This Week’s Market Commentary

This week is fairly light in terms of the number of economic releases scheduled for release. There are only three monthly or quarterly reports on the agenda that have the potential to influence mortgage rates and none of them are considered to be highly important. That means that the stock markets could be the focal point multiple days, especially the middle part of the week.

October’s Factory Orders is the first, coming late this morning. This report is similar to the Durable Goods Orders report that was released the week before last, except this one includes manufacturing orders for both durable and non-durable goods. This data usually isn’t a major influence on bond trading, but with little data this week that can impact mortgage rates, it could draw more attention than usual. Analysts are expecting to see a decline in new orders of approximately 0.4%. The larger decline, the better the news for bond prices and mortgage rates because it would signal manufacturing sector weakness.

There is no other relevant economic news scheduled for release until Friday morning. October’s Goods and Services Trade Balance report will be posted early Friday morning. This report gives us the size of the U.S. trade deficit, but it is considered to be of low importance to mortgage rates. It is expected to show a $44.0 billion trade deficit. Unless it varies greatly from forecasts, I don’t expect this data to affect mortgage pricing Friday.

Also Friday is the release of December’s preliminary reading to the University of Michigan’s Index of Consumer Sentiment. This index measures consumer willingness to spend and can usually have enough of an impact on the financial markets to change mortgage rates slightly. Consumer sentiment or confidence is tracked because the more comfortable consumers are about their own financial situations, the more likely they are to make a large purchase in the near future. Since consumer spending makes up two-thirds of the economy, any related data is watched closely. Friday’s release is expected to show a reading of 65.0, which would be an increase from last month’s final reading. A decline in confidence would be considered good news for the bond market and mortgage rates.

Overall, today will probably bring us the most movement in rates as the markets digest weekend news. I don’t believe we will see as much volatility in the stock markets as we saw last week though. Interestingly, despite the sizable rally in stocks last week, mortgage rates didn’t take much of a hit. Even though mortgage bonds showed resilience last week, I still think that the upward risk outweighs the likelihood of seeing noticeable improvements in rates in the immediate future. Therefore, I recommend maintaining contact with your mortgage professional if still floating an interest rate

New Jumbo Mortgage Rules’ Effect on Expensive Areas

On Saturday October 1, the size of jumbo mortgage loans available to Fannie Mae and Freddie Mac will get smaller, changing the mortgage landscape.

According to a recent Yahoo! Finance article, this will have a greater effect on expensive zip codes, like many in the Bay Area and peninsula.

“In expensive housing markets where prices have fallen, the limits will drop the most,” reported Yahoo! Finance.

While the new lower limit of $625,500 — down from today’s $729,750 — is likely enough to cover a house in many places in the country, that is not the case everywhere.

To read more about these new limits and what they mean for expensive zip codes, read the full article here.

This Week’s Market Commentary

This week brings us the release of only two relevant monthly economic reports but neither of them is considered to be highly important. There are two important Treasury auctions this week that may influence mortgage rates more than the minor economic data that is scheduled.

It is also a holiday-shortened week with the bond market closed Friday in observance of the Veterans Day holiday. The stock markets will be open Friday, but bonds will not be traded meaning that many lenders will be closed.

Neither of this week’s monthly economic reports is expected to lead to noticeable changes in mortgage rates. This means that the stock markets will likely be a significant influence on bond trading and mortgage rates in addition to the two particular Treasury auctions. If the stock markets rally, we could see funds shift from bonds into stocks that potentially offer better returns, leading to higher mortgage rates. If stocks fall from current levels early in the week, bonds and mortgage shoppers should benefit.

The two important Treasury auctions come Wednesday and Thursday when 10-year Notes and 30-year Bonds are sold. The 10-year sale is the more important of the two as it will give us a better indication of demand for mortgage-related securities. If the sales are met with a strong demand from investors, we should see the bond market move higher during afternoon trading the days of the auctions. But a lackluster interest from buyers, particularly international investors, would indicate a waning appetite for longer-term U.S. securities and lead to broader bond selling. The selling in bonds would probably result in upward revisions to mortgage rates.

The first monthly data of the week is September’s Goods and Services Trade Balance report early Thursday morning. It helps us measure the size of the U.S. trade deficit, but usually is not a major influence on bond trading or mortgage pricing. It does affect the value of the U.S. dollar, which makes U.S. securities more attractive to international investors when the dollar is strong. This is because the securities’ proceeds are worth more when sold and converted to the investor’s domestic currency. However, its results will not likely directly lead to changes in mortgage rates. Analysts are expecting to see a $45.8 billion trade deficit.
November’s preliminary reading of the University of Michigan’s Index of Consumer Sentiment will be released late Friday morning. This index measures consumer confidence, which gives us an indication of consumer willingness to spend. It is expected to show a reading of 61.5, up from October’s final reading of 60.9. That would be considered negative news for bonds because rising sentiment means consumers are more optimistic about their own financial situations and are more likely to make large purchases in the near future. Since consumer spending makes up two-thirds of the U.S. economy, any related data is watched closely.

Overall, it is difficult to predict just how active this week will be for mortgage rates. As expected, last week brought us quite a bit of volatility in rates. This week could be very calm or could be just as active as last week was. I don’t believe the economic data on tap will be a catalyst. I think the key will be the stock markets and Wednesday’s Treasury auction. If they give us favorable results, mortgage rates will likely close the week lower than today’s opening levels.

This Week’s Market Commentary

This week brings us the release of seven economic reports for the markets to digest, in addition to a speaking engagement by Fed Chairman Bernanke. Also worth noting is the fact that this will be an extremely busy week for corporate earnings, which usually translates into stock volatility.

The most important economic reports are scheduled for the middle part of the week, but we may see movement in mortgage rates each day. Intra-day revisions to mortgage rates on more than one day are also possible. Therefore, proceed with caution if closing in the near future.

Today has September’s Industrial Production data scheduled to be posted. It will be released mid-morning, giving us an indication of manufacturing strength by tracking output at U.S. factories, mines and utilities. It is expected to show a 0.2% increase in output from August’s level, meaning that manufacturing activity rose slightly.

A larger than expected increase in production would be negative for bonds and mortgage rates as it would indicate economic strength. A decline in output would likely push mortgage rates lower tomorrow morning.
September’s Producer Price Index (PPI) will be released early Tuesday morning. This is one of the two very important inflation readings we get each month. This index measures inflationary pressures at the producer level of the economy. Analysts are expecting to see a 0.2% increase in the overall index and a 0.1% rise in the core data reading. The core data is the more important of the two because it excludes more volatile food and energy prices. A larger than expected increase could raise concerns in the bond market about future inflation and lead to higher mortgage rates Tuesday. However, weaker than expected readings should result in lower rates.

