Mortgage Rates Decline 2-26-2018
By James Brooks
The bond market up 9/32 (2.83%), which with gains late Friday should improve Raleigh area rates by .250 of a discount point.
The Commerce Department gave us January's New Home Sales data this morning, announcing a 7.8% decline in sales of newly constructed homes. This was much softer than expected and brought sales to their lowest level since August of last year. That is good news for the bond and mortgage markets because it indicates the new home portion of the housing sector was weaker than many had thought. While the decline is good news for rates, the fact that it covers only an estimated 10% of all home sales in the country reduces its importance to the markets.
Tomorrow will be a busy day with two relevant economic releases and a highly important Fed event all taking place before noon. First, January's Durable Goods Orders data will give us an important measurement of manufacturing sector strength at 8:30 AM ET. It tracks orders at U.S. factories for items expected to last three or more years, such as electronics, refrigerators and airplanes. Analysts are expecting to see a 2.0% decline in new orders, pointing to manufacturing sector weakness. It is worth noting that this data is known to be quite volatile from month to month, so large swings in the headline reading are common.
February's Consumer Confidence Index (CCI) will be posted at 10:00 AM ET tomorrow morning. This Conference Board index measures consumer confidence in their personal financial situations, giving us a measurement of consumer willingness to spend. If consumers are feeling good about their own financial and employment situations, they are more apt to make large purchases in the near future. Since consumer spending makes up over two-thirds of the economy, related data is considered important in terms of gauging economic growth. It is expected to show an increase in confidence from the 125.4 reading in January to 126.5 this month. A lower reading would be considered good news for bonds and mortgage rates since it would indicate consumers are less likely to make a large purchase in the near future than many had thought.
The most important of the three will be new Fed Chairman Jerome Powell?s semi-annual Fed testimony on the status of the economy at 10:00 AM. He will be speaking to the House Financial Services Committee tomorrow morning and the Senate Banking Committee Thursday. Market participants will watch his words very closely. The Fed is required to deliver this testimony twice a year, which is considered to be of extreme importance to the financial markets. We almost always see the markets move as a result of what is said during this testimony. Look for him to address our employment situation, inflation, stock gains and global political/financial issues and their impact on our economy. His testimony begins at 10:00 AM ET with a prepared statement which is then followed by Q & A with committee members. His prepared words are expected to be released prior to appearing, so we could see a reaction early Tuesday morning. I am expecting to see the markets fluctuate Tuesday morning, possibly affecting mortgage rates also. The first day of testimony usually causes the most volatility because the prepared statement made on the second day often differs little from that of the first day.
If I were considering financing/refinancing a home, I would.... Lock if my closing was taking place within 7 days... Lock 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