Consumer Confidence

Consumer Confidence Hints at Higher Home Prices & Rates

The Consumer Confidence Index is rising, a potentially double-edged sword for residents of Schererville Indiana and for Americans, in general.

According to The Conference Board, economic confidence is as high as it’s been since August 2007 — 4 months before the start of the recession.  Americans are optimistic again.

Confidence matters to the economy because as confidence increases, in theory, consumer spending follows.  Consumer spending accounts for 70 percent of the U.S. economy.

It’s why Wall Street is responsive to confidence data.

When consumer confidence is rising, households start to make big-ticket purchases they may have otherwise put off indefinitely. Maybe it’s a replacing old appliances; or, trading in an old automobiles; or, splurging on a vacation.

Rising confidence can also spur real estate sales.

When confidence is rising, a growing family that chose to “make do” in their 3-bedroom, 1.5-bathroom starter home may opt to move-up to a 4-bedroom, 3-bath instead at a slightly higher monthly carrying cost.  And there are families in every city in every state making those same decisions.

As a result, the housing market gets a boost — especially in the mid-to-upper price ranges. Values rise on higher demand for homes.

The downside is that growing confidence tends to push conforming and FHA mortgage rates up.  This is because an expanding economy draws investment dollars away from bonds and into stocks — including mortgage bonds. 

The reduced demand for mortgage-backed bonds leads bond prices to fall and mortgage rates to rise.  Sometimes by a little, sometimes by lot.

So, if you’re buying a home or thinking of a refinance, rising confidence in the economy may be a signal to act sooner rather than later.  Talk to your real estate agent and/or your loan officer about next steps and get your plan in place.

Consumer Confidence

What’s Ahead for Mortgage Rates This Week: June 1st

Mortgage markets worsened last week as concerns of a global debt crisis lessened and stock markets rebounded. The gains in stocks came at the expense of bonds — including mortgage bonds. 

Conforming and FHA mortgage rates rose in Indiana for the first time in 5 weeks, pulling mortgage pricing off its best levels of the year.

The best mortgage rates of last week were locked Tuesday morning.

This week, mortgage rates may rise even more. In addition to the release of May’s jobs report and consumer confidence data, fears of broader economic slowdown appear to be easing.

Day-by-day, the chances of rates rising are real. 

On Tuesday, a consumer confidence survey is released. Consumer confidence is linked to economic growth because 70 percent of the economy is based in consumer spending. In theory, as consumer confidence grows, the economy should, too. 

Therefore, a strong reading should push mortgage rates higher.

On Wednesday, Pending Home Sales and Auto Sales data is released for last month. Both items are “big ticket” and will reflect on consumer confidence. Strong readings should be rough on rates.

On Thursday, jobless claims data hits the wires along with worker productivity stats.  These two releases normally don’t carry much weight, but with the jobs market in focus this year, markets will be watching for clues about Friday‘s big report — the May Non-Farm Payrolls.

Anything can happen when the jobs report is released. 

An estimated 290,000 jobs were created in April and economists think more than a half-million people re-entered the workforce in May.  This is good for the economy, of course, but can drag on mortgage rates.  If job growth even comes close to the 500,000 marker, mortgage rates could zoom higher.

Mortgage rates moved higher last week but are still very low. If you’ve been thinking about refinancing your mortgage, you probably shouldn’t put it off much longer.  Talk to your loan officer today — the longer you wait, the more that rates can rise.

Consumer Confidence

Consumer Sentiment Rises, Will It Lead to Economic Recovery

In a bit of good news for the economy, Consumer Sentiment fell to 4-month lows in August.  The drop wasn’t “good news”, per se, but because it wasn’t nearly as large as economists expected, Wall Street cheered it. 

The index, jointly published by the University of Michigan and Reuters, measures how Americans feel about their situation today, and how they envision it six months in the future.

Since bottoming 5 months ago, consumer sentiment has added more than 10 points. 

Rising Consumer Sentiment figures can foreshadow economic growth because confident consumers are more apt to spend money on big-ticket items including appliances, automobiles, and, of course, new homes.  

The recent run of sentiment data is one more reason to believe a full economic recovery is underway.

That said, the Consumer Sentiment survey has its flaws.

For one, the survey’s sample set includes just 500 households nationwide and that’s not a true cross-section of America. And second, just because people feel more confident about their finances doesn’t always mean they’ll spend more money — sometimes, they choose to save.

For now, though, stronger-than-expected sentiment data should help propel both retail sales and home sales volume through the fall season, and may even create some inflationary pressure on the economy.