Wednesday has three reports scheduled that may influence mortgage rates. The first is the sister report of Tuesday’s PPI. This would be September’s Consumer Price Index (CPI). It measures inflationary pressures at the more important consumer level of the economy and is one of the most important reports that the bond market gets each month. Analysts are expecting to see a rise of 0.3% in the overall index and an increase of 0.2% in the core data reading.

A larger than expected increase in the core reading could raise inflation concerns, pushing bond prices lower and mortgage rates higher. Inflation is the number one nemesis of the bond market because it erodes the value of a bond’s future fixed interest payments. When inflation is a threat, even down the road, bonds sell for discounted prices that push their yields higher. And since mortgage rates tend to follow bond yields, this leads to higher rates for mortgage borrowers.

September’s Housing Starts is Wednesday’s second release, also coming at 8:30 AM ET. This report will probably not have much of an impact on the bond market or mortgage rates. It gives us a measurement of housing sector strength and mortgage credit demand by tracking construction starts of new homes, but is usually considered to be of low importance to the financial and mortgage markets. It is expected to show an increase in new home starts between August and September. I believe we need to see a significant surprise in this data for it to influence mortgage rates.

The final report scheduled for release Wednesday will come during afternoon trading when the Federal Reserve posts its’ Beige Book at 2:00 PM ET. This data details economic conditions throughout the U.S. by region and is relied upon heavily by the Federal Reserve when determining monetary policy at their FOMC meetings. If it reveals stronger signs of economic growth from the last release, we could see mortgage rates revise higher Wednesday afternoon.

Thursday has the last two reports of the week with the release of September’s Existing Home Sales data and Leading Economic Indicators (LEI), both at 10:00 AM ET. This index attempts to measure future economic activity, particularly during the next three to six months. Current forecasts are calling for an increase of 0.3% from August’s reading. This would indicate that economic activity is likely to increase moderately over the next couple of months. That would be relatively bad news for the bond market and mortgage rates, but this report is considered to be only moderately important. Therefore, a small increase would not be of much concern to the bond and mortgage markets. Ideally, we would like to see a decline in the index.

The National Association of Realtors will release September’s Existing Home Sales data. This report gives us an indication of housing sector strength and mortgage credit demand by tracking home resales. I don’t see it having much of an influence on the bond market or mortgage rates, but a reading that varies greatly from analysts’ forecasts could lead to a slight change in mortgage pricing. It is expected to show a decline in sales from August to September, meaning the housing sector remained soft. That would be favorable news for the bond market since a weak housing sector makes a broader economic recovery less likely.

Overall, it appears that Tuesday or Wednesday are the likely candidates for the most important day of the week. In addition to the economic data Tuesday, Fed Chairman Bernanke will speak at a Boston Fed conference during early afternoon hours. This adds to the days’ value as his words always have the potential to cause volatility in the markets. Besides the economic reports, there are many companies posting earning reports during the week, including some big names that include Apple, Citigroup, IBM and Intel.
If the corporate earnings releases are generally weaker than forecasts, stocks may suffer, making bonds more appealing to investors. The end result would likely be an improvement in rates. The flip side though is stronger than expected earnings that drive stocks higher, pushing bond prices lower and mortgage rates upward. Accordingly, please maintain contact with your mortgage professional if still floating an interest rate.

Foreclosures Slow Down in Bay Area

Bay Area foreclosures slowed in September, down 7% from August and 10% from this time last year, according to an article in the Contra Costa Times. A report released Thursday by RealtyTrac revealed these numbers, though how long the decline will last is uncertain.

2,594 homeowners in the Bay Area were given a notice of default in September, the first step in the foreclosure process.

RealtyTrac does not include Santa Clara County in its definition of the Bay Area, however, and there was a slight increase in foreclosures in that county, as well as in San Mateo County, though that is included in the Bay Area defined by the company.

RealtyTrac CEO Daren Blomquist said that “in the next six months, it’s likely that default notices will be on a consistent upward rise in the Bay Area, once banks catch up with their backlog of current foreclosures and more people fall behind on their mortgages.”

New API Scores Out For California Schools

The 2011 scores for California schools’ Academic Performance Index, also known as the API, were recently released.

They are very important as school’s scores can influence the value of nearby homes, especially in competitive Bay Area neighborhoods. In Santa Clara County, for example, these scores have a huge impact on home values.

“In our county it is particularly important because we have this huge variance,” said local Realtor Larry Miller. “On one side of the street, it’s one school, and a different school on the other side. That can mean a $150,000 difference in home price.”

The API scores can be found on the state’s website here. Some schools have gone up in their score, and some down, which affects a home’s values

Company Ranked #4 in Top Retail Producers by Inside Mortgage Finance

Great news! PHH, our parent company, moved up in the rankings after the close of Q2. We are now #4 in the Top Retail Producers list, according to Inside Mortgage Finance.

This Week’s Market Commentary

This week brings us the release of only two pieces of economic data, but neither of them is considered to be highly important. In addition to the economic releases, we also have two speaking engagements that may influence the markets and possibly mortgage pricing. The financial and mortgage markets will closed today in observance of the Labor Day holiday, meaning we will not see new mortgage rates until Tuesday morning.

The first release of the week comes Wednesday afternoon. The Federal Reserve will release its Beige Book report at 2:00 PM ET Wednesday. This report details current economic conditions in the U.S. by Federal Reserve regions. It is believed to be a key source of data when the Fed meets for their FOMC meetings and is usually released approximately two weeks prior to each meeting. If it reveals any significant surprises, we may see movement in the markets and mortgage pricing as analysts adjust their theories on the Fed’s next move.

July’s Goods and Services Trade Balance data will be posted early Thursday morning, giving us the size of the U.S. trade deficit. It is expected to show a deficit of approximately $51.5 billion, which would be a decline from June’s $53.1 billion. However, I would consider this the least important of this week’s events, meaning it will likely have little impact on bond trading or mortgage rates unless it varies greatly from forecasts.

Thursday also has the two speeches that we need to watch. The first is at 1:00 PM ET when Fed Chairman Bernanke speaks to the Minnesota Economic Club in Minneapolis. Anytime Mr. Bernanke speaks, there is a potential for his words to cause havoc in the markets. However, I don’t believe he will say anything that we did not see or hear in last week’s FOMC minutes or his speech in Jackson Hole the previous week. Still, he is speaking, so we are listening.

The one that is more likely to have a noticeable impact on the markets and mortgage pricing comes from President Obama Thursday evening. He will speak to the nation via a joint session of Congress at 7:00 PM ET about the economy and the current employment situation. He is looking for support in his ideas to boost economic activity and payroll numbers. It will be interesting to see what ideas he has, but there is little doubt that if anything substantive is proposed, we will see an active morning in the markets Friday. Since he will be speaking after market hours Thursday, his words will influence the international markets before the U.S. markets. That should give us an idea of what to expect Friday morning.

