Year End Tax Tips for 2012

What do you need to know about your taxes before December 31st?  There are a number of tax changes happening in 2013, and you should know when you want certain income to be taxed.  Finding a good tax professional will be more expensive right now since it’s the holidays and it would be a rush job, but it may save you quite a bit come April 15th.

Ok, so what can you do personally?

From Year End Tax Tips on about.com:

There are basic year-end tax planning techniques that can be utilized to successfully manage income taxes. Year-end tax planning techniques include:

• Accelerating or deferring income.
• Accelerating or deferring expenses that can be used for tax deduction or tax credits.
• Taking advantage of any tax provisions that are scheduled to expire at the end of 2012.

All of these strategies have one factor in common: the timing of income and expenses. Accelerating means earning additional income or incurring additional tax-deductible expenses in 2012 rather than in 2013. Deferring means pushing additional income or additional deductions to 2013 rather than 2012. To the extent that income and expenses can be moved from one year to the next, these tactics can be utilized to optimize a person’s tax liabilities between the years 2012 and 2013. Year-end planning is about finding the right year in which to earn additional income or to spend money on more tax deductions. For the most part, income earned in 2012 is taxed in 2012, and deductions incurred in 2012 are deductible in 2012.

And here are tips for Year End Tax Planning for Investors on about.com:

• Check Your Default Cost Basis Reporting Settings in Your Brokerage Account
• Consider Re-Balancing Your Portfolio By Tax Type
• Selling off Losing Investments
• Sell off Winning Investments
• Pairing Losses with Gains
• Deferring Losses until Next Year
• Deferring Gains until Next Year
• Tax Planning with Capital Loss Carryovers

Additional Resources:

1. IRS Tax Tips
2. Kiplinger Slideshow of Recommendations
3. 8 Tax Tips from TurboTax
4. H & R Block End of Year Tax Tips

Do some planning and see how you can save yourself some money come April 15.

Do you wait until the last minute or do you start planning your taxes right away?

Weekly Mortgage Commentary_December 17, 2012

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This week brings us the release of seven monthly or quarterly economic reports in addition to two semi-relevant Treasury auctions. None of the releases are considered to be highly important to the markets and mortgage rates, but several of them do have the potential to cause some movement in rates. The more important news comes later in the week. Therefore, we may see more movement in mortgage pricing as the week progresses.

There is nothing of economic relevance scheduled for release Monday or Tuesday. However, this week does have Treasury auctions scheduled the first three days. The two that are most likely to influence mortgage rates are Tuesday’s 5-year and Wednesday’s 7-year Note sales. If those sales are met with a strong demand, particularly Wednesday’s auction, bond prices may rise during afternoon trading. This could lead to improvements to mortgage rates shortly after the results of the sales are posted at 1:00 PM ET each day. But a lackluster investor demand may create bond selling and upward revisions to mortgage rates Tuesday and/or Wednesday afternoon.

Wednesday’s only data is November’s Housing Starts, but it is the week’s least important data. I don’t see it causing much movement in mortgage rates unless it shows a huge variance from expectations. It is expected to show a decline in construction starts of new homes, hinting at a weakening housing sector last month. Generally speaking, an increase in new starts would be bad news for bonds and mortgage pricing, but unless there is a significant surprise it will likely have little impact on Wednesday’s mortgage rates.

Thursday brings us the release of three reports, with the first being the final revision to the 3rd Quarter Gross Domestic Product (GDP). I don’t think this data will have an impact on mortgage rates unless it varies greatly from its expected reading. Last month’s first revision showed that the economy expanded at a 2.7% annual pace during the quarter and this month’s final revision is expected to show no change from that level. A revision higher than the 2.7% rate that is expected would be considered bad news for bonds. But since this data is quite aged at this point and 4th quarter numbers will be posted next month, I don’t think it will have much of an impact on mortgage rates Thursday.

The second report of the day comes at 10:00 AM ET when November’s Existing Home Sales figures will be posted. This release will come from the National Association of Realtors, giving us a measurement of housing sector strength and mortgage credit demand. It is expected to show an increase in sales, indicating housing sector growth. A decline in sales would be considered positive for bonds and mortgage rates because a softening housing market makes a broader economic recovery more difficult. But unless the actual readings vary greatly from forecasts, the results will probably have little or no impact on mortgage rates.

The Conference Board will release their Leading Economic Indicators (LEI) for the month of November late Thursday morning also. This release attempts to measure or predict economic activity over the next three to six months. It is expected to show a small decline, meaning that it predicts slowing economic growth over the next several months. This probably will not have much influence on bond prices or affect mortgage rates unless it shows a much stronger reading than the 0.2% decrease that is forecasted. The weaker the reading, the better the news for bonds and mortgage pricing.

The final three economic reports of the week come Friday morning and they are the more important ones scheduled. The first is November’s Personal Income and Outlays data at 8:30 AM ET. It will give us an important measurement of consumer ability to spend and current spending habits. Since consumer spending makes up over two-thirds of the U.S. economy, any related data usually has a noticeable impact on the financial markets and mortgage rates. Current forecasts are calling for a 0.3% increase in income and a 0.3% increase in spending. If this report reveals weaker than expected readings, we should see the bond market improve and mortgage rates drop slightly Friday morning.

November’s Durable Goods Orders is the second report, also being posted early Friday morning. This data gives us an important measurement of manufacturing sector strength by tracking orders for big-ticket items or products that are expected to last at least three years. Analysts are expecting the report to show a 0.2% rise in new orders. A decline in new orders would indicate that the manufacturing sector was weaker than many had thought. This would be good news for the bond market and should drive mortgage rates lower. However, a larger jump in orders could lead to mortgage rates moving higher early Friday morning. This data is known to be quite volatile from month-to-month though, so it is not unusual to see large headline numbers on this report.

The last economic report will be released just before 10:00 AM ET when the revised University of Michigan Index of Consumer Sentiment for December is posted. Current forecasts are calling for a small downward revision from the preliminary reading of 74.5. This is fairly important because rising consumer confidence indicates that consumers may be more apt to make large purchases in the near future. A reading above the 74.0 that is forecasted would be negative for bonds and mortgage rates.

Overall, I am expecting to see little movement in the markets and mortgage rates the first couple days. As the week progresses and we get to the economic releases, we should see more activity in the markets and changes to mortgage pricing. The least important day for mortgage rates will likely be Monday unless something drastic happens overnight. We will probably see the most movement in rates Friday, but Thursday’s economic data can also move mortgage pricing noticeably. The Fiscal Cliff issue will also be a topic of discussion and trading in the markets as we get closer to the deadline. Therefore, please maintain contact with your mortgage professional if still floating an interest rate, especially the latter part of the week.

Weekly Mortgage Commentary_November 19, 2012

This holiday-shortened week brings us the release of four relevant economic reports for the markets to digest. All of the week’s data is being posted over three days due to the Thanksgiving holiday, so the first part of the week should be the most interesting for mortgage shoppers.

October’s Existing Home Sales data will be posted by the National Association of Realtors late Monday morning. It gives us a measurement of housing sector strength and mortgage credit demand by tracking home resales. This report is expected to show a small decline in sales, meaning the housing sector weakened slightly last month. That would be good news for the bond market and mortgage pricing, but unless it shows a significant surprise, it will likely not have a major impact on Monday’s mortgage rates.

Tuesday’s only relevant data is October’s Housing Starts. This report gives us an indication of housing sector strength, but usually does not have a noticeable impact on mortgage rates. I don’t expect this month’s version to be any different unless it varies greatly from analysts’ forecasts. It is expected to show a sizable decline in starts of new homes, meaning the new home portion of the housing sector softened last month.

