. More importantly, most of the data is current after we have been relying on old data over the past month or so because of the government shutdown. Weekend news from Venezuela may have an impact on the markets tomorrow, but at the time of this posting it appears it will be inconsequential with no major impact on mortgage rates. Of course that could change during overnight trading, so we will be watching to see what happens going into tomorrow morning’s session.

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Bonds

Market Closed

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Dow

Market Closed

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NASDAQ

Market Closed

Mortgage Rate Trend

Trailing 90 Days - National Average

  • 30 Year Fixed
  • 15 Year Fixed
  • 5/1 ARM

Indexes Affecting Rate Lock

High

Unknown

ISM Index (Institute for Supply Management)

Scheduled activities begin late tomorrow morning when the Institute for Supply Management (ISM) posts their manufacturing index for December that measures manufacturer sentiment of business conditions. A reading below 50 means that fewer surveyed manufacturing executives felt that business improved during the month than those who felt it had softened. That indicates manufacturing sector weakness rather than growth. Analysts are currently expecting to see a 48.3 reading tomorrow, up slightly from November's 48.2. A smaller reading will be good news for the bond market and mortgage shoppers since it would signal manufacturing activity was weaker than expected. An unexpected increase that points toward a strengthening sector would likely lead to higher mortgage rates tomorrow morning.

Medium

Unknown

ADP Employment

The second economic release of the week will be the ADP Employment report before the markets open Wednesday morning. It tracks changes in private-sector jobs, using the company's clients that use them for payroll processing as a base. While it does draw attention, it is my opinion that it is overrated and is not a true reflection of the broader employment picture. It also is not accurate predicting results of the monthly government report that follows a couple days later. Still, because we sometimes see a noticeable reaction to the report, it is on our calendar. Forecasts are calling for 46,000 new payrolls after shedding 32,000 jobs in November. A much smaller number would be considered favorable for bonds and mortgage rates.

Low

Unknown

Factory Orders

Wednesday also has two late morning reports set for release. October's shutdown-delayed Factory Orders data will give us more insight into the manufacturing sector, albeit it is pretty aged now. Its impact on mortgage rates should be minimum because a good portion of the data was previously released in the Durable Goods Orders report two weeks ago. Forecasts show a 1.1% decline in new orders for durable and non-durable goods, hinting at a slowing manufacturing sector back in October. A larger decline would be good news for rates even though we likely won't see a strong reaction to the report in Wednesday’s mortgage pricing.

Medium

Unknown

ISM Service Index

The Institute for Supply Management's (ISM) non-manufacturing index (aka service index) for December is Wednesday’s third release. This is the sister report of tomorrow’s ISM manufacturing index with this version tracking executive opinions on business conditions in the service sector rather than manufacturing. They are expected to announce a reading of 52.2, down from November's 52.6. A reading above 50.0 means more surveyed executives felt business improved during the month than those who said it worsened. Good news for mortgage rates would be a much weaker than predicted reading.

Low

Unknown

Productivity and Costs (Quarterly)

In addition to the weekly unemployment update, we will also get 3rd Quarter Productivity numbers at 8:30 AM ET Thursday. This is one of the few reports that a stronger than expected result is favorable for rates. High levels of productivity allow the economy to grow without inflation necessarily rising also. The second quarter update of this data showed a 3.3% pace of worker output. A noticeably larger increase could help lead to slightly lower rates Thursday, but any reaction should be fairly minimal.

High

Unknown

Employment Situation

Friday brings us the final two reports, one being the almighty monthly governmental Employment report at 8:30 AM ET. The Employment report is arguably the single most important monthly release we see. It gives us the national unemployment rate, the number of jobs added or lost during the month and average hourly earnings, which is a key measure of wage inflation. Rising unemployment, a decline in payrolls and flat earnings would be ideal news for the bond market. Analysts are expecting to see the unemployment rate slip 0.1% from November's four-year high of 4.6%, while 155,000 new jobs were added to the economy and an increase in earnings of 0.3%. If we see weaker than expected results, the bond market should rally, improving Friday's mortgage rates noticeably. However, stronger than expected readings may cause mortgage rates to spike higher.

Medium

Unknown

Univ of Mich Consumer Sentiment (Prelim)

January's preliminary reading to the University of Michigan's Index of Consumer Sentiment will finish this week's calendar at 10:00 AM Friday. It helps predict consumer willingness to spend. By theory, if consumers feel better about their own financial and employment situations, they are more apt to make a large purchase in the near future. Stronger consumer spending numbers translate into economic growth that makes stocks more appealing and bonds less attractive to investors. Current predictions show a minor increase from December's 52.9. The lower the reading, the better the news for bonds and mortgage rates.

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Unknown

none

Overall, Friday is the most important day of the week for rates due to the importance the Employment report carries in the markets. Tomorrow could also be interesting with the ISM index coupled with a potential reaction to this weekend’s Venezuela news. The calmest day should be Tuesday unless something unexpected happens. There are a couple of highly influential reports coming this week and most of the data is current now that we have worked through the important reports that were delayed by the government shutdown. The less important data that is still delayed isn’t going to have a noticeable impact on rates at this point, meaning we can expect to see strong reactions if there are surprises in this week’s marquee reports. Therefore, please be prudent and keep an eye on the markets if still floating an interest rate.

Float / Lock Recommendation

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.