I think many believe that the current situation in Washington makes it very difficult for all parties to quickly pass any type of bill that will really lower unemployment and help the economy gain momentum. Therefore, it is unlikely that Thursday’s speech will unveil a plan that will make everyone happy, but hopefully it will at least get the ball rolling. After the debt ceiling debacle, maybe Washington learned to play a little nicer with each other. We will see.

Overall, this week looks like it may be a little less active for mortgage rates than last week was. With the financial markets closed tomorrow, we only have four days of trading. There is no particular data that is important enough to label its day of release as the most important of the week, but Thursday’s speeches make that day the best candidate. The lack of important economic news may allow the stock markets to heavily influence bond trading and mortgage rates this week. As long as the stock markets do not stage a sizable rally or sell-off, the likelihood of seeing significant changes to mortgage rates before Thursday or Friday morning is fairly minimal

Prepare for an Earthquake: Making a Disaster Kit

In California, earthquakes can and will happen here quite often. If a big one strikes on this earthquake-prone area, it is important to be prepared and keep you and your family safe.

Creating a disaster kit for your home is not difficult and could make all the difference one day, as well as providing peace of mind. The California Emergency Management Agency (CalEMA) emphasizes that the first 72 hours after a major disaster are critical.

“Electricity, gas, water, and telephones may not be working. In addition, public safety services such as police and fire departments will be busy handling serious crises. You should be prepared to be self-sufficient – able to live without running water, electricity and/or gas, and telephones – for at least three days following a major emergency.”

In order to prepare for three days, create a Disaster Kit with supplies for three days and place it in a central location. Most importantly, make sure you have one gallon of water per person, per day. This is the amount of water needed for survival.

Other supplies, including food, essential medications, and a freshly stocked first aid kit are essential in a proper disaster kit. This state video runs through how to make one: Emergency Kit Video

Homes and Hope: Coldwell Banker 2011 Habitat for Humanity Fundraiser

Coldwell Banker is holding its 13th annual Homes and Hope raffle fundraiser for Habitat for Humanity, and Princeton Capital is proud to be sponsoring it. Raffle tickets can be purchased at Coldwell Banker offices and from real estate agents for $2 each, and the grand prize, provided by us, is $5,000.

The prize list is extensive, with multiple hotel stays, gift certificates, and an iPad. This year’s fundraising goal is  just over $365,000.

In the past twelve years, Coldwell Banker has raised more than $2.1 million for Habitat for Humanity, helped to build 159 Habitat homes, and contributed more than 44,000 hours of volunteer labor. Help this tradition of success and philanthropy by picking up a raffle ticket during the month of August.

Inexpensive Home Maintenance Tasks Can Prevent Big Expenses in the Future

For a few hours’ time and a small investment, you can do a lot to protect your property. Even renters can ensure comfortable surroundings with some of these tips.

Get energy efficient. If you have not yet installed a programmable thermostat, now is the time to do it. You can reduce your cooling costs by 10 percent, according to the U.S. Department of Energy. Thermostats cost $40 to $70.

Seal around the tub and shower. Cracked or poorly sealed caulking around tubs, showers, and sinks can lead to water damage to floors, walls, and the ceilings below, say experts writing in Money magazine. When you see cracks or gaps, buy a $5 tube of caulking and reapply.

Prevent fires. Check your fire extinguisher to see if it’s still charged. If you need a new one, buy an extinguisher that works on both kitchen and electrical fires. The National Fire Protection Agency recommends one that is labeled ABC. Cost is about $40.

Test the sump pump. Before a heavy rain floods your basement, test your sump pump to see if it works. Pour water into the well around it. Raising the water level should make it go on.

Prevent shocks. Electrical outlets near water in the kitchen and bathroom should have ground fault circuit interrupters that protect from a shock They have “test” and “reset” buttons. If you need one, the GFCI costs about $10, but you should hire an electrician to install it.

Service the garage door. Spray penetrating oil such as WD-40 into the hinges and rollers so the door will open and close more easily. Test the safety reverse mechanism by placing an object in the door’s path to see if it stops. WD-40 costs about $7.

This Week’s Market Commentary

There are seven reports scheduled for release this week may affect mortgage pricing in addition to two relevant Treasury auctions, but despite all that, the current debt ceiling issue may take center stage. With no data scheduled for release today, the stock markets and updates out of Washington will drive the markets.

Friday evening’s collapse of talks on the topic happened after the markets closed, so it will be interesting to see how we fare this morning. I suspect it is going to be ugly if significant progress is not made in Washington. At posting time of this report, the Japan indexes are showing losses, but not by a concerning amount.

The economic data starts Tuesday when the Conference Board posts their Consumer Confidence Index (CCI) for July at 10:00 AM ET. This index measures consumer sentiment, giving us an idea of consumer willingness to spend. If consumers are more confident in their own financial situations, they are apt to make large purchases in the near future. This is important because consumer spending makes up two-thirds of the U.S. economy. If the CCI reading is weaker than expected, meaning that consumers were less confident than thought, we may see bond prices rise and mortgage rates drop Tuesday. Current forecasts are calling for a reading of 56.0, which would be a lower reading than June’s 58.5 and indicate consumers are becoming less comfortable with their finances.
June’s New Home Sales will also be released late Tuesday morning. It gives us a measurement of housing sector strength and mortgage credit demand. Analysts are expecting it to show a small increase in sales of newly constructed homes, indicating that the housing sector gained some strength. That would be considered negative news for bonds, but since this data tracks only 15% of all home sales it usually has little impact on the bond market and mortgage rates unless it varies greatly from forecasts.

Wednesday brings us two events that are relevant to mortgage rates. The first will come from the Commerce Department when they post June’s Durable Goods Orders at 8:30 AM ET. Current forecasts are currently calling for an increase in new orders of 0.4% from May to June. This data gives us an indication of manufacturing sector strength by tracking orders at U.S. factories for big-ticket items, or products that are expected to last three or more years. A stronger than expected number may lead to higher mortgage rates Wednesday morning. If it reveals a decline in new orders, mortgage rates should drop because it would indicate manufacturing weakness. It should be noted though that this data is known to be extremely volatile from month to month, so a minor difference between forecasts and the actual reading may not move mortgage rates much.

The Federal Reserve will release its Beige Book report Wednesday afternoon. This report is named simply after the color of its cover, but it is considered to be important to the Fed when determining monetary policy during their FOMC meetings. It details economic activity and conditions by region throughout the U.S. Since Fed Chairman Ben Bernanke’s testimony to Congress two weeks ago gave us a recent update, I don’t think we will see any significant surprises in this report. Therefore, we will likely see little movement in mortgage rates Wednesday afternoon as a result of this report.