Also Tuesday is a public speaking engagement by Fed Chairman Bernanke. He will be speaking at a function in New York at 12:15 PM ET, which will be followed by Q&A. This speech isn’t of much importance to the markets. However, anytime he speaks his words have the potential to influence the financial and mortgage markets. Therefore, we will be watching it, but with little concern.

The revised November reading to the University of Michigan’s Index of Consumer Sentiment will be posted late Wednesday morning. It will give us a measurement of consumer willingness to spend. If confidence is rising, consumers are more apt to make a large purchase in the near future, fueling economic activity. Analysts are expecting to see a small downward revision to the preliminary reading of 84.9. Unless we see a significant variance from the forecasted 84.5, I don’t think this data will cause much movement in mortgage rates Wednesday.

The final report of the week will come from the Conference Board at 10:00 AM ET Wednesday when they release their Leading Economic Indicators (LEI) for October. This is a moderately important report that attempts to predict economic activity over the next three to six months. It is expected to show a 0.2% increase, meaning economic activity will likely rise modestly over the next couple of months. Generally speaking, this would be bad news for bonds. However, since this data is considered only moderately important, its results need to vary by a wide margin from forecasts for it to affect mortgage rates.

The financial markets will be closed Thursday in observance of the Thanksgiving Day holiday. There will not be an early close Wednesday ahead of the holiday, but they will close early Friday and will reopen next Monday morning. I suspect that Friday will be a very light day in bond trading as many market participants will be home. Banks have to be open Friday, but we will likely see little change to mortgage rates that day.

Overall, I believe that we will see more volatility in the markets and mortgage rates the first couple days of the week. The most important day will probably be Wednesday, while the least important will be Friday. Also worth noting are rising tensions and activities overseas that could affect the global markets and carry into ours. As we have seen recently, those crisis and the markets can get pretty active at any time, so please be careful and maintain contact with your mortgage professional if you have not locked an interest rate yet.

Weekly Mortgage Commentary_November 12, 2012

This holiday-shortened week brings us the release of four monthly economic reports for the markets to digest along with the minutes from the last FOMC meeting. With very important data scheduled for release two different days and relevant data three of the four trading days, we will likely see a fair amount of volatility in the markets and mortgage pricing this week. The bond market will be closed Monday in observance of the Veteran’s Day holiday, but the stock markets will be open for business. While we may see some lenders open for business, many likely will not issue new rates or lock agreements until Tuesday morning when the bond market reopens. Because the bond market is closed Monday, there will be no update to this report.

There is nothing of relevance scheduled for release Tuesday, leaving the bond market to movement in stocks and overseas news. But Wednesday makes up for it with three events scheduled that we need to watch, including two of the week’s more important economic reports. The Commerce Department will give us October’s Retail Sales figures early Wednesday morning. This data measures consumer spending, which is considered extremely important to the markets because it makes up over two-thirds of the U.S. economy. It is expected to show a 0.2% decline in retail-level spending, meaning consumers spent less last month than they did in September. An increase in spending would be considered negative news for bonds because increases in spending fuels an economic recovery and raises inflation concerns in the bond market. If Wednesday’s report reveals a larger than expected decline in spending that indicates consumers spent less than thought, bonds should react favorably, pushing mortgage rates lower. If it shows an unexpected increase, mortgage rates will likely move higher.

The second report of the morning Wednesday is the release of October’s Producer Price Index (PPI) from the Labor Department, which is one of the two key inflation readings on tap this week. The PPI measures inflationary pressures at the producer level of the economy. There are two portions of the index that are used- the overall reading and the core data reading. The core data is the more important of the two because it excludes more volatile food and energy prices. If it reveals stronger than expected readings, indicating that inflationary pressures are rising at the manufacturing level, the bond market will probably react negatively and cause mortgage rates to move higher. Analysts are expecting to see no change in the overall reading and a 0.1% increase in the core data.

Also worth noting is the release of the minutes from the last FOMC meeting Wednesday afternoon. Traders will be looking for any indication of the Fed’s next move regarding monetary policy. They will be released at 2:00 PM ET, so any reaction will come during afternoon trading. This release is one of those that may cause some volatility in the markets after they are posted, or could be a non-factor. If they show anything surprising, we may see some movement in rates Wednesday afternoon, but it is more likely there will be little reaction.

Thursday’s only monthly report is October’s Consumer Price Index (CPI) at 8:30 AM ET. This index is similar to Wednesday’s PPI, except it measures inflationary pressures at the more important consumer level of the economy. We consider the CPI one of the most important reports the bond market gets each month. The overall reading is expected to show a 0.1% increase from September’s level while the core data is also expected to rise 0.1%. Weaker than expected readings would be good news for bonds and mortgage rates, while larger than forecasted increases could lead to higher mortgage rates Thursday morning.

The week closes with only a moderately important release Friday morning. October’s Industrial Production data will be posted mid-morning Friday. It gives us a measurement of manufacturing sector strength by tracking output at U.S. factories, mines and utilities. It is expected to reveal a 0.1% increase in production, indicating little strength in the manufacturing sector. Stronger levels of production would be considered bad news for the bond market and mortgage rates, but this data is not as important as the most of the week’s other reports are. Therefore, it will likely take a sizable variance from forecasts for it to have a noticeable impact on mortgage pricing.

Overall, look for Wednesday to be the most important day of the week with two very important reports scheduled and the FOMC minutes, but Thursday’s CPI is also a major release for the bond market. It is difficult to label any particular day as the quietest day, but Tuesday is a good candidate. The key releases will be Wednesday’s Retail Sales and Thursday’s CPI reports. They will probably determine whether rates close the week higher or lower than Tuesday’s opening levels. Since this is likely to be a fairly active week for mortgage rates, it would be prudent to maintain regular contact with your mortgage professional if still floating an interest rate.

Weekly Mortgage Commentary_11-5-2012

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 also two important Treasury auctions this week that may influence mortgage rates more than the minor economic data will. I don’t foresee any significant happening with mortgage rates unless something quite unexpected happens, but we should still see minor changes to pricing several days.

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 $45.4 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 83.0, up slightly from October’s final reading of 82.6. 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 over two-thirds of the U.S. economy, any related data is watched closely. The lower the reading, the better the news for mortgage shoppers.

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 when the markets were open for trading. This week should be much calmer as I don’t believe the economic data on tap will be a catalyst for large swings in the major indexes or bond prices. 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 Monday’s opening levels.

This Week's Market Commantary_October 29

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This week has an active agenda with seven economic reports scheduled for release that have the potential to influence mortgage rates. There is at least one relevant report scheduled each day this week, making it likely to be an active one for the financial and mortgage markets.

The first release of the week will come Monday at 8:30 AM ET when September’s Personal Income and Outlays report will be posted. This data gives us an indication of consumer ability to spend and current spending habits. It is important to the markets because consumer spending makes up over two-thirds of the U.S. economy. Rising income generally indicates that consumers have more money to spend, making economic growth more of a possibility. This is bad news for the bond market and mortgage rates because it raises inflation concerns, making long-term securities such as mortgage related bonds less attractive to investors. Analysts are expecting to see a 0.6% increase in income and a 0.4% rise in spending. Smaller than expected increases in both readings would be good news for the bond market and mortgage pricing.

