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If you are considering locking in an interest rate for a New York mortgage or a Florida mortgage, read this post.
There were three pieces of relevant economic data posted yesterday, but it was the Labor Department’s release that is driving the morning’s trading. They announced that the unemployment rate inched up 0.1% to 8.2% last month when it was expected to remain unchanged. They also said that only 69,000 new jobs were added to the economy during the month, falling well short of the 150,000 that was expected. Furthermore, we saw a downward revision of 38,000 jobs to April’s estimate, which was a 33% downward revision. This all means that, as I suspected, the employment sector was not growing nearly as quickly as many had thought, making the data extremely favorable for the bond market and mortgage rates.
The remaining two reports are actually important releases, but because of the Employment report results, they have been a non-factor in yesterday’s trading. Not that they would have hurt mortgage rates anyhow. The Personal Income and Outlays report showed a 0.2% increase in income and a 0.3% rise in spending. The spending reading matched forecasts, but the income was slightly lower than expectations. That makes this report slightly favorable for the bond market and mortgage rates.
We saw the Institute for Supply Management's (ISM) manufacturing index late this morning. It revealed a reading of 53.5 that was a bit lower than what was expected, indicating that conditions in the manufacturing sector were a little softer than many had thought. That is also good news for bonds and mortgage pricing, but it has had little impact on this morning’s activity. Traders saw all they needed to see in the employment numbers.
Yesterday’s data was wonderful news for mortgage shoppers. It signals that the burst of hiring we saw earlier this year was more or less a fluke and was not a sign of a strengthening economy. The good news is that today’s stock losses likely isn’t the end of the selling. 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 again note that the 10-year Treasury is currently at a historic low of 1.47%. That is a HISTORIC low. 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 this fall before it loses investor appeal, raising concerns about inflationary risks in the future and then start to rise. 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.
Next week brings us the release of a couple economic reports that are relevant to mortgage rates, including Monday’s release of Factory Orders. This is not one of the more important reports we see each month, so we probably will see the markets trade more on weekend news than this data. The week is highlighted by testimony by Fed Chairman Bernanke the latter part. Look for details on the week’s activities in Sunday’s weekly preview.
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... This is only my opinion of what I would do if I were financing a home. It is only an opinion and cannot be guaranteed to be in the best interest of all/any other borrowers.
Empire Home Mortgage Inc. is a registered Mortgage Broker with the New York and Florida State Banking Departments and our loans are arranged through third party providers.
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