There is no relevant monthly or quarterly data scheduled for release Thursday, but there are three releases scheduled to be posted Friday morning. The first is the preliminary reading of the 2nd Quarter Gross Domestic Product (GDP), which is considered to be the best indicator of economic activity. It is the sum of all goods and services produced in the U.S. and usually has a great deal of influence on the financial markets. This reading is arguably the single most important we get regularly. Current forecasts are estimating that the economy grew at a 1.6% annual rate during the second quarter. A faster pace will probably hurt bond prices, leading to higher mortgage rates Friday. But a smaller than expected reading would likely fuel a bond market rally and lead to lower mortgage pricing.

The second report of the day Friday is the 2nd Quarter Employment Cost Index (ECI) that measures employers’ costs for wages and benefits. It is considered to be an important measurement of wage inflation and can impact the bond market and mortgage rates if it varies much from forecasts. If it shows a rapid increase, raising inflation concerns, the bond market may drop and mortgage rates rise. It is expected to reveal an increase of 0.5%, but the GDP reading likely will have more of an influence on the markets and mortgage rates.

Friday’s third piece of data is the final revision to July’s University of Michigan Index of Consumer Sentiment that will help us measure consumer optimism about their own financial situations. As with Tuesday’s CCI release, this data is considered important because rising consumer confidence usually translates into higher levels of spending. This adds fuel to the economic recovery and is looked at as bad news for bonds. Friday’s release is an update to the preliminary reading we saw two weeks ago, so unless we see a drastic revision to the preliminary estimate, I think the markets will probably shrug this news off.

Also worth mentioning are a couple of Treasury auctions that may affect bond trading and mortgage rates this week. The two most important are Wednesday’s 5-year Note and Thursday’s 7-year Note sales. Results of this week’s auctions will be posted 1:00 PM ET each day. If investor interest is strong, we can expect the broader bond market to rally and mortgage rates to move lower. However, lackluster demand could lead to bond selling and higher mortgage rates Wednesday and Thursday afternoons. Unless progress is made on the debt ceiling prior to these sales, it is highly unlikely that they will go well.

Overall, I am expecting an extremely active week in the financial and mortgage markets. With several important economic reports on tap, we will likely see noticeable movement in mortgage rates more than one day. The most important report of the week is Friday’s preliminary GDP reading, making it one of the most important days of the week. But it is difficult to say which day we can expect to see the most movement in rates as several of the releases and scheduled events have the potential to influence mortgage rates. The wild card is the debt ceiling. Any news on that topic will probably heavily influence the financial and mortgage markets. Therefore, I STRONGLY recommend maintaining contact with your mortgage professional this week if still floating an interest rate!

New Federal Program to Help Struggling Homeowners

The federal government has created a program to help the over four million unemployed homeowners behind on their mortgage payments – a loan that doesn’t need to be repaid.

According to an article in the Wall Street Journal, the effort by the Department of Housing and Urban Development will allow qualified homeowners that have lost their jobs to borrow up to $50,000 which they may never have to repay if they meet the requirements.

HUD’s goal with this $1 billion effort, called the Emergency Homeowners Loan Program, is to help people in the short-term who will likely be back on their feet soon. There are conflicting viewpoints on the chance of success of this program; some see it as a band-aid, others as not enough help.
Applications for the program will be accepted through July 22.

Fannie Mae Revision to Cash-out Waiting Period

There is good news on the lending front for buyers who pay all cash for a property and then want to get a conventional conforming loan within six months of the purchase.

Until recently, Fannie Mae guidelines required all cash buyers to wait a minimum of six months before they could obtain a conventional loan for the property. This requirement conflicted with IRS code that allows mortgage interest deduction only on loans placed within 90 days of purchase.

Fannie Mae has revised their Selling Guide and will now allow a cash-out refinance within six months of an all cash purchase.

To take advantage of the Fannie Mae revision to the cash-out waiting period, all of the following parameters must be met:

• The new loan amount cannot be more than the documented amount the borrower paid for the property.
• The purchase was an arms-length transaction.
• The source of funds for the purchase can be documented (e.g., bank statements, personal loan documents, HELOC on another property).
• Any loans used as the source for the purchase transaction will be required to be repaid on the new HUD-1.
• All other cash-out refinance eligibility requirements are met and cash-out pricing is applied.

This revised Fannie Mae guideline lets buyers who pay all cash refinance with a conventional conforming loan within 90 days of the purchase and get the benefit of the IRS mortgage interest deduction.

Of course, it is still less expensive for the buyer to obtain the conventional financing during the initial purchase, but when that isn’t possible, this revised guideline is a good alternative.

Tagged as: cash buyer, fannie mae, loans, real estate, refinance

This Week’s Market Commentary

This week brings us the release of seven important economic reports for the bond market to digest in addition to the minutes from the last FOMC meeting, two relevant Treasury auctions and semi-annual Congressional testimony by Fed Chairman Bernanke.

Several of the economic reports are considered to be of high importance, meaning we will likely see more volatility in the financial markets and mortgage pricing over the next several days. There are also some heavily watched corporate earnings releases scheduled for the stock markets this week that can influence bond trading and therefore, mortgage pricing. In other words, we are in for a heck of a week.

The first data of the week is May’s Goods and Services Trade Balance report early Tuesday morning, which measures the size of the U.S. trade deficit. This data is not considered to be of high importance to the bond market and will not likely have an impact on mortgage rates. However, if it does vary greatly from analysts’ forecasts of a $44.0 billion deficit, we may see some movement in bond prices and possibly a slight change in mortgage pricing. This is the least important of this week’s economic data.

Also worth noting about Tuesday is the afternoon release of the minutes from the last FOMC meeting. There is a possibility of the markets reacting to them following their 2:00 PM ET release, especially if they show unexpected dissention among some of its members during discussion and voting at the last meeting or give any indication of the Fed’s possible next move with monetary policy.

There is no relevant economic data scheduled for release Wednesday, but Fed Chairman Bernanke will present his semi-annual update about the economy and monetary policy before Congress. He will speak before the House Financial Services Committee Wednesday and the Senate Banking Committee Thursday, each at 10:00am ET. His testimony will be broadcast and watched very closely.

Analysts and traders will be looking for the status of the economy and his expectations of future growth, particularly inflation and unemployment concerns that will lead to changes in key short-term interest rates. This should create a great deal of volatility in the markets during the prepared testimony and the question and answer session that follows. If he indicates that inflation may become a point of concern or anything that hints at rapid economic growth, we can expect to see the bond market fall and mortgage rates rise Wednesday.
We usually see the most movement in rates during the first day of this testimony as the Chairman’s prepared words for both appearances are quite similar to each other, meaning that the second day of testimony rarely gives us anything we did not hear during the first day. The general exception is something asked or answered during the Q&A portion of the second day’s appearance.