October’s Consumer Confidence Index (CCI) is Tuesday’s only news. This Conference Board index will be released at 10:00 AM ET Tuesday. It gives us a measurement of consumer willingness to spend and is expected to show a small increase in confidence from last month’s 70.3 reading. That would mean that consumers felt a little better about their own financial situations than last month, indicating they are more likely to make large purchases in the near future. As long as the reading doesn’t exceed the forecasted 72.5, we will likely see the bond market react favorably to this report. This data is watched closely because it is related to consumer spending.

The 3rd Quarter Employment Cost Index (ECI) will be released at 8:30 AM ET on Wednesday. This data tracks employer costs for salaries and benefits, giving us an indication of wage inflation pressures. Rapidly rising costs raises wage inflation concerns and may hurt bond prices. It is expected to show an increase in costs of 0.5%. A smaller than expected increase would be good news for mortgage rates, but this is not one of the more important reports of the week. Therefore, it will likely take a large variance from forecasts for this report of have a noticeable influence on mortgage pricing.

Thursday has two relevant economic reports scheduled for release. The first is the 3rd Quarter Productivity reading at 8:30 AM ET. It is expected to show a 1.6% increase in worker productivity during the third quarter. A larger increase would be good news for the bond market because higher levels of employee productivity allow the economy to expand without inflationary pressures being a concern.

The key data of the day and one of the two highly important reports of the week will be the Institute for Supply Management’s (ISM) manufacturing index at 10:00 AM ET Thursday. This index measures manufacturer sentiment, which is important because it gives us an indication of manufacturing sector strength. It is considered to be one of the more important reports we see each month, partly because it is the first report every month that tracks the preceding month’s activity. Thursday’s release is expected to show a reading of 51.0, indicating that manufacturer sentiment slipped from September’s level. This means fewer surveyed business executives felt business improved during the month than in September, hinting at manufacturing sector weakness. A smaller than expected reading would be good news for bonds and mortgage rates, especially if it falls below the benchmark 50.0.

Friday brings us the release of two pieces of economic data, one of which is arguably the single most important monthly report. The Labor Department will post October’s Employment report early Friday morning. This report is comprised of many statistics and readings, but the most important ones are the unemployment rate, the number of new jobs added or lost during the month and average hourly earnings. Current forecasts call for the unemployment rate to move higher by 0.1% to 7.9%, an increase in payrolls of approximately 125,000 and a 0.2% increase in average earnings. Weaker than expected readings should renew concerns about the labor market and rally bonds enough to improve mortgage rates, especially if the stock markets react poorly to the news. On the other hand, if the report indicates employment sector strength, we could see mortgage rates spike higher Friday morning.

The second report of the day will be September’s Factory Orders data. This report is similar to last week’s Durable Goods Orders release except it includes orders for both durable and non-durable goods. It is expected to show a 4.5% increase in new orders from August’s level. A smaller than forecasted increase would be good news for the bond market and mortgage rates while a larger than expected rise is bad news and could contribute to higher mortgage pricing since it would indicate economic strength. It is worth noting though, that the Employment report is much more important to the financial and mortgage markets than this data is.

Overall, the single most important day is likely to be Thursday or Friday. In addition to the economic reports, I believe stocks will experience volatility that will also impact bond trading. The key to the week will be Friday’s employment numbers, but any significant swings in the stock markets may also influence whether mortgage rates close the week higher or lower than Monday morning’s levels.

This Week's Market Commentary_October 22nd

This week brings us the release of four economic reports and two relevant Treasury auctions for the bond market to digest in addition to another FOMC meeting. There is nothing of importance scheduled for release Monday or Tuesday, but we do have important events to watch every other day. The data scheduled this week ranges from low importance to extremely important so some reports will have a much bigger impact on trading than others. We also need to keep an eye on the stock markets as they can be heavily influential on bond market direction and mortgage rates. In other words, there is a pretty good chance of seeing noticeable movement in mortgage rates several days this week, especially if the major stock indexes rally or post sizable losses.

Wednesday starts the week’s agenda with the release of September’s New Home Sales at 10:00 AM ET. This data covers the small percentage of home sales that last week’s Existing Home Sales report didn’t include and is this week’s least important data. It is expected to show an increase in sales of newly constructed homes, but regardless of its results I am not expecting it to have a significant impact on mortgage rates Wednesday.

This week’s FOMC meeting is a two-day meeting that begins Tuesday and adjourns Wednesday afternoon. There really is no possibility of the Fed changing key short-term interest rates this week. But market participants will be looking at the post-meeting statement for any indication of change in Fed sentiment or possibly further development on recent talk of them issuing certain targets in particular economic readings that would trigger an automatic increase in key short-term interest rates. This would eliminate most of the guessing in the markets of what it will take for the Fed to start raising those rates. The meeting will adjourn at 2:150 PM ET Wednesday, so look for any reaction to the statement to come during afternoon hours.

Early Thursday morning, the Commerce Department will post Durable Goods Orders for September. This report gives us a measurement 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. Analysts are currently calling for a jump in new orders of approximately 7.4%. If we see a much larger increase in orders, mortgage rates will probably rise as bond prices fall. On the other hand, a significantly weaker than expected reading should be good news for the bond market and mortgage rates, but this data can be quite volatile from month to month and is difficult to forecast. Therefore, a small variance from forecasts likely will have little impact on bond trading or mortgage pricing.

The final two economic reports will be released Friday morning, one of which is not only the most important report of the week, but also the most important we see regularly. The preliminary reading of the 3rd Quarter Gross Domestic Product (GDP) will be released early Friday morning. The GDP is considered to be the benchmark measurement of economic growth because it is the total of all goods and services produced in the U.S. and therefore is likely to have a major impact on the financial markets and mortgage pricing. There are three versions of this report, each a month apart. Friday’s release is the first and usually has the biggest impact on the markets. Current forecasts call for an increase of approximately 1.9% in the GDP, which would mean that the economy grew at a noticeably quicker pace than the 2nd quarter’s 1.3%. If this report shows a much smaller increase, I am expecting to see the bond market rally and mortgage rates fall. However, a larger than expected rise could lead to a rally in stocks, bond selling and a sizable increase in mortgage pricing Friday morning.

The week’s last report comes just before 10:00 AM ET Friday when the University of Michigan updates their Index of Consumer Sentiment for this month. Current forecasts show this index remaining nearly unchanged from the preliminary reading of 83.1. This report is moderately important because it helps us measure consumer confidence, which is believed to indicate consumers’ willingness to spend. If consumers are more confident in their own financial and employment situations, they are more apt to make a large purchase in the near future. Since consumer spending makes up over two-thirds of the U.S. economy, any related data is watch closely.

This week also has Treasury auctions scheduled each day except Friday. The only two that have the potential to influence mortgage rates are Wednesday’s 5-year and Thursday’s 7-year Note sales. If those sales are met with a strong demand from investors, particularly Thursday’s auction, bond prices may rise during afternoon trading. This could lead to improvements to mortgage rates shortly after the results of the sales are posted at 1:00 PM ET each day. But a lackluster investor interest may create selling in the broader bond market and lead to upward revisions to mortgage rates.

Overall, it will likely be a fairly calm early part of the week but very active latter part for the markets and mortgage rates. I believe that the single most important day will probably end up being Friday with the extremely important GDP release in the morning, but anytime there is an FOMC meeting there is a good possibility of seeing the markets move significantly. Monday is likely to be the least important day, but we still could see some movement in rates as the markets prepare for the upcoming week. Accordingly, I strongly recommend maintaining contact with your mortgage professional this week if still floating an interest rate.

