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Mortgage Market in Review – March 13, 2017

   

Market Comment

Mortgage bond prices finished the week sharply lower which pushed rates higher.  Factory orders rose 1.2% versus the expected 1% increase.  The trade deficit was $48.5B which was in line with expectations.  ADP payrolls increased by 298K.  Analysts expected an increase of 190K.  Productivity in Q4/2016 rose 1.3% and labor costs rose 1.7%. That data was near expectations.  Weekly jobless claims printed at 243K and continuing claims, a summation of all receiving benefits, at 2,058K. Expectations were for claims at 233K and continuing claims at 2,066K.  The Bureau of Labor Statistics (BLS) employment situation report showed unemployment at 4.7% and the creation of 235K non-farm jobs.  The payrolls component was higher than the expected 188K increase.  Mortgage interest rates finished the week worse by approximately 7/8ths of discount point.


LOOKING AHEAD

Economic
Indicator
Release
Date & Time
Consensus
Estimate

Analysis
Producer Price Index Tuesday, March 14,
8:30 am, et
Up 0.6%,
Core up 0.3%
Important.  An indication of inflationary pressures at the producer level.  Weaker figures may lead to lower rates.
Consumer Price Index Wednesday, March 15,
8:30 am, et
Up 0.5%,
Core up 0.3%
Important.  A measure of inflation at the consumer level.  Weaker figures may lead to lower rates.
Retail Sales Wednesday, March 15,
8:30 am, et
Up 1.1% Important.  A measure of consumer demand.  A smaller than expected increase may lead to lower mortgage rates.
Fed Meeting Adjourns Wednesday, March 15,
2:15 pm, et
25bps rate hike Important.  A 1/4% rate hike is expected
Housing Starts Thursday, March 16,
8:30 am, et
1250K Important.  A measure of housing sector strength.  Weakness may lead to lower rates.
Weekly Jobless Claims Thursday, March 16,
8:30 am, et
230K Important.  An indication of employment.   Higher claims may result in lower rates.
Philadelphia Fed Survey Thursday, March 16,
10:00 am, et
45 Moderately important.  A survey of business conditions in the Northeast.  Weakness may lead to lower rates.
Industrial Production Friday, March 17,
9:15 am, et
Up 0.2% Important.  A measure of manufacturing sector strength.  A lower than expected increase may lead to lower rates.
U of Michigan Consumer Sentiment Friday, March 17,
10:00 am, et
97 Important.  An indication of consumers’ willingness to spend.  Weakness may lead to lower mortgage rates.

Manage Risks

To make wise lock decisions everyone needs to be aware of two primary risks.  Those are price and event risks.  Price risk is simply where the market stands since regularly scheduled morning pricing.  Event risk is the economic data that is heading our way.  Most rate changes come in response to an economic release.  A borrower that chooses to float in front of economic events takes a very big financial risk.

 

Floating overnight when there is little data and positive movement since pricing is a calculated risk.  Floating with losses ahead of a significant release is a gamble.  Most borrowers would be wise to take advantage of current rates and then refinance in the future if rates fall.

 


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