Wednesday also starts the first of the two important Treasury auctions when 10-year Notes will be sold. That sale will be followed by a 30-year Bond auction Thursday. These sales can influence market trading in bonds and possibly affect mortgage rates. If the sales are met with a strong demand from investors, particularly Wednesday’s sale, we should see afternoon improvements in bonds that could lead to downward revisions to mortgage rates. However, if concern about the amount of debt that is being sold keeps buyers on the sidelines, we may see bonds fall after results are posted at 1:00 PM ET and mortgage rates move higher those days.

In addition to the second day of testimony and the 30-year Bond auction, Thursday does have some key economic data being posted. The first is June’s Producer Price Index (PPI) from the Labor Department. It is a very important release because it measures inflationary pressures at the producer level of the economy. It is expected to show a 0.3% decline in the overall reading and a 0.2% increase in the core data reading. The core reading is the more important of the two because it excludes more volatile food and energy prices. The bond market should react quite favorably if we get weaker than expected readings, but a larger than expected rise in the core reading could send mortgage rates higher Thursday.

June’s Retail Sales report will also be posted at 8:30 AM ET Thursday morning. This data is considered to be of high importance because it measures consumer spending. Consumer spending makes up two-thirds of the U.S. economy, so any related data is watched closely. The Commerce Department is expected to say that sales at retail establishments fell 0.2% last month. A larger than expected decline in sales could help fuel a bond rally and lead to lower mortgage rates because it would mean that the economy is likely weaker than thought.

Friday has the remaining three economic releases, beginning with what arguably is the single most important monthly report for the bond market. That is June’s Consumer Price Index (CPI) at 8:30 AM ET, which is a mirror of Thursday’s PPI with the exception that the CPI measures inflation at the more important consumer level of the economy. Analysts have forecasted a 0.1% decline in the overall index and a 0.2% rise in the core data. The core data is considered to be the key reading because it gives us a more stable measure of inflation. Higher than expected readings could raise inflation fears and push mortgage rates higher, while readings that fall short of forecasts should lead to lower rates Friday.

June’s Industrial Production data is the second report of the day at 9:15 AM ET. This data measures output at U.S. factories, mines and utilities, giving us an indication of manufacturing sector strength. It is expected to show a 0.2% rise in production, indicating that the manufacturing sector strengthened slightly during the month. That would basically be bad news for bonds, however, the CPI will take center stage Friday morning.

The final report of the week is the University of Michigan’s Index of Consumer Sentiment. This index is released in a preliminary form each month and then followed up two weeks later with a final reading. The preliminary reading for July will be posted late Friday morning and is expected to drop slightly from June’s final reading of 71.5. This would indicate that consumers were a little less comfortable with their own financial situations this month than last month. It is believed that if consumers are confident in their own finances, they are more apt to make large purchases in the near future. And with consumer spending making up two-thirds of our economy, investors pay close attention to reports such as these. So, a decline in confidence would be good news for mortgage rates because it means many consumers will probably delay making a large purchase in the immediate future, limiting economic activity.

Also worth noting is the fact that tomorrow kicks off the corporate earnings reporting season when Alcoa posts their quarterly results. Market participants are anxiously waiting for these announcements to see how the economy is affecting earnings. Just as important as this past quarter’s results are their forward-looking estimates. If revenue, earnings and projections from the big-named companies exceed expectations, stocks will likely rally.

This would make bonds less appealing to investors and lead to bond selling. But if results are weaker than expected, indicating that the economy is stifling earnings, bonds will be more attractive to investors as stocks slide. That could help boost bond prices and help lower mortgage rates.

Overall, it is difficult to try to label one particular day as the most important this week. It is easy to say the least important will likely be tomorrow, but every other day has important data or other events that can cause significant movement in the markets and mortgage rates. The single most important report for the bond market is the CPI Friday morning, but Thursday’s data is not far behind. Wednesday’s Bernanke testimony could be huge also. The week’s corporate earnings also have the potential to heavily influence bond trading and mortgage rates via stock market swings. Therefore, it is highly recommended to maintain fairly constant contact with your mortgage professional this week if still floating an interest rate.

Loan Pre-Approval and Turning Yourself Into a “Cash Buyer

Being pre-approved for a loan puts you in a great position when buying a home. It puts you on equal footing with an all-cash buyer, in essence turning yourself into a cash buyer.

With a real pre-approval, the buyer is the next-best-thing to being a “cash buyer” because the seller can rest assured that the buyer will qualify for a loan.

A truly “all-cash buyer” does not have to worry about lender approvals, but will typically still be concerned with a property appraisal and an acceptable title report.

Being pre-approved for a loan puts a buyer in a better position with the seller of the property. It allows the buyer to understand the costs associated with the purchase as well as the monthly costs associated with the ongoing ownership.

The Pre-Approval Process
The pre-approval process simply means that a buyer is getting approved for a loan prior to reaching an agreement with a seller of a property. The buyer will provide the lender with current income, asset and credit documents and the lender will determine the loan amount for which the buyer will be able to borrower.

The pre-approval process can take anywhere from 2 – 30 days, depending on the variables surrounding the possible transaction (credit worthiness, location of assets, calculation of income, etc).

Once a loan amount and purchase price have been determined by the lender, the final approval will usually be subject to an acceptable purchase contract, property appraisal, title report and final interest rates.
While it will vary from borrower to borrower based in the individual characteristics, a lender will typically be able to pre-approve a buyer within 5 days of receiving all of the applicable income, asset and credit documents

This Week’s Market Commentary

This week brings us the release of four economic reports for the markets to digest, with three of them being considered important.

One of those three is one of the more important reports we see each month.

There is relevant data or events scheduled for each day except Thursday, so it will likely be another active week for mortgage rates.

May’s Personal Income and Outlays data will be posted early this morning. This report gives us an indication of consumer ability to spend and current spending activity. They are important because consumer spending makes up two-thirds of the U.S. economy.

Analysts are expecting to see an increase of 0.3% in income and a 0.1% rise in the spending portion of the report. Smaller than expected increases should be good news for the bond market and mortgage rates.

June’s Consumer Confidence Index (CCI) is the second report of the week. It will be posted late Tuesday morning. It is important to the financial markets because it measures consumer willingness to spend. If consumers are more confident about their own financial situations, they are likely more apt to make large purchases in the near future.

Current forecasts are calling for a reading of 60.3, down from last month’s 60.8 reading. The lower the reading, the better the news for bonds and mortgage rates.

Friday has two reports scheduled, with the first coming from the University of Michigan who will update their Index of Consumer Sentiment for May. This index gives us a measurement of consumer willingness to spend.

As with Tuesday’s CCI, if consumers are more comfortable with their own financial situations, they are more apt to make large purchases in the near future. Since consumer spending makes up two-thirds of the U.S. economy, any related data has the potential to affect bond trading and mortgage rates.

The second report of the day and the last data of the week is the Institute of Supply Management’s (ISM) manufacturing index for June late Friday morning. This index measures manufacturer sentiment by surveying trade executives on current business conditions. A reading above 50 means that more surveyed executives felt business improved during the month than those who felt it had worsened.