The Week's Market Commentary_October 15

This week brings us the release of six economic reports for the markets to digest. Unlike last week, the most important events are scheduled for the first part of the week while the latter part is much lighter. However, due to stock earnings along with the week’s economic news, we could see mortgage rates move several days with a decent possibility of seeing an intra-day revision or two.

Tuesday has two reports scheduled that may influence mortgage rates. The first is September's Consumer Price Index (CPI) at 8:30 AM ET. It measures inflationary pressures at the very 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 0.5% 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.

The second report of the day will be September's Industrial Production data at 9:15 AM ET, 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 be favorable for the bond market and mortgage rates, but the CPI is much more influential to the markets than this report is and will be the focus of trading Tuesday morning.

September's Housing Starts is Wednesday's only release, 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 have an impact on mortgage rates Wednesday.

Thursday also has only a single monthly report scheduled for release with September’s Leading Economic Indicators (LEI) 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 0.2% from August's reading. This would indicate that economic activity is likely to increase slightly 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 late Friday morning. 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 Monday or Tuesday are the likely candidates for the most important day of the week. In addition to the economic data, there are many companies posting earning reports during the week, including some big names such as 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.

This Week's Market Commentary_October 9th

 This week brings us the release of four economic reports that are of interest to the mortgage market along with two fairly important Treasury auctions. The week also gets heavy in quarterly earnings releases for companies, which could cause significant movement in the stock markets. The earnings results could affect bond trading as investors move funds into stocks if the reports are good. The other possibility is that earnings would generally disappoint, meaning investors may move funds out of stocks and into bonds as a safe-haven. The latter would be good news for the bond market and mortgage rates.

The first report of the week comes at 2:00 PM ET Wednesday afternoon when the Federal Reserve posts its' Beige Book. This report details economic conditions throughout the U.S. by Fed 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.

Also Wednesday is the first of two important Treasury auctions this week. The sale of 10-year Notes will be held Wednesday while 30-year Bonds will be sold Thursday. We often see some weakness in bonds ahead of the sales as the firms participating prepare for them. However, as long as the auctions are met with decent demand from investors, the firms usually buy them back. This tends to help recover any presale losses. But, if the sales are met with a lackluster interest from investors- particularly international buyers, the bond market may move lower after the results are posted and mortgage rates may move higher. Those results will be announced at 1:00 PM each sale day.

August's Trade Balance report will be released early Thursday morning. It gives us the size of the U.S. trade deficit but is the week's least important report and likely will have little impact on the bond market and mortgage rates. Analysts are expecting to see a $43.8 billion deficit, but it will take a wide variance from forecasts to directly influence mortgage pricing.

The week closes with two reports being posted Friday morning, one of which is very important to the bond market and mortgage rates. That would be September's Producer Price Index (PPI) early Friday 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 0.8% increase in the overall index and a 0.2% 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 Friday. However, weaker than expected readings should result in bond market strength and lower mortgage pricing.

The last report of the week is October's preliminary reading to the University of Michigan's Index of Consumer Sentiment late Friday morning. This index measures consumer willingness to spend and usually has a moderate impact on the financial markets. Rising confidence means consumers feel better about their own financial and employment situations, meaning they are more apt to make a large purchase in the near future. Since consumer spending makes up over two-thirds of the U.S. economy, any related date is watched closely. Good news for the bond market would be a sizable decline in consumer confidence, but due to the importance of Friday's other report, I suspect this data will have little impact on mortgage rates. It is expected to show a reading of 78.5, up slightly from September's final of 78.3.

Overall, I am expecting to see a fair amount of movement in mortgage rates again this week, but the biggest changes will likely come the latter part of the week. The key economic report is Friday's PPI but the Fed’s Beige Book also has the potential to influence the markets and mortgage rates if it shows any surprises. Therefore, we can label Wednesday or Friday as the most important day of the week. Also worth noting is the active week for corporate earnings that can cause a great deal of volatility in stocks and mortgage rates any day of the week. Accordingly, please proceed cautiously and maintain contact with your mortgage professional if you have not locked an interest rate yet.

This Week's Market Commentary

This week brings us the release of only three monthly economic reports that are likely to influence mortgage rates in addition to the minutes from the most recent FOMC meeting. However, two of those three releases are extremely important to the financial and mortgage markets and can cause significant movement in mortgage rates if they show surprises. It appears we will have a couple of days with noticeable changes in rates and a couple with little or no change.

Monday has the Institute for Supply Management (ISM) posting their manufacturing index for September at 10:00 AM ET. This index measures manufacturer sentiment and it can be heavily influential on the markets and mortgage rates. Analysts are expecting to see little change from August's 49.6 reading, meaning surveyed manufacturers felt business conditions were steady from the previous month. The 50.0 benchmark is extremely important because a reading below that level means more surveyed executives felt business worsened in the month than those who said it had improved. This data is important not only because it measures manufacturer sentiment, but it is also very recent data. Some economic releases track data that are 30-60 days old, but the ISM index is only a few weeks old, usually the first report we see each month. If it reveals a reading below 49.6, meaning sentiment fell short of expectations, we should see the bond market move higher and mortgage rates fall tomorrow.

Tuesday and Wednesday have nothing of concern scheduled for release. Look for the stock markets to drive bond trading and mortgage rates. Stock strength will likely pressure bonds and lead to an increase in mortgage rates, while stock selling should draw funds into bonds and help lower mortgage pricing.

Thursday's monthly economic data will come from the Commerce Department, who will post August's Factory Orders data at 10:00 AM ET. This manufacturing sector report is similar to last week's Durable Goods Orders release, but also includes orders for non-durable goods. It can impact the bond market enough to change mortgage rates if it varies from forecasts by a wide margin. Analysts are forecasting a decline of 6.0% in new orders, meaning manufacturing activity slowed considerably in August. This would be good news for the bond market and mortgage pricing, but I believe we will need to see a much larger decline for this report to create a noticeable improvement in rates.

Later Thursday is the release of the minutes from the last FOMC meeting. These may be a major mover of the markets or could be a non-factor, depending on what they say. The key will be concerns over the economy, inflation and the Fed's next move. If Fed members were concerned about the economy slipping into another recession, we may see the bond market move higher and mortgage rates lower Thursday afternoon. It will be interesting to see how much debate and disagreement amongst members took place during the meeting. However, since we already know about the QE3 program that was announced last month, I don’t believe we will see mortgage rates show much reaction to these minutes. They will be posted at 2:00 PM ET, so any reaction will come during afternoon trading.

Also worth noting is some news from overseas before the markets open Thursday. The Bank of England’s monetary policy announcement (equivalent to our FOMC) will be released at 7:15 AM ET while the European Central Bank will announce at 7:45 AM ET. The ECB will draw the most attention as global investors are extremely concerned about the Eurozone and what actions will be taken to shore up some of its’ member’s finances. We don’t normally address these events but recent announcements have drawn a lot of attention here, so we should be on the alert for a reaction in the bond and mortgage markets.

The Labor Department will post September's Employment report early Friday morning. This report will reveal the U.S. unemployment rate, number of new payrolls added or lost during the month and average hourly earnings. These are considered to be very important readings of the employment sector and can have a huge impact on the financial markets. The ideal scenario for the bond market is rising unemployment, falling payrolls and a drop in earnings.

If this report gives us weaker than expected readings, bond prices should move higher and we should see lower mortgage rates Friday. However, stronger than forecasted readings could cause a sizable spike in mortgage pricing and start an upward trend in rates. Analysts are expecting to see the unemployment rate remain at 8.1%, an increase of 120,000 new jobs from August's level and a 0.2% increase in earnings.

