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Mortgage Market in Review – January 1, 2018

Market Comment

Mortgage bond prices finished the week higher which put downward pressure on rates after some recent sharp spikes higher.  Housing prices rose 6.4% over the past year according to the S&P Case Shiller home price index.  Housing is a bright spot in the economy with prices reaching all-time highs thanks in part to limited inventory and low mortgage rates.  Consumer confidence printed at 122.1 versus the expected 128. This data is important because a consumer who feels good about the future is more likely to spend discretionary income rather than save it. The data was weaker than expected however confidence remains elevated overall with readings in the 120 range. With 67% of our economy (Gross Domestic Product GDP) coming from consumer spending the data bodes well from higher growth.  We ended the week better by approximately 1/4 of a discount point.


Date & Time

ISM Index Wednesday, Jan. 3,
10:00 am, et
58.2 Important.  A measure of manufacturer sentiment.  Weakness may lead to lower mortgage rates.
Construction Spending Wednesday, Jan. 3,
10:00 am, et
Up 1.1% Low importance.  An indication of economic strength.  Significant weakness may lead to lower rates.
ADP Employment Thursday, Jan. 4,
8:30 am, et
195K Important.  An indication of employment.  Weakness may bring lower rates.
Weekly Jobless Claims Thursday, Jan. 4,
8:30 am, et
230K Important.  An indication of employment.   Higher claims may result in lower rates.
Employment Friday, Jan. 5,
8:30 am, et
Payrolls +228K
Very important.  An increase in unemployment or weakness in payrolls may bring lower rates.
Trade Data Friday, Jan. 5,
8:30 am, et
$49B deficit Important.  Affects the value of the dollar.  A falling deficit may strengthen the dollar and lead to lower rates.
Factory Orders Friday, Jan. 5,
10:00 am, et
Up 0.1% Important.  A measure of manufacturing sector strength.  Weakness may lead to lower rates.

The Year Ahead

The future of the economy will continue to be debated.  There is no certainty in predictions but the recent data, Fed statements, and Fed action clearly signal continued signs of improvement.  The Fed is now talking about raising rates again three or more times in 2018 depending on the data.  The effect on the housing sector, which remains a vital part of the economy, remains uncertain.  However, the last thing the housing market needs is higher rates.

What we can be certain of is the likeliness that mortgage interest rates will become volatile as we get closer to the next Fed rate hike.  Historically, mortgage interest rates seem to improve slowly.  In contrast, when rates increase, they often do so quickly and furiously.  One negative day often erases a week of positive improvements.

The Fed isn’t the only player in the financial markets and there are many others buying and selling securities.  Remember that the Fed does not directly dictate that mortgage interest rates will be at a certain rate.  Rates are determined by the supply and demand for mortgage-backed securities and can change rapidly hour to hour.  Now is a great time to take advantage of mortgage interest rates at these still favorable levels and avoid exposure to future market volatility.

Copyright 2018. All Rights Reserved. Mortgage Market Information Services, Inc. The information contained herein is believed to be accurate, however no representation or warranties are written or implied.