Analysts are expecting a reading of 51.1. That would indicate that manufacturers felt business worsened from the previous month, when we saw a 53.5 reading. Good news for bonds and mortgage rates would be a weaker than expected reading, particularly something below the recessionary threshold of 50.0.

Overall, tomorrow and Tuesday’s data should bring some volatility in trading and mortgage rates, but Friday’s ISM report is definitely the most important of the week.

How to Decorate Using Feng Shui

Feng shui is an ancient Chinese system of aesthetic arrangement believed to help improve life by receiving positive qi, sometimes spelled chi. In a new home, or when rearranging things in your current home, utilizing feng shui principles in decor is not very difficult.

The video below introduces concepts of arranging furniture using the principles of feng shui.

Tagged as: decor, feng shui, stress reduction

Mortgage Rates Set New 2011 Low

Mortgage rates have continued their decline and have set yet another 2011 low, according to the Wall Street Journal.

A decrease in new jobs has caused the mortgage rates to fall to the lowest point of the year. The decline in fixed rates represented the eighth-straight weekly fall.

This is a result of the statement by the Bureau of Labor Statistics this week that employers did not add nearly as many private-sector jobs as they expected.

Freddie Mac’s most recent survey shed light on the lower rates, and the downward trend is continuing.

This Week’s Market Commentary

This will likely prove to be another active week in terms of mortgage rate movement due to the economic data and other events that are scheduled, but we may see less intra-day swings than we did the past two weeks. There are four economic reports scheduled for release in addition to another Federal Open Market Committee (FOMC) meeting.

There is no relevant economic news scheduled for release tomorrow. Tuesday brings us the first data with the release of May’s Existing Home Sales report. The National Association of Realtors will give us figures on home resales late Tuesday morning. This data helps us measure housing sector strength and mortgage credit demand, but it usually takes a large variance from forecasts for it to cause a noticeable change to mortgage rates. It is expected to show a decline in home sales from April to May.

Wednesday’s only event is the adjournment of the FOMC meeting that began Tuesday. It is widely expected that Mr. Bernanke and company will not change key short-term interest rates at this meeting. But, as we have seen so many times in the past, it is the post meeting statement that often creates the most volatility in the markets. They could give an opinion of the overall economy or inflation, hinting at a possible future move or lack of one. Statements like these could cause a knee-jerk reaction in the markets and possibly mortgage pricing after the 12:30 PM ET adjournment.

Thursday’s only report is the release of May’s New Home Sales. It is similar to Tuesday’s Existing Home Sales report, but tells us how well sales of newly constructed homes were last month. It is also expected to show a decline in sales, but will likely not have much of an impact on mortgage rates because this data tracks only the 15% of home sales that Tuesday’s data does not.

There are two reports being released Friday morning. The first is the final reading to the 1st Quarter Gross Domestic Product (GDP). The GDP is the sum of all products and services produced in the U.S. and is considered to be the best measurement of economic growth or contraction. However, this data is quite aged now (covers January through March) and will likely have little impact on the bond market or mortgage pricing unless it varies greatly from previous readings. Market participants are looking more towards next month’s release of this quarter’s GDP reading. Last month’s first revision showed a 1.8% rise in the GDP, which is what analysts are expecting to see again.

May’s Durable Goods Orders will also be posted early Friday morning, giving us an indication of manufacturing sector strength. It is known to be quite volatile from month to month and is expected to show an increase of 1.0% in new orders from April to May. A large decline would be the ideal scenario for the bond market and would likely lead to a decline in mortgage pricing because it would indicate manufacturing sector weakness.

Overall, today will likely be the quietest day of the week unless the stock markets stage a rally or sizable sell-off. The most active should be Wednesday with the FOMC meeting adjourning or Friday due to the Durable Goods report being posted that day. Tuesday’s news may also affect mortgage rates, but likely not as much as other days.

This Week’s Market Commentary

This week is pretty busy with seven economic reports scheduled to be released, all of which are being posted over four days.

Three of the seven are considered to be of high importance to the markets and mortgage rates. The remaining ones are of interest to the markets but likely will not cause a large change in mortgage rates unless they vary greatly from forecasts.

There are two reports scheduled for release Wednesday, but one of them is the week’s most important and arguably the single most important report we see each month. That is May’s Consumer Price Index (CPI). It is very similar to Tuesday’s PPI, but measures inflationary pressures at the more important consumer level of the economy. It is expected to show a 0.1% increase in the overall reading and a 0.1% increase in the core data. A larger than expected increase in the core reading would most likely lead to a noticeable upward change to mortgage rates Wednesday, while a weaker core reading could lead to a bond rally and lower mortgage pricing.

The first data of the week comes Tuesday when two of the highly important reports are scheduled. May’s Retail Sales data and Producer Price Index (PPI) will both be released at 8:30 AM ET Tuesday morning. The sales data gives us a very important measure of consumer spending, which is highly relevant to the bond market because consumer spending makes up two-thirds of the U.S. economy. Analysts are expecting to see that retail-level sales fell 0.7% last month. A larger decline in sales would be good news for the bond market and could lead to lower mortgage rates Tuesday.

The second release of the day is one of the week’s two key measurements of inflation. May’s Producer Price Index (PPI) will help us measure inflationary pressures at the producer level of the economy. There are two readings of this index, the overall and the core data. The core data is considered to be the more important one because it excludes more volatile food and energy prices. A large increase could raise concerns about inflation rising as soon as the economy gains some traction. This would not be good news for bond prices or mortgage rates since inflation erodes the value of a bond’s future fixed interest payments. Rising inflation causes investors to sell bonds, driving prices lower, pushing their yields upward and mortgage rates higher. Analysts are expecting to see an increase of 0.1% in the overall index and a 0.2% rise in the core data. It will not take much of a variance from forecasts for the markets to react, which would most likely lead to changes in mortgage rates.

Wednesday’s second relevant report will come mid-morning when May’s Industrial Production data is released. This report will be released at 9:15 AM ET and is considered to be moderately important. It measures output at U.S. factories, mines and utilities, giving us a fairly important measurement of manufacturing sector strength. If it reveals that production is rising, concerns of manufacturing strength may come into play in the bond market. A larger increase then the expected 0.2% would indicate that the manufacturing sector is stronger than thought and would likely help push mortgage rates higher. That is assuming that the CPI doesn’t surprise us.

May’s Housing Starts will be posted early Thursday morning. This data tracks starts of new home projects. It is the week’s least important report and likely will not affect mortgage rates unless its results vary greatly from forecasts. It is expected to show that starts of new homes rose last month, indicating some strength in the housing sector. That is basically bad news for the bond market and mortgage rates because a weak housing sector makes a broader economic recovery less likely. However, this data is not important enough to cause a noticeable change in mortgage rates.