Overall, I suspect we will see a fair amount of volatility in the markets and mortgage rates this week, but the busiest days will probably be early and late in the week. There isn't that much data being released, but what is being posted is extremely important to the markets and highly influential on mortgage pricing. Labeling tomorrow and Friday as the most important days is easy due to the importance of the economic reports scheduled those days. The calmest days for mortgage rates will likely be Tuesday or Wednesday but major moves in the stock markets either day could lead to movement in mortgage rates. Even though there are only a couple of relevant economic reports being posted this week, it would still be prudent to maintain fairly constant contact with your mortgage professional this week if still floating an interest rate.

This Week's Market Commentary_September 10th

This week brings us the release of six relevant economic reports that may influence mortgage rates in addition to two Treasury auctions and an afternoon of FOMC events. Several of the economic reports and the FOMC stuff are all considered to be highly important to the financial and mortgage markets, meaning that we may see significant changes to rates this week. There is a very good chance of seeing noticeable changes in rates several days. Look for the stock markets to be the biggest force behind bond trading and changes to mortgage pricing until we get to the middle part of the week. The week's first event is July's Goods and Services Trade Balance data early Tuesday morning, giving us the size of the U.S. trade deficit. It is expected to show a deficit of approximately $44.0 billion, which would be an increase from June's $42.9 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. There are two Treasury auctions this week that have the potential to influence mortgage rates. The first is Wednesday’s 10-year Treasury Note auction, which will be followed by a 30-year Bond auction Thursday. It is fairly common to see some weakness in bonds before these sales as investors prepare for them. If the sales are met with a decent demand from investors, indicating that interest in longer-term securities such as mortgage-related bonds still exists, the earlier losses are usually recovered after the results are announced. The results of Wednesday’s sale will be posted at 1:00 PM ET while Thursday’s results are set for 11:30 AM ET due to other events scheduled that day. If demand was strong, particularly from international investors, we should see mortgage rates improve during afternoon trading Wednesday. However, due to the magnitude of Thursday’s Fed events, that day’s auction will likely have little impact on the bond market and mortgage rates. One of the week's two important inflation readings is the only economic report scheduled for release Thursday morning. The Labor Department will post August's Producer Price Index (PPI) at 8:30 AM ET, giving us an important measurement of inflationary pressures at the producer level of the economy. There are two readings that analysts follow in this release. They are the overall index and the core data reading. The core data is the more important of the two since it excludes more volatile food and energy prices. Analysts are predicting a 1.2% increase in the overall index, and a rise of 0.2% in the core data. Stronger than expected readings could fuel inflation concerns in the bond market. That would be bad news for bonds and mortgage rates because inflation is the number one nemesis of the bond market as it erodes the value of a bond's future fixed interest payments. As inflation becomes more of a concern in the markets, bonds become less appealing to investors, leading to falling prices and higher mortgage rates. Thursday’s Fed events start with the 12:30 PM adjournment of the FOMC meeting that began Wednesday. It is widely expected that Mr. Bernanke and company will not change key short-term interest rates at this meeting, but there is a great deal of hope in the market that we are getting closer to another move by the Fed such as QE3. Friday’s Employment numbers helped bolster the calls for Fed action. I believe that an announcement of a bond buying program should rally not only stocks but also bonds and mortgage rates because those are the securities that the Fed will purchase in the QE program. On the other hand, the lack of at least a strong indication that QE3 is coming soon will probably lead to selling in the markets and an upward revision to mortgage rates. Also worth noting is that the FOMC meeting is ending earlier than the traditional 2:15 PM because it is one of the meetings that will be followed by a press conference with Fed Chairman Bernanke. The meeting will adjourn at 12:30 PM while the press conference will begin at 2:15 PM and will probably lead to afternoon volatility in the markets and mortgage rates Thursday. The Fed will also update their economic and monetary policy projections right before the press conference begins. They are expected to be posted at 2:00 PM ET. Any significant revisions to the Fed’s outlook on unemployment, GDP growth or their timetable for keeping key rates at current levels will also cause volatility in the markets and mortgage rates. Friday has the remaining four pieces of economic data with two of them considered to be major releases. Those highly important reports are August's Retail Sales and Consumer Price Index (CPI) will both be posted at 8:30 AM. The sales report will give us a very important measurement of consumer spending, which is extremely relevant to the markets because it makes up over two-thirds of the U.S. economy. Current forecasts are calling for a 0.7% increase in sales. Analysts are also calling for a 0.8% rise in sales if more volatile auto transactions are excluded. Larger than expected increases would be considered bad news for bonds and likely lead to an increase in mortgage pricing since it would indicate economic growth. The Consumer Price Index (CPI) is also one of the most important reports we see each month. It is considered to be a key indicator of inflation at the consumer level of the economy. As with its' sister PPI report, there are two readings in the report- the overall index and the core data reading. Current forecasts show a 0.6% increase in the overall reading and a 0.2% rise in the core data reading. As with the PPI, a larger increase in the core data would signal rising inflation and would likely lead to higher mortgage rates Friday morning. August's Industrial Production data will be posted mid-morning Friday. This report gives us a measurement of manufacturing sector strength by tracking output at U.S. factories, mines and utilities. It is considered to be moderately important but could help change mortgage rates if there is a significant difference between forecasts and the actual reading. Analysts are expecting to see a 0.2% decline from July's level of output. A sizable increase could lead to slightly higher mortgage rates, while a weaker than expected figure would indicate a softer than thought manufacturing sector and would be considered good news for bonds and mortgage rates. However, the CPI and Retail Sales reports are the key data of the day and will likely influence mortgage pricing much more than the production report will. The last release of the week will be posted by the University of Michigan late Friday morning. Their Index of Consumer Sentiment will give us an indication of consumer confidence, which hints at consumers' willingness to spend. If consumer confidence in their own financial situation is rising is rising, they are more apt to make large purchases. But, if they are growing more concerned about their job security or finances, they probably will delay making that large purchase. This influences future consumer spending data and can impact the financial markets. It is expected to show a reading of 73.3, which would mean confidence slipped from August's level of 74.3. That would be considered favorable news for bonds and mortgage rates because waning consumer spending indicates slower economic growth. Overall, I think we need to label Thursday as the most important day of the week with the PPI and Fed events scheduled. However, Friday has some very important economic data set for release and also has the potential to heavily influence bond trading and mortgage rates. Tomorrow will probably end up being the calmest day for mortgage rates, but we still may see minor changes if the stock markets show much movement. I strongly recommend maintaining contact with your mortgage professional if still floating an interest rate, especially the latter part of the week. If I were considering financing/refinancing a home, I would.... Lock if my closing was taking place within 7 days... Float if my closing was taking place between 8 and 20 days... Float if my closing was taking place between 21 and 60 days... Float if my closing was taking place over 60 days from now... CLICK HERE TO STOP RECEIVING OUR REPORT



This Week's Market Commentary

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This week brings us the release of six economic reports that may affect mortgage rates along with two Treasury auctions and a Fed conference that has several key speakers. With data and related events scheduled every day the rest of this week, it is likely to be an active one for mortgage rates.

The Conference Board will post their Consumer Confidence Index (CCI) for August late this morning. This index measures consumer sentiment about their personal financial situations, giving us a measurement of consumer willingness to spend. If consumers are feeling more confident in their own finances, they are more apt to make a large purchase in the near future, fueling economic growth. A decline in confidence would indicate that surveyed consumers probably will not be buying something big in the immediate future. That would be a sign of economic weakness and should drive bond prices higher, leading to lower mortgage rates today. It is expected to show a reading of 65.5, which would be a slight decline from July's 65.9. The lower the reading, the better the news for bonds and mortgage rates.