If these levels are sustained, expect that mortgage rates will rise.

Consumer Confidence

Weekly Economic Releases for Mar. 29th

This week brings us the release of only four important reports but three of those four are considered to be very important and one is arguably the single most important data we see each month. There is no relevant news scheduled for release tomorrow, so look for the stock markets to be a major influence on bond trading and possibly mortgage rates.

The first relevant report of the week comes late Tuesday morning when March’s Consumer Confidence Index (CCI) will be posted. This index gives us an indication of consumers’ willingness to spend. Bond traders watch this data closely because consumer spending makes up two-thirds of our economy. If this report shows that confidence is falling, it would indicate that consumers are more apt to delay making large purchases. If the report reveals that confidence looks to be growing, we may see bond traders sell, pushing mortgage rates higher Tuesday morning. It is expected to show an increase from February’s 25.0 reading to 27.0 for March.

The Institute for Supply Management (ISM) will release their manufacturing index late Wednesday morning. This index gives us an important measurement of manufacturer sentiment by surveying trade executives. A reading below 50 means more surveyed executives felt business worsened during the month than those who said it had improved. This month’s report is expected to show a reading of 36.0, which would be a slight increase from February’s reading of 35.8. This means that analysts think business sentiment remained close to last month’s level.

February’s Factory Orders will be posted early Thursday morning. This data is similar to last week’s Durable Goods Orders report, except that this report includes orders for both durable and non-durable goods. It is also the least important of this week’s four reports. Unless it varies greatly from forecasts of a 0.3% decline, I suspect that it will be a non-factor in the mortgage market.

The biggest news of the week will come early Friday morning when the Labor Department posts March’s Employment report, giving us the U.S. unemployment rate and the number of jobs added or lost during the month. This is an extremely important report to the financial and mortgage markets. It is expected to show an increase in the unemployment rate from February’s 8.1% to 8.5% and that approximately 655,000 payrolls were lost during the month. A higher unemployment rate and a larger number of lost jobs would be good news for bonds and would likely push mortgage rates lower Friday.

Overall, I expect to see the most movement in rates either Wednesday or Friday. Friday is the most important day of the week with the employment numbers being released, but we will likely see a fair amount of movement in rates Wednesday morning also. I am expecting tomorrow to be the calmest day of the week, but the week in general will probably be pretty active. Accordingly, it would be prudent to maintain contact with your mortgage professional if still floating an interest rate.

If I were considering financing/refinancing a home, I would…. Float 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.

Consumer Confidence

Weekly Economic Releases for Mar. 22nd

This week brings us the release of six monthly and quarterly reports for the bond market to digest. Two of these reports can be considered much less important than the others, but with data scheduled for release four out of the five days we will still likely see movement in rates from day to day.

The first report of the week is February’s Existing Home Sales late tomorrow morning. It will give us a measurement of housing sector strength and mortgage credit demand, but is usually considered to be of low importance to the financial markets. Its’ sister report – New Home Sales, will be posted Wednesday morning. Since tomorrow’s release is the day’s only data, it may influence bond trading enough to cause a slight change in mortgage rates if it varies greatly from forecasts. Current forecasts are calling both reports to show a decline in sales.

Wednesday’s important data comes from the Commerce Department, who will post February’s Durable Goods Orders. This report gives us a measurement of manufacturing sector strength by tracking new orders for big-ticket items, or products that are expected to last three or more years. This data is known to be volatile from month to month but is still considered to be of high importance. Analysts are expecting it to show a decline in new orders of approximately 2.0%. A smaller decline would be considered a negative for bonds and could lead to higher mortgage rates Wednesday morning.

The next relevant data is Thursday’s final revision to the 4th Quarter GDP. This is the second and final revision to January’s preliminary reading and is expected to show a downward revision of 0.4% to the reading that was posted last month. Analysts are now more concerned with next month’s preliminary reading of the 1st quarter than data from three to six months ago, so I don’t expect this report to affect mortgage rates much.

There are two relevant reports scheduled for release Friday. The first is February’s Personal Income & Outlays report. This data helps us measure consumers’ ability to spend and current spending habits, which is important to the mortgage market because of the influence that consumer spending related information has on the financial markets. If a consumer’s income is rising, they are more likely to make additional purchases. This raises inflation concerns and has a negative affect on the bond market and mortgage rates. Current forecasts are calling for a 0.1% drop in income and a 0.3% increase in spending.