Friday has the remaining two reports, both during late morning hours. June’s preliminary reading to the University of Michigan’s Index of Consumer Sentiment is the first. This index measures consumer willingness to spend and usually has a moderate impact on the financial markets. It is expected to show a reading of 73.5. A smaller than expected reading would be considered good news for bonds because it would mean that surveyed consumers were less optimistic about their own financial situations than thought. That often means they are less likely to make large purchases in the near future, but since this report is only moderately important it likely will not influence mortgage rates considerably.

May’s Leading Economic Indicators (LEI) will close out the week’s data at 10:00 AM Friday. The Conference Board, who is a New York-based business research group, will post this data. It attempts to predict economic activity over the next three to six months. Good news for mortgage rates would be a decline in this index, but it is expected to show a 0.4% increase.

Overall, look for Tuesday or Wednesday to be the biggest day of the week. Not just because it brings the release of four of the week’s seven reports, but also because of the importance of some of those releases. We saw plenty of movement in the markets and mortgage pricing last week and it is quite likely that this week will be similar. The stock markets will also influence bond trading and mortgage rates, so watch the major indexes in addition to the economic reports. The fact that the Dow closed the week below 12,000 will be headline news if it does not bounce back above. It is highly recommended that you maintain contact with your mortgage professional this week if still floating an interest rate.

How to avoid big problems with your do-it-yourself project

On a warm sunny day, you might not want to think about the cold days of fall or the snowy days of winter. But recalling them could revive your wishes for a cozy fireplace or the need for extra heat in the family room.

Summer is a good time to make choices and decisions. Choices include low-cost prefabricated wood-burning units, personally designed masonry fireplaces and high-efficiency gas fireplaces. Your first consideration should be the purpose of the fireplace. One that is for purely aesthetic purposes is different from one that provides needed heat.

Free-standing wood stoves are a popular choice for adding heat, as are fireplace inserts. An insert converts fireplaces into an efficient heat source.

Some homeowners want to buy a fireplace or insert they can install themselves, but household advisor Angie Hicks of Angie’s List recommends hiring a professional.

Professionals will do a site survey to make sure that where they put it meets code requirements and that they can do the chimney or venting on the appliance properly.

They will advise do-it-yourselfers and help them as much as they can, but the homeowner must check with local government to ensure there are no restrictions or heating requirements involved.

With a wood-burning stove, a flue pipe has to go up through the height of the house and out the roof.
With gas, you may not have to do that. Some gas fireplaces can be vented through the wall. Some are unvented, but you have to be sure the square footage of the room is sufficient.

Want Granite Countertops? Prices are Lowest Ever

The price of granite has declined by about 50 percent. You can thank competition for the reduction as producers in Asia and Brazil quarries now market granite in the United States.

Remodeling contractors say the cost of labor for kitchen projects is down as well. People who have waited out the recession and have the money to do it are moving forward with kitchen updates.

The Harvard Joint Center for Housing Studies say remodeling spending fell 16 percent between 2007 and 2010. Now, affordable prices for traditionally upscale appointments are perking up homeowners’ remodeling plans.

According to the National Association of Home builders, overall remodeling costs are running at least 20 percent lower than 2006.

The biggest budget killer: impulse buying.

Studies at the University of Pittsburgh show that impulse buying adds up to 30 percent of overall spending. Here are some tricks to keep you from unplanned purchases:

• Look at the clothing or electronic gadget but don’t touch them. Picking up an expensive sweater or cellphone increases your sense of ownership, which makes it more difficult to resist buying. Consider what you would rather do with the money. Save it toward a grand vacation? Focus on which one you would rather give up.

• Shop with a list. This classic idea can be one of the biggest money savers of all. Decide what you want and need. Mentally decide how much you are willing to spend on gifts, personal care and items for your home, and how you could save one-third of those costs over a year.

• Create separate savings accounts for items like vacations, Christmas, and new furniture. One Dartmouth researcher says a reminder on your calendar can help. Reminders like “Deposit tax refund to Roth IRA” can boost savings by 15 percent.

Tagged as: budget, decor, real estate, remodeling, saving money

Cell Phones for Soldiers Donation Drive

Princeton Capital is holding a donation drive to collect old cell phones for our troops overseas. Drop off your used cell phone to any Princeton Capital Loan Officer, or at our corporate office located at 16780 Lark Avenue in Los Gatos.

“Over the past few years, we have been amazed by the generosity of others. But, we have also seen the need to support our troops continue.” says Brittany Bergquist, Cell Phones for Soldiers co-founder.

“It is easy for Americans to make a small sacrifice of support by donating their unused cell phones, and providing families with a much-needed connection to their loved ones overseas.”

More than 150,000 troops are serving overseas. Cell Phones for Soldiers is calling on all Americans to support the troops by donating old cell phones. The organization hopes to collect over 1 Million cell phones this year to help keep troops connected with their families.

Cell Phones for Soldiers was founded by teenagers Robbie and Brittany Bergquist from Norwell, Mass., with $21 of their own money. Since then, the registered 501(c)(3) non-profit organization has raised millions of dollars in donations and distributed millions of prepaid calling cards to troops serving overseas.

Through increased fundraising efforts, the Bergquist family hopes to raise more than $10 million in the next five years to fund new programs, such as providing video phones and prepaid service to allow troops abroad to see their families on a regular basis.

The donated phones are sent to ReCellular, which pays Cell Phones for Soldiers for each phone – the money is used to purchase prepaid calling cards which are sent to troops.

Proceeds from this donation drive will be used to purchase calling cards for our troops so they can stay connected with their families. Call 408-355-2000 for more information about how and where to donate.

This Week’s Market Commentary

This week brings us the release of five important economic reports in addition to two Treasury auctions that may influence rates. Only two of the five reports are considered to be of fairly high importance to the bond market and mortgage pricing. The remaining reports are considered to be of moderate or low importance and will likely not heavily influence mortgage rates.

April’s New Home Sales data will be released late Tuesday morning. This report gives us a measurement of housing sector strength and future mortgage credit demand. However, it is actually the least important release of the week and probably will not have much of an impact on mortgage pricing because it tracks only approximately 15% of all home sales. It is expected to show little change in sales from March’s level, meaning the new home portion of the housing sector was flat last month.

Wednesday has one of the week’s more important reports scheduled with April’s Durable Goods Orders being posted. This data gives us an indication of manufacturing sector strength by tracking orders at U.S. factories for big-ticket products.

It is currently expected to show a decline in new orders of approximately 2.0%, indicating manufacturing sector weakness. That would be good news for the bond market and mortgage rates, but this data is known to be quite volatile. Therefore, a small variance from forecasts would likely have little impact on mortgage rates Wednesday.