Wednesday has two reports scheduled that can potentially influence mortgage pricing. The first is the first revision to the 2nd Quarter Gross Domestic Product (GDP) at 8:30 AM ET. The GDP is the total of all goods and services produced in the U.S. and is considered to be the best measurement of economic activity. This reading is the second of three that we see each quarter. Last month's preliminary reading revealed that the economy grew at an annual rate of 1.5%. Wednesday's revision is expected to show that the GDP actually rose only 1.6%. A smaller than expected reading should help lower mortgage rates Wednesday, especially if the inflation portion of the release does not get revised higher. There will be a final revision issued next month, but it probably will have little impact on mortgage rates since traders will be more interested in the current quarter’s activity.

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 or changes from the past, we may see movement in the markets and mortgage pricing as analysts adjust their theories on the Fed's next move. Most likely though, it will be a non-event and will not lead to a noticeable change in mortgage rates.

July's Personal Income and Outlays report will be released early Thursday morning, giving us a measurement of consumer ability to spend and current spending habits. It is expected to show an increase of 0.3% in income and a 0.5% increase in spending. Since consumer spending makes up over two-thirds of the U.S. economy, weaker than expected numbers would be considered good news for the bond market and mortgage rates.

Friday is a multi-release day with August's revision to the University of Michigan's Index of Consumer Sentiment and last month’s Factory Orders data both being posted late Friday morning. The sentiment index helps us track consumer willingness to spend similarly to Tuesday’s CCI. It is expected to show no change from August's preliminary reading of 73.6. If it revises lower, consumers were less confident about their personal financial situations than previously thought. This would be good news for the bond market and mortgage rates because waning confidence usually means that consumers are less likely to make large purchases in the near future. As with the CCI index, the lower the reading the better the news for bonds and mortgage rates.

July's Factory Orders data measures manufacturing sector strength and is similar to last week's Durable Goods Orders, but includes orders for both durable and non-durable goods. It is expected to show a 2.0% increase in new orders. A smaller than expected rise would be favorable for bonds, but I don't see this data causing much movement in rates unless its results vary greatly from forecasts since the big-ticket products portion of the report was released last week.

Also worth mentioning are a couple of Treasury auctions that may affect bond trading and mortgage rates this week along with a speaking engagement by Fed Chairman Bernanke. The two relevant Treasure auctions are Wednesday's 5-year Note and Thursday's 7-year Note sales. Results of the auctions will be posted at 1:00 PM ET each day. If investor interest is strong in the auctions, 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.

Mr. Bernanke will be speaking Friday morning at the Jackson Hole Fed conference in Wyoming. He will be addressing current and future economic conditions, so his words are likely to influence the markets and mortgage pricing Friday. Also scheduled to speak are the European Central Bank and International Monetary Fund Presidents. What they will say and how it will impact the markets is difficult to predict, but there is a high probability of the markets reacting heavily to their words, so the event needs to be watched.

Overall, I believe it is going to be a fairly active week for the financial and mortgage markets. Choosing the best candidate for the most important day isn’t as easy. Wednesday has two economic reports scheduled along with the 5-year Note auction, but Friday’s Jackson Hole conference can be a market mover by itself without the two economic reports that are scheduled that day. So, let’s go with Wednesday AND Friday as the key days of the week. Since it looks to be another active week, I strongly recommend maintaining contact with your mortgage professional if still floating an interest rate.

BREAKING: FHFA sets new short sale guidelines for Fannie Mae, Freddie Mac

The Federal Housing Finance Agency announced that Fannie Mae and Freddie Mac are issuing new, clear guidelines to their mortgage servicers that will align and consolidate existing short sales programs into one standard short sale program.

The streamlined program rules will enable lenders and servicers to quickly and easily qualify eligible borrowers for a short sale.

Among the changes: Fannie Mae and Freddie Mac will offer up to $6,000 to second lien holders to expedite a short sale. Previously, second lien holders could slow down the short sale process by negotiating for higher amounts.

Not any more.

Read HousingWire coverage by clicking here.

This Week's Market Commentary_August 13, 2012

This week brings us the release of seven pieces of economic data that are relevant to the bond market and mortgage pricing. There is no relevant data scheduled for release today, so look for the stock markets to drive bond trading and mortgage rates. There is data scheduled for every other day with three of the four remaining days having multiple reports being posted. This means we are likely to see plenty of movement in the markets and mortgage rates this week.

Tuesday has two of the week’s reports scheduled to be posted. July’s Retail Sales data is the first and one of the highly important reports scheduled this week. This data is very important to the financial markets and mortgage rates because it helps us measure consumer spending. Since consumer spending makes up over two-thirds of the U.S. economy, any data related to it can cause a fair amount of movement in the markets. A smaller than expected increase would indicate that consumers are spending less than previously thought, pointing towards further slowing in the economic recovery. This is good news for the bond market and mortgage rates as it eases inflation concerns and makes long-term securities such as mortgage-related bonds more attractive to investors. Current forecasts are calling for an increase of 0.3%.

One of the week’s key inflation indexes will also be posted early Tuesday morning. July’s Producer Price Index (PPI) will give us an indication of inflation at the producer level of the economy. There are two readings in the report- the overall index and the core data reading. The core data is more important because it excludes more volatile food and energy prices that can change significantly from month to month. Current forecasts call for a 0.2% rise in the overall reading and a 0.2% increase in the core data. A larger increase in the core data could push mortgage rates higher Tuesday morning. If it reveals weaker than expected readings, we may see mortgage rates improve as a result. That is assuming that the Retail Sales data doesn’t show a surprise increase or decline.

The PPI will be followed by the even more important Consumer Price Index (CPI) early Wednesday morning. The Consumer Price Index is one of the most important reports we see each month as it measures inflation at the consumer level of the economy. As with the PPI, there are also two readings in the report. Current forecasts call for a 0.2% increase in the overall index and a 0.2% rise in the core data reading. Declines in the readings, especially in the core data, should lead to lower mortgage rates as it would mean inflation is still not a threat to the economy. However, stronger than expected readings will likely cause an increase to mortgage pricing Wednesday.

July’s Industrial Production is Wednesday’s second report with a release time of 9:15 AM ET. It gives us a measurement of manufacturing sector strength by tracking output at U.S. factories, mines and utilities. It is considered to be moderately important to the markets and can influence mortgage rates slightly. Current forecasts are calling for a 0.6% increase in production, indicating some strength in the manufacturing sector. Good news for the bond market and mortgage rates would be a decline in output, signaling sector weakness.

Thursday has only one monthly report scheduled for release. July’s Housing Starts will be posted at 8:30 AM ET Thursday. This report gives us an indication of housing sector strength and future mortgage credit demand. However, it isn’t considered to be of high importance to the bond market or mortgage pricing and usually doesn’t cause much movement in mortgage rates unless it varies greatly from forecasts. It is the least important of the week’s reports and is expected to show a slight increase in construction starts of new homes. The lower the number of starts, the better the news for the bond market, as it would indicate a weaker than expected housing sector.