The second report comes from the University of Michigan at 9:45 AM ET. Their revision to the March consumer sentiment index will give us an indication of consumer confidence, which hints at consumers’ willingness to spend. It is expected to show little change from the previous reading of 56.6.

Overall, it is difficult to label one particular day as the most important of the week. The single most important report will likely be the Durable Goods Orders, but none of the week’s data has the potential to be a major market mover. It will be interesting to see whether last week’s Fed news influences this week’s trading. After the huge rally, we saw some weakness in bonds at the end of the week, but this did not come as a surprise. If the stock markets start to move lower again, we should see gains in bonds and improvements in mortgage rates. But, if stocks continue to move higher, further pressure in bonds are possible, leading to higher mortgage pricing.

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 c annot be guaranteed to be in the best interest of all/any other borrowers.

Consumer Confidence

Weekly Economic Releases for Feb. 22nd

This week brings us the release of six pieces of economic data for the bond market to digest along with some very important testimony from Fed Chairman Bernanke. Two of the reports are considered to be of low importance, but since we have data being posted every day of the week except for tomorrow, it is likely that we will see plenty of movement in mortgage rates the next few days.

Tuesday morning brings us the first of this week’s data with the release of February’s Consumer Confidence Index (CCI) during late morning trading. This Conference Board index measures consumer confidence in their personal financial situations, giving us a measurement of consumer willingness to spend. Since consumer spending makes up two-thirds of the economy, related data is considered important in terms of gauging economic activity. It is expected to show a decline in confidence from 37.7 in January to 36.0 this month. A lower reading would be considered good news for bonds and mortgage rates.

Mr. Bernanke will deliver the Fed’s semi-annual testimony on the status of the economy late Tuesday morning. He will be speaking to the Senate Banking Committee and market participants will watch his words very closely. The Fed Chairman 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 he says during this testimony. Look for him to address the banking and housing crises specifically and their impact on the overall economy. His testimony begins at 10:00 AM ET with a prepared statement then is followed by Q & A with committee members. I am expecting to see the markets fluctuate during this session, possibly affecting mortgage rates also.

January’s Existing Home Sales report will be posted late Wednesday morning. This is one of the least important reports of the week, along with Thursday’s New Home Sales report. They measure housing sector strength and mortgage credit demand, but usually do not have a significant impact on bond trading or mortgage rates. The Existing Home Sales report is expected to show an increase in sales but new home sales are expected to fall slightly.

The only important data scheduled for release Thursday is January’s Durable Goods Orders data. This data gives us an important measurement of manufacturing sector strength by tracking orders at U.S. factories for items expected to last three or more years. A larger drop than the 2.3% that is expected would be good news for the bond market and mortgage rates. This data is quite volatile from month-to-month, so large swings are fairly normal.

The first of two revisions to the 4th Quarter GDP reading is scheduled for release Friday morning. Analysts’ forecasts currently call for a decline of 5.4%, indicating that the economy was weaker in the last quarter of the ye ar than initially thought. It will be interesting to see where this figure falls and what its impact on the markets will be. Generally speaking, higher levels of activity are bad news for the bond market.

The last piece of data scheduled for release this week is the University of Michigan’s revision to their Index of Consumer Sentiment for February. Current forecasts show this index revising slightly higher than previously thought. The preliminary reading was 56.2 and is now expected to stand at 56.5, indicating that consumer sentiment was slightly stronger than previously thought. This index is important because it helps us measure consumer confidence that translates into consumer willingness to spend.

Overall, look for plenty of movement in bond prices and mortgage rates this week. I think we will see the most movement either Tuesday or Thursday, but Friday may be fairly active also. This would be a good week to maintain contact with your mortgage professional.

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.

Consumer Confidence

Contradiction of Data – Consumer Confidence Falls, Home Sales Rise

Consumer Confidence fell this month for the first time in three months, reflecting Americans’ concern for the economy, housing, and the financial system.

The reading isn’t much of a surprise given our collective exposure to a near-constant stream of negative news. Before long, the reports become a self-fulfilling prophecy.

Despite falling confidence, however, the housing industry appears to be reviving. Sales of existing homes are on the rise and an increasing number of homes are under contract to sell. And, if these statistics seem out of place, consider the external forces that are accompanying this “down” economy:

• In some markets, home values have plummeted to early-2000 levels
• Government intervention has brought mortgage rates to near-5 percent
• Congress is pledging key support to housing and mortgage markets

These points can’t be captured in confidence surveys which, by comparison, ignore facts and focus on Big Picture behavioral questions like “Do you think you’ll be better off a year from now?” and “What’s your attitude toward buying major household items?”. It’s useful information for economists, but not so much for home buyers.