The first of two revisions to the 1st quarter Gross Domestic Product (GDP) will be released at 8:30 AM Thursday. The second revision to this report comes next month but isn’t expected to carry much importance. The GDP is the sum of all goods and services produced in the U.S. and is considered to be the best indicator of economic growth. Last month’s preliminary reading revealed a 1.8% increase in the annual rate of growth. Analysts expect a slight upward revision to this reading with the consensus being a 2.0% rate of growth. If the upward revision is much stronger than expected, we may see the bond market react negatively and mortgage rates move higher because it would mean the economy was stronger than thought last quarter.
April’s Personal Income and Outlays data is the first of two reports due Friday. It will be posted at 8:30 AM and gives us an indication of consumer ability to spend and current spending habits. An increase in income means that consumers have more money available to spend. Since consumer spending makes up two-thirds of the U.S. economy, this data can cause movement in the financial markets and mortgage rates. Current forecasts are showing a 0.4% increase in income and a 0.5% rise in spending. Weaker readings would be considered good news for bonds and mortgage rates.

The second report of the day and the last relevant data of the week will come from the University of Michigan who will update their Index of Consumer Sentiment for May. It is forecasted to show a small increase from this month’s preliminary reading of 72.4. A reading above 72.6 would be considered negative for bonds and mortgage pricing.

Overall, I think we have a fairly busy week ahead of us. The big report of the week is Wednesday’s Durable Goods Orders. If Thursday’s GDP revision varies greatly from forecasts, it can also lead to sizable changes in rates. There are also a couple of Treasury auctions that are worth noting. The 5-year Note sale is Wednesday and the 7-year Note auction will be held Thursday. Both may influence bond trading and possibly mortgage rates if they are met with an exceptional demand or if there is lackluster interest from investors.

The bond market will close early Friday afternoon ahead of next Monday’s Memorial Day holiday. With all this, there is a pretty good possibility of seeing mortgage rates change several times this week- especially if there is more volatility in the stock markets. Accordingly, please proceed extremely cautiously if still floating an interest rate.

Six Unobvious Reasons to Recycle

1. Protect your home from hazardous waste. The average American home accumulates up to 20 pounds of hazardous waste each year. Even more frightening, usually 100 pounds of waste is stored in cabinets, the garage, closets, basements, and other storage spaces in the average home.

2. Help the community and local job options by donating to the Goodwill, which collects electronics as well as most other things, to recycle or sell. They use the profits to help fund job training and employment opportunties in the local community.

3. You can hold a recycling event as a fundraiser for one of your favorite causes (a local school, sports league, church, etc.) with the help of http://www.recyclingforcharities.com/

4. According to the Environmental Protection Agency, American households own an average of 24 electronic products that could be potentially donated or recycled. 85% of them end up in landfills instead.

5. Recycling is less expensive than sending trash to a landfill. According to http://www.ecocycle.org/, recycling instead of landfilling saves $55 per ton, saving you money, along with the environmental benefits.

6. Stimulate the economy by creating jobs. Eco-Cycle states that “or every one job at a landfill, there are ten jobs in recycling processing and 25 jobs in recycling-based manufacturers. The recycling industry employees more workers than the auto industry.”

This Week’s Market Commentary

There are five pieces of relevant economic data scheduled for release this week that may affect mortgage rates, in addition to two important Treasury auctions.

The four most important four reports will be posted over two days, meaning the markets will have to rely on factors other than economic news for direction several days. There is no relevant data due today or Tuesday, so expect the stock markets to help drive bond trading and mortgage rates those days.

March’s Goods and Services Trade Balance report will be released early Wednesday morning. This report gives us the size of the U.S. trade deficit but likely will not have much of an impact on the bond market or mortgage pricing. It is expected to show a $47.8 billion trade deficit, but it is the least important of this week’s data and likely will have little influence on Wednesday’s mortgage rates.

The Treasury will hold a 10-year Note sale Wednesday and a 30-year Bond sale Thursday. Results of the auctions will be posted at 1:00 PM ET each day. If they are met with a strong demand from investors, we could see bond prices rise enough during afternoon trading to cause downward revisions to mortgage rates. However, lackluster bidding in the sale, meaning longer-term securities are losing their appeal, could lead to higher mortgage pricing those afternoons.

The first important piece of data this week is April’s Retail Sales, which will be released at 8:30 AM ET. It is an extremely important report for the financial markets since it measures consumer spending. Consumer spending makes up two-thirds of the U.S. economy, so this data can have a pretty significant impact on the markets. Current forecasts are calling for a 0.6% increase in sales from March to April.

A weaker than expected level of sales should push bond prices higher and mortgage rates lower Thursday morning as it would signal that economic activity may not be as strong as thought. However, a larger increase could fuel fears of economic growth that would lead to bond selling and higher mortgage rates.

April’s Producer Price Index (PPI) will also be released early Thursday morning. It helps us measure inflationary pressures at the producer level of the economy. If this report reveals weaker than expected readings, indicating inflation is not a concern at the producer level, we should see the bond and stock markets rally. The overall index is expected to show an increase of 0.5%, while the core data that excludes more volatile food and energy prices has been forecasted to rise 0.2%. No change or a decline in the core data would be ideal for mortgage shoppers because inflation is the number one nemesis for long-term securities such as mortgage-related bonds.

Friday has the remaining two reports. The first is April’s Consumer Price Index (CPI) at 8:30 AM ET. It is similar to Thursday’s PPI report, but measures inflationary pressures at the more important consumer level of the economy. These results will be watched closely and can lead to significant volatility in the bond market and mortgage pricing if they show any surprises. Current forecasts are calling for a 0.4% increase in the overall index and a 0.1% rise in the core data reading. As with the PPI, the core data is the more important of the two readings.

The last report of the week is May’s preliminary reading to the University of Michigan’s Index of Consumer Sentiment. This index measures consumer willingness to spend, which relates to consumer spending. If consumers are more confident of their own financial situations, they are more apt to make large purchases in the near future. This report usually has a moderate impact on the financial markets though, because it is not exactly factual data. It is expected to show a reading of 69.8, which would be no change from last month’s final reading.

If it shows a large decline in consumer confidence, bond prices could rise and mortgage rates would move slightly lower, assuming the CPI does not give us a significant surprise. The CPI is much more important to the markets than the sentiment index is, so look for it to be the biggest influence on Friday’s mortgage pricing.

Overall, it likely will be another active week for mortgage rates. Besides the week’s important economic news, look for the stock markets to be a major influence on trading. The most important day of the week is Thursday with the Retail Sales and PPI reports on the agenda, but Friday’s CPI is extremely important to the bond market. It appears we will likely see the most movement in mortgage rates the latter part of the week unless the stock markets post sizable gains or losses the first part. With some very important data being posted this week, it would be prudent to be attentive to the markets if still floating an interest rate.
For the most recent daily market commentary, click here.