Mortgage Market in Review – October 31, 2016

November 1, 2016
Market Comment

Mortgage bond prices finished the week lower which pushed rates higher. Data was mixed throughout the week but we finished with strong growth figures Friday. Consumer confidence was 98.6 versus the expected 100.8 mark. New home sales were 593K versus the expected 600K. The European Central Bank echoed the rate hike warnings of the Fed. ECB President Draghi said that “we would certainly prefer not to have to keep interest rates at such low levels for an excessively long time, since the unwelcome side-effects may accumulate over time.” Weekly jobless claims were 258K versus the expected 259K. Gross domestic product data surprised to the upside (see article below.) Mortgage interest rates finished the week higher by approximately 3/8 to 1/2 of a discount point.


LOOKING AHEAD

Economic
Indicator		 Release
Date & Time		 Consensus
Estimate
Analysis
Personal Income and Outlays Monday, Oct. 31,
8:30 am, et		 Up 0.3%,
Up 0.1%		 Important. A measure of consumers’ ability to spend. Weakness may lead to lower mortgage rates.
PCE Core Inflation Monday, Oct. 31,
8:30 am, et		 Up 0.2% Important. A measure of price increases for all domestic personal consumption. Weaker figure may help rates improve.
ISM Index Tuesday, Nov. 1,
10:00 am, et		 51.4 Important. A measure of manufacturer sentiment. Weakness may lead to lower mortgage rates.
ADP Employment Wednesday, Nov. 2,
8:30 am, et		 155K Important. An indication of employment. Weakness may bring lower rates.
Fed Meeting Adjourns Wednesday, Nov. 2,
2:15 pm, et		 No rate changes Important. No rate changes are expected but volatility may surround the adjournment of this meeting.
Weekly Jobless Claims Thursday, Nov. 3,
8:30 am, et		 255K Important. An indication of employment. Higher claims may result in lower rates.
Preliminary Q3 Productivity Thursday, Nov. 3,
8:30 am, et		 Up 0.1% Important. A measure of output per hour. Improvement may lead to lower mortgage rates.
Factory Orders Thursday, Nov. 3,
10:00 am, et		 Up 0.2% Important. A measure of manufacturing sector strength. Weakness may lead to lower rates.
Employment Friday, Nov. 4,
8:30 am, et		 5%,
Payrolls +158K		 Very important. An increase in unemployment or weakness in payrolls may bring lower rates.

GDP Surprise

The Advance Q3 gross domestic product report showed a stronger than expected increase last Friday. GDP rose 2.9% versus the expected 2.5% increase. This was important because it is one of the biggest releases heading into the Fed meeting Wednesday afternoon and a rate hike is on the table. Three members voted for a hike at the last meeting. While no rate hike is expected until possibly December the recent GDP data supports those members that want to raise rates sooner rather than later.

Mortgage rates pushed higher recently as traders anticipated a future Fed rate hike. The timing is the big unknown. Rates remain historically favorable despite the recent volatility. Now is a great time to take advantage of low rates to avoid any future rate spikes.

Copyright 2016. All Rights Reserved. Mortgage Market Information Services, Inc. www.ratelink.com The information contained herein is believed to be accurate, however no representation or warranties are written or implied.