Anecdotally, a lot of the country’s housing markets have already started their recovery. Couple that with the natural momentum of Spring Buying and the stimulus package’s proposed first-time home buyer tax credit and you can clearly see the disconnect.

Just because confidence is down doesn’t mean that home prices will be, too.

Consumer Confidence

Weekly Economic Releases for Feb. 8th

There are only three pieces of economic data scheduled to be posted this week along with a couple of Treasury auctions and relevant speeches from highly important speakers. Only one of the three reports are considered to be of high importance while one is moderately important. The third is not considered to be of much importance unless it varies greatly from forecasts.

None of the economic reports will be posted tomorrow. However, tomorrow evening President Obama will address the nation on national television. He will likely speak about his economic recovery plan amongst other important topics. What he says may heavily influence trading the following morning. It is very difficult to predict whether the markets are likely to react favorably to his words or negatively. But I am expecting to see volatility Tuesday morning.

Fed Chairman Bernanke will be speaking before the House Financial Services Committee Tuesday at 1:00 PM ET. He is expected t o testify and update the panel on the Fed’s liquidity injections and future plans. His words could create movement in the markets and possibly mortgage pricing during afternoon trading.

There is no relevant data scheduled for release until Wednesday morning. This is when the week’s least important data, December’s Goods and Services Trade Balance, will be posted. This report measures the U.S. trade deficit and can affect the value of the U.S. dollar versus other currencies, but it usually does not cause enough movement in bond prices to affect mortgage rates.

The most important of the three reports this week is Thursday’s release of January’s Retail Sales data. This report is very important to the financial markets because it measures consumer spending. Since consumer spending makes up two-thirds of the U.S. economy, any related data is watched quite closely. If Thursday’s report reveals weaker than expected sales, the bond market should thrive and m ortgage rates will fall. However, a stronger reading than the expected unchanged level of sales could lead to higher mortgage rates. Current forecasts are calling for a decline in sales of 0.3%.

February’s preliminary reading to the University of Michigan Index of Consumer Sentiment will be released late Friday morning. This index measures consumer willingness to spend and usually has a moderate impact on the financial markets. If it shows an increase in consumer confidence, the stock markets may move higher and bond prices could fall. It is currently expected to rise slightly from January’s final reading of 61.2 to 61.5 for this month.

Overall, it is difficult to peg a particular day as the most important of the week. Tuesday will be quite interesting with the reaction to President Obama’s words from Monday evening and Fed Bernanke’s testimony on the Fed’s attempts to stabilize the financial system. The single most important piece of economic news comes Thursday, so that day needs to be given much weight also. Throw in the fact that there is an early close Friday due to the President’s Day holiday next Monday, and we have the makings of an interesting week ahead of us.

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… Lock 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.

Consumer Confidence

What’s Ahead for Mortgage Rates This Week: February 2, 2009

Consumer confidence reached an all-time low and 100,000 Americans were issued layoff notices last week, each playing a role in the mortgage market’s relative worsening.

For the third consecutive week, mortgage rates rose and average loan fees increased, too.

Amid all of the negative economic news, however, there were two bright spots worth identifying and discussing. They show that country may be closer to economic recovery than expected.

First, the supply of “used” homes for sale fell from 11 months to 9 months nationwide. This suggests that homebuyers are re-entering the housing market in force, a signal that home prices are nearing equilibrium.

And, second, the nation’s GDP — a measurement of the country’s complete economic footprint — didn’t fall by nearly as much as what the experts had predicted. A positive surprise like this makes us wonder about what else the Doomsday Economists may be wrong.

We won’t have to wonder long.

With this week comes copious amounts of data, legislation and rhetoric to influence mortgage rates. Some of the news-bites that mortgage markets will digest this week include:

• The Personal Consumption Expenditures Index report. PCE is a preferred inflation measurement and inflation is the enemy of mortgage rates. A high reading will pressure mortgage rates up.
• Retail stores report on same-store sales.
• The Pending Home Sales report. This notes the number of “homes under contract” and is a good gauge for buyer interest and the general health of housing.
• 20% of the S&P 500 firms will report earnings.
• Congress is expected to vote on the Stimulus package.

The biggest impact on rates, however, could come on Friday with the release of January’s jobs report. Employment data is always market-mover and with the press giving so much attention to layoffs lately, expect Wall Street to be extra jittery it.

Markets expect the economy lose a half-million jobs in last month.

(Image courtesy: Wall Street Journal Online)

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