Rate Lock Advisory

Tuesday, May 23th

Tuesday’s bond market has opened in positive territory following a mixed open in stocks and favorable economic news. The major stock indexes are calm but mixed with the Dow up 29 points and the Nasdaq down 4 points. The bond market is currently up 3/32 (2.24%), which should keep this morning’s mortgage rates at yesterday’s early levels.

3/32


Bonds


30 yr - 2.24%

29


Dow


20,924

4


NASDAQ


6,128

Mortgage Rate Trend

Trailing 90 Days - National Average

  • 30 Year Fixed
  • 15 Year Fixed
  • 5/1 ARM

Indexes Affecting Rate Lock

Low


Positive


New Home Sales

The Commerce Department gave us April's New Home Sales report at 10:00 AM ET this morning. It revealed an 11.4% decline in sales of newly constructed homes last month. This was a much larger decline than was expected, meaning the new home portion of the housing sector was softer than many had thought. That makes the data favorable for bonds and mortgage rates because a weaker housing sector makes broader economic growth less likely. However, this is not considered to be a highly important piece of data, so we are seeing a minimal reaction in the bond market.

Medium


Unknown


Existing Home Sales from National Assoc of Realtors

Tomorrow has three events worth watching as they may influence mortgage rates. National Association of Realtors will bring us the first when they post their Existing Home Sales report at 10:00 AM ET. As with its sister report (today’s New Home Sales), this data will also give us a measurement of housing sector strength demand but tracks resales of existing homes in the U.S. Current forecasts are calling for a decline in home sales between March and April. Ideally, the bond market would prefer to see a large decline, indicating housing sector weakness. A large increase in sales could lead to bond weakness and a slight increase in mortgage rates tomorrow morning since a strengthening housing sector raises optimism about general economic growth.

Medium


Unknown


Federal Open Market Committee (FOMC) Minutes

The day’s other two events will come during afternoon trading. One 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 or concerns regarding economic growth. The goal is to form opinions about the Fed's next move regarding interest rates, which is expected to happen at an upcoming FOMC meeting. Since the minutes will be released at 2:00 PM ET, if there is a market reaction to them it will be evident during mid-afternoon trading tomorrow.

Medium


Unknown


Treasury Auctions (5,7,10,30 year securities)

Also tomorrow afternoon is the first of this week's two Treasury auctions that are worth watching. The Fed will auction 5-year Notes tomorrow and 7-year Notes on Thursday. Neither of these sales will directly impact mortgage pricing, but they can influence general bond market sentiment. If the sales go poorly, we could see broader selling in the bond market that leads to upward revisions to mortgage rates. On the other hand, strong sales usually make bonds more attractive to investors, bringing more funds into bonds. The buying of bonds that follows often translates into lower mortgage rates. Results of the sales will be posted at 1:00 PM ET each auction day, so look for any reaction to come during early afternoon hours tomorrow and Thursday.

Float / Lock Recommendation

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... 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.