Friday also has two pieces of data that are relevant to mortgage rates, but both come during late morning trading. The University of Michigan will release their Index of Consumer Sentiment for August at 9:55 AM Friday. This index gives us a measurement of consumer willingness to spend. If confidence is rising, then consumers are more apt to make large purchases. This helps fuel consumer spending and economic growth. By theory, a drop in confidence should boost bond prices, but this data is considered moderately important and carries much less significance than some of the week’s other reports. Analysts are expecting to see a reading of 72.2, which would be a slight decline from July’s revised reading of 72.3. The smaller the reading, the more concerned consumers are in their own financial situations and the better the news for mortgage rates.

The final report of the week will come from the Conference Board, who will give us its Leading Economic Indicators (LEI) for July. This index attempts to measure economic activity over the next three to six months and is considered to be moderately important. A higher than expected reading is bad news for the bond market because it indicates that the economy may be strengthening more than thought. However, a weaker than expected reading means that the economy may not grow as much as predicted, making stocks less appealing to investors. This also eases inflation concerns in the bond market and could lead to slightly lower mortgage rates Friday if the stock markets remain calm and the day’s other data does not show any surprises. It is expected to show an increase of 0.2 % in the index, indicating minor economic growth over the next couple of months. It will take a sizable difference between forecasts and its actual reading for this report to influence mortgage rates.

Overall, I am expecting Tuesday or Wednesday to be the most important days of the week. Tuesday’s Retail Sales report and Wednesday’s CPI are the two single most influential reports. Since Tuesday has the Retail Sales and PPI reports and consumer level inflation is not expected to be an immediate threat, I am leaning towards it as the day that we will see the most movement in mortgage rates. However, Wednesday is also a key day. I am expecting to see the least movement tomorrow, unless the stock markets stage a significant rally or sell-off. With so much going on this week, I strongly recommend maintaining contact with your mortgage professional if still floating an interest rate.

Now Cheaper To Buy Than To Rent

It is now considerably cheaper to own a home than to rent that same home, something unheard of since 2008.

This and other promising information about the housing market was recently released by Harvard in their annual “State of the Nation’s Housing,” an in-depth study performed by The Joint Center for Housing Studies at Harvard University.

Because of historically low mortgage rates and low home prices post-recession, it is a perfect time to buy.

On the other hand, rent prices are soaring, especially in the Bay Area. According to Trulia, San Francisco and Oakland saw the biggest jumps in rent in the United States over the last year, with increases of 14.7 percent and 11.2 percent, respectively.

“With rents up, home prices sharply down, and mortgage interest rates at record lows, mortgage costs relative to monthly rents haven’t been this favorable since the early 1970s,” said Eric S. Belsky, managing director for the Joint Center for Housing Studies at Harvard.

The report also noted that today, mortgage payments for the median priced US home are roughly half of what they were in 1990. The study showed that mortgage payments are now 23% less than rent payments for the median priced home.

This means that it is a fantastic time to be a home buyer, and to get off of the fence if you’ve been waiting for the market to turn around.

Take a look at the entire Harvard study here:
http://www.jchs.harvard.edu/research/state_nations_housing.

This Week's Market Commentary_June 11, 2012

This week is pretty busy with five economic reports scheduled to be released, all of which are being posted over three days. Three of the five are considered to be of high importance to the markets and mortgage rates.

The rest are of interest to the markets but likely will not cause a large change in mortgage rates unless they vary greatly from forecasts. In addition to the economic data, we also have two Treasury auctions that have the potential to influence bond trading and mortgage rates.

None of the relevant data is being posted tomorrow or Tuesday, so look for the stock markets to influence bond trading and mortgage rates again. Of particular interest will be this weekend’s news that Spain’s banks are receiving a significant cash infusion to at least temporarily ease the crisis there. This will likely fuel a stock rally today that should pressure bonds and mortgage rates. On top of that, weakness late Friday has us going into the new week with a small upward revision built into today’s morning rates.

The first data of the week comes Wednesday 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 Wednesday 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 over two-thirds of the U.S. economy. Analysts are expecting to see that retail-level sales fell 0.2% last month. A larger decline in sales, signaling a slowing economy, would be good news for the bond market and could lead to lower mortgage rates Wednesday.

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 a decline of 0.7% in the overall index and a 0.2% rise in the core data.

The two relevant Treasury auctions scheduled will also be held the middle part of the week. A 10-year Treasury Note sale is scheduled for Wednesday while 30-year Bonds will be sold Thursday. Results of both auctions will be posted at 1:00 PM ET on the sale days. If investor demand was high, we may see bonds rally during afternoon trading, however, weak demand could lead to selling and an increase to mortgage rates. It is common to see some pressure in bonds right before these sales as investors prepare for them, but as long as the sales are not weak those pre-auction losses are usually recovered once they are completed.

Thursday has one of the week’s most important and arguably one of the single most important reports the bond market gets each month. That is May’s Consumer Price Index (CPI). It is very similar to Wednesday’s PPI, but measures inflationary pressures at the more important consumer level of the economy. It is expected to show a 0.2% decline 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 Thursday, while a weaker core reading could lead to a bond rally and lower mortgage pricing.

Friday closes the week with two relevant reports, the first coming 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 0.1% would indicate that the manufacturing sector is stronger than thought and would likely help push mortgage rates slightly higher.

June’s preliminary reading to the University of Michigan’s Index of Consumer Sentiment will be posted late Friday morning. 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 77.0, which would be a decline from May’s 79.3. 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.

Overall, look for Wednesday or Thursday to be the biggest day of the week. Not just because it brings the release of three of the week’s five 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. It is highly recommended that you maintain contact with your mortgage professional this week if still floating an interest rate.

This Week's Market Commentary_June 4, 2012

This week is relatively light in terms of scheduled economic reports that are relevant to mortgage pricing. None of the factual economic reports are considered to be highly important to the financial markets or mortgage pricing. The data that is on the agenda is considered to be moderately important, but Wednesday afternoon and Thursday morning have events scheduled that could be the biggest factor in whether mortgage rates move higher or lower this week.

The first release of the week will come from the Commerce Department, who will post April's Factory Orders data late tomorrow morning. This manufacturing sector report is similar to last week's Durable Goods Orders release, but also includes orders for non-durable goods. It can cause some movement in the financial markets if it varies from forecasts by a wide margin, but it isn't expected to cause much of a change in rates. Current forecasts are calling for an increase in new orders of 0.2%.

There is nothing of relevance scheduled for release Tuesday, but Wednesday has two events that we will watch. The first is the revised 1st Quarter Productivity and Costs data at 8:30 AM ET. This data measures employee output and employer costs for wages and benefits. It is considered to be a measurement of wage inflation. This is relevant because it is believed that the economy can grow with low inflationary pressures when productivity is high. Economic growth isn’t much of a concern to the bond market at the moment, but if productivity is at a high level when the economy does turn the corner, inflation may not be as much of a topic as it would be without strong productivity levels. Last month's preliminary reading revealed a 0.5% decline and analysts are expecting to see a 0.7% decline, but I don't think this piece of data will have much of an impact on the bond market or mortgage pricing unless it varies greatly from that reading.

Wednesday afternoon has the Federal Reserve’s release of their Beige Book. This data details economic conditions throughout the U.S. by Federal Reserve region. It is relied upon heavily by the Fed to determine monetary policy during their FOMC meetings. If it shows surprisingly softer economic activity since the last report, the bond market may thrive and mortgage rates could drop shortly after the 2:00 PM ET release. If it reveals signs of inflation growing or rapidly expanding economic activity in many regions, we could see mortgage rates revise higher Wednesday afternoon.

