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Mortgage Market in Review – January 2, 2017


Market Comment

Mortgage bond prices finished the week higher which helped rates fall.  Rates were higher Tuesday as mortgage companies sold MBSs to cover locked borrowers.  Consumer confidence printed at 113.7 versus the expected 109.8 mark.  That data was much stronger than expected and not rate friendly which added to the selling pressure.  Thin trading conditions coupled with Fed MBS purchases Wednesday helped us recover the earlier losses and more.  Weekly jobless claims printed at 265K and continuing claims, a summation of all receiving benefits, at 2,102K. Claims were expected at 263K and continuing claims at 2,063K.  The 7Y Treasury auction showed strong demand.  Mortgage interest rates finished the week lower by about 1/2 of a discount point.


Date & Time

Construction Spending Tuesday, Jan. 3,
10:00 am, et
Up 0.8% Low importance.  An indication of economic strength.  Significant weakness may lead to lower rates.
ISM Index Tuesday, Jan. 3,
10:00 am, et
53.3 Important.  A measure of manufacturer sentiment.  Weakness may lead to lower mortgage rates.
ADP Employment Thursday, Jan. 5,
8:30 am, et
218K Important.  An indication of employment.  Weakness may bring lower rates.
Weekly Jobless Claims Thursday, Jan. 5,
8:30 am, et
263K Important.  An indication of employment.   Higher claims may result in lower rates.
Employment Friday, Jan. 6,
8:30 am, et
Payrolls +182K
Very important.  An increase in unemployment or weakness in payrolls may bring lower rates.
Trade Data Friday, Jan. 6,
8:30 am, et
$43B deficit Important.  Affects the value of the dollar.  A falling deficit may strengthen the dollar and lead to lower rates.
Factory Orders Friday, Jan. 6,
10:00 am, et
Up 1.5% 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 times in 2017 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 2017. 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.