Thursday has no important economic data scheduled, but Fed Chairman Bernanke will speak before a Congressional Joint Economic Committee about his outlook for the economy. His words are always the focus of attention and can be highly influential on the markets and mortgage rates. It will be interesting to see exactly what he says and how much his outlook has changed in the recent weeks, especially after Friday’s disappointing Employment report. He is scheduled to testify at 10:00 AM ET, so we could see many lenders post rates later than usual to allow the markets to react to his prepared speech and the Q&A that follows. I think this event is more likely to benefit mortgage shoppers than lead to a spike in rates, but it is the week’s most important event so I recommend proceeding cautiously into it if still floating an interest rate.

April's Goods and Services Trade Balance report will close the week’s economic reports early Friday morning. This data gives us the size of the U.S. trade deficit and will be released at 8:30 AM ET. It isn't likely to cause much movement in the markets or mortgage rates, but nevertheless forecasters are expecting to see a $49.9 billion trade deficit. It will take a wide variance from this projection for the data to influence mortgage rates.

Overall, it likely is going to be a moderately busy week for the mortgage market. The most action will likely come during the middle days, assuming that the stock markets don't go into heavy selling or rally. Friday’s employment data helped fuel large stock losses and pushed bond yields to new record lows. The loss puts the Dow just a little more than 100 points away from breaking below an extremely important benchmark of 12,000. If stocks recover a good part of last week’s losses, we can expect bond prices to suffer and mortgage rates to rise. On the other hand, further stock weakness could lead to more funds moving into bonds and another round of improvements to mortgage rates.

As referenced Friday, I believe the major indexes still have plenty of room to fall, which traditionally makes bonds more attractive as investors seek a safe-haven to place funds and escape the volatility. However, we should note that the 10-year Treasury is currently at a historic low yield of 1.47%. Even lower than when the financial crisis was at its peak. My concern is that I am not sure just how much lower we can see yields fall before investor appeal wanes, raising concerns about inflationary risks in the future. We are in unchartered waters with mortgage rates so low, stocks still relatively overpriced, overseas concern rising again and bond yields at record lows. It is going to be interesting to see what happens over the summer. At some point in the near future we will need to shift to a conservative approach towards mortgage rates, but for the time being, enjoy the improvements.

This Week’s Market Commentary_May 21, 2012

This week brings us the release of four important economic reports in addition to two Treasury auctions that may influence rates. Only one of the reports is 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. There is nothing of importance scheduled for release tomorrow, so expect the stock markets to influence bond trading and mortgage pricing.

The National Association of Realtors will give us their Existing Home Sales report late Tuesday morning. This data tracks resales of homes in the U.S. during April, giving us a measurement of housing sector strength. This type of data is relevant because a weakening housing sector makes a broader economic recovery less likely. Current forecasts are calling for an increase in home sales between March and April. Ideally, the bond market would prefer to see a decline, indicating further housing sector weakness. A large increase in sales could lead to bond weakness and a small increase in mortgage rates Tuesday morning.

April’s New Home Sales report is the sister report of the Existing Home Sales and will be released late Wednesday morning. It gives us a similar measurement of housing sector strength and future mortgage credit demand, but tracks a much smaller portion of housing sales than Tuesday’s report does. Actually, it is the least important release of the week and probably will not have much of an impact on mortgage pricing. It is expected to show gains in sales from March’s level, meaning the new home portion of the housing sector also strengthened last month.

Thursday has the week’s most important report 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. These are items made with an expected life span of three or more years. It is currently expected to show an increase in new orders of approximately 0.3%, indicating the manufacturing sector remained fairly flat last month. That would be relatively 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 Thursday’s mortgage rates.

The last relevant data of the week will come from the University of Michigan, who will update their Index of Consumer Sentiment for May late Friday morning. This type of data is watched closely because when consumers are feeling more confident about their own financial situations, they are more likely to make a large purchase in the near future. Since consumer spending makes up over two-thirds of the U.S. economy, rising confidence and the higher levels of spending that usually follow, are considered negative news for bonds and mortgage rates. Friday’s report is expected to show a small decline from this month’s preliminary reading of 77.8. A reading above 77.5 would be considered negative for bonds and mortgage pricing.

Overall, I think we have a moderately busy week ahead of us. The big report of the week is the Durable Goods Orders, making Thursday the best candidate for most active day for mortgage rates. Tuesday’s housing report may also cause movement in rates if it shows a sizable variance from forecasts. 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 also influence bond trading and possibly mortgage rates if they are met with an exceptional demand or if there is lackluster interest from investors.

Also worth noting is the fact that 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.

This Week's Market Commentary_May 14, 2012

This week brings us the release of five pieces of relevant economic news in addition to the minutes from the most recent FOMC meeting. Two of the economic reports are considered to be highly important to the markets and mortgage rates, while the others carry enough significance to influence mortgage rates if they show a wide variance from forecasts.

The first important piece of data this week is April’s Retail Sales, which will be released at 8:30 AM ET Tuesday. It is an extremely important report for the financial markets since it measures consumer spending. Consumer spending makes up over 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 0.2% increase in sales from March to April.

A weaker than expected level of sales should push bond prices higher and mortgage rates lower Tuesday 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 stock buying and bond selling that would push mortgage rates higher.

April’s Consumer Price Index (CPI) will also be posted at 8:30 AM ET Tuesday. It is similar to last week’s PPI report, but measures inflationary pressures at the more important consumer level of the economy. These results will be watched closely and could lead to significant volatility in the bond market and mortgage pricing if they show any surprises. Current forecasts are calling for no change in the overall index and a 0.2% rise in the core data reading. The core data is the more important of the two readings because it excludes more volatile food and energy prices, giving analysts a more stable and reliable measurement of inflation.

Wednesday has three reports scheduled, starting with April’s Housing Starts at 8:30 AM ET. This data measures housing sector strength and mortgage credit demand by tracking newly issued permits and actual starts of new home construction. It is expected to show an increase in new starts from March’s readings. Since this report is not considered to be of high importance to the bond market, it likely will have little impact on mortgage rates unless it varies greatly from forecasts.

The second report of the day is April’s Industrial Production at 9:15 AM ET. It measures manufacturing sector strength by tracking output at U.S. factories, mines and utilities. It is expected to show a 0.5% increase in production, indicating that manufacturing activity is growing. A smaller than expected increase in output would be good news for the bond market and mortgage rates because it would indicate that the manufacturing sector is not as strong as thought. This report is just a bit more important to the markets as the earlier housing report, so they both will likely need to show unexpected strength or weakness for them to cause movement in mortgage rates.

Wednesday’s third release is the minutes of the last FOMC meeting. Market participants will be looking for how Fed members voted during the last meeting and any comments about inflation concerns in the economy and economic growth. The goal is to form opinions about the Fed being able to wait until late 2014 to make a move to either boost economic activity or slow growth to ease inflation concerns. Since the minutes will be released at 2:00 PM ET, if there is a market reaction to them it will be evident during afternoon trading Wednesday.

The last data of the week comes late Thursday morning with the release of April’s Leading Economic Indicators (LEI). This Conference Board report attempts to measure economic activity over the next three to six months. It is expected to show a 0.2% increase from March’s reading, meaning that economic activity is likely to strengthen slightly over the next few months. A decline would be good news for the bond market and mortgage rates, while an increase could cause mortgage rates to inch higher Thursday.

Overall, it looks like we may see the most activity Tuesday with the two most important reports of the week scheduled. Wednesday could also be active while Friday is the best candidate for calmest day unless something unexpected happens. However, sizable gains or losses in the major stock indexes could influence bonds and mortgage rates more than a good part of this week’s economic data can. Therefore, please maintain contact with your mortgage professional if still floating an interest rate.