This Week's Market Commentary

This week brings us the release of only two pieces of monthly economic data that are considered relevant to mortgage rates. It is a holiday-shortened week with the financial markets closing early tomorrow and remaining closed Tuesday in observance of Christmas. I suspect tomorrow will be a fairly thin day of trading with many traders home for the holiday already.

There is nothing of relevance scheduled for release Monday, meaning we should see a fairly calm day in the mortgage market unless something unexpected happens. That will be the same situation Wednesday also, although there are some minor private sector and regional manufacturing reports set to be posted that could help nudge trading in one direction or the other. It is likely to be a fairly quiet day also since none of the releases are considered top-tier reports.

The only two relevant monthly economic reports of the week come Thursday morning. The first is November’s New Home Sales data that will give us a measurement of housing sector strength and mortgage credit demand. It is the sister report of last week’s Existing Home Sales report, but covers a much smaller portion of the housing market than that one did. A weakening housing sector is considered good news for the bond market and mortgage rates because a broader economic recovery is less likely in the immediate future. Since bonds tend to thrive in weaker economic conditions, a large decline would be considered favorable for bond prices and mortgage rates. Current forecasts are calling for an increase in sales of newly constructed homes. Ideally, we would like to see a decline in sales.

The Conference Board will post their Consumer Confidence Index (CCI) for December late Thursday morning. This is a fairly important release because it measures consumer willingness to spend. If consumers are more confident about their personal financial situations, they are more apt to make large purchases. Since consumer spending makes up over two-thirds of the U.S. economy, any related data is watched closely by market participants and can have a significant influence on mortgage rate direction. Current forecasts are calling for an increase in confidence from November's reading of 56.0. Analysts are expecting tomorrow's release to show a reading of 70.0, meaning consumers felt worse about their own financial situation than they did in November. The lower the reading, the better the news it is for bonds and mortgage pricing.

Overall, we will probably see little change in mortgage rates until possibly Thursday morning when we get to the relevant economic data. Yet what could have the biggest influence on the market and mortgage rates this week is any progress on Fiscal Cliff negotiations. Any bit of news that hints at a possible compromise and resolution should have a positive impact on stocks, hurting bond prices and mortgage rates. However, more of the recent talk that indicates no compromise is near could drive stocks lower, boosting bond prices that lead to improvements in mortgage rates. With the holiday taking the first two days of the week, I believe we won’t see much movement in rates until Thursday at the earliest. After that, things should heat up a bit. 

This Week's Market Commentary

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 tomorrow 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.

This Week's Market Commentary

This week brings us the release of five economic reports that are considered relevant to mortgage rates, but only four of them are of concern. In addition to them, we also have the year’s last FOMC meeting and other related Fed events and two Treasury auctions that have the potential to influence mortgage pricing. The biggest news comes the middle and late days of the week, so we should see more movement in rates as the week progresses.

There is nothing of relevance scheduled for tomorrow. This means we can expect the stock markets to drive bond trading and mortgage rates again. If the major stock indexes open the week with gains tomorrow morning, bonds may move lower, pushing mortgage rates higher. But a weak open in stocks could lead to slightly lower mortgage rates tomorrow. We could also see traders position themselves ahead of the week's agenda, so even though there is nothing concerning on the calendar, we could see mortgage rates change.

October's Goods and Services Trade Balance report will be posted early Tuesday morning. This report gives us the size of the U.S. trade deficit, but it is considered to be of low importance to mortgage rates. It is actually the week’s least important monthly report. It is expected to show a $42.7 billion trade deficit, which would be an increase from September. Unless it varies greatly from forecasts, I don't expect this data to affect mortgage pricing Tuesday.

Wednesday has no important economic data scheduled for release but it does have the 12:30 PM adjournment of the FOMC meeting that began Tuesday. It is widely expected that Mr. Bernanke and company will not change key short-term interest rates at this meeting, but traders and analysts are anxious to get the Fed’s current economic forecasts. Also worth noting is that the 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 hosted by Fed Chairman Bernanke. The meeting will adjourn at 12:30 PM, forecasts will be posted at 2:00 PM and the press conference will begin at 2:15 PM. It is fairly safe to assume that all of that will lead to afternoon volatility in the markets and mortgage rates Wednesday.

There are Treasury auctions scheduled for several days this week, but the two important ones are the 10-year Note sale Wednesday and the 30-year Bond sale Thursday. Wednesday's auction is the more important of the two and will likely have a bigger influence on mortgage rates. Results of Wednesday’s sale will be posted at 11:30 AM ET due to the FOMC events while Thursday’s will be at the usual 1:00 PM. If they were met with a strong demand from investors, particularly international buyers, we should see strength in bonds and improvements to mortgage pricing those days shortly after. On the other hand, a weak interest in the auctions could lead to upward revisions to mortgage rates.

Thursday has two important economic reports scheduled for release, both at 8:30 AM ET. November's Retail Sales report is one of them. This report will give us a key measurement of consumer spending by tracking sales at retail level establishments. This data is highly important to the markets because consumer spending makes up over two-thirds of the U.S. economy. Rapidly rising consumer spending raises the possibility of seeing solid economic growth. Since long-term securities such as mortgage bonds are usually more appealing to investors during weaker economic conditions, a large increase in retail sales will likely drive bond prices lower and mortgage rates higher Thursday. Current forecasts are calling for an increase of 0.4% in November's sales.

November's Producer Price Index (PPI) will also be posted early Thursday morning. It 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, giving a more stable reading for analysts to consider. If Thursday's release reveals stronger than expected readings, indicating that inflationary pressures are rising, the bond market will probably react negatively and drive mortgage rates higher. If we see in-line or weaker than expected numbers, the bond market should respond well and mortgage rates should fall. Current forecasts are showing a 0.5% decline in the overall index and a 0.1% rise in the core data.

Friday has more highly important data when November's Consumer Price Index (CPI) is posted at 8:30 AM ET. It is similar to Thursday's Producer Price Index, except it tracks inflationary pressures at the more important consumer level of the economy. Current forecasts call for a decline of 0.2% in the overall index and a 0.1% rise in the core data reading. This data is one of the most watched inflation indexes, which is extremely important to long-term securities such as mortgage related bonds. Rising inflation erodes the value of a bond's future fixed interest payments, making them less appealing to investors. That translates into falling bond prices and rising mortgage rates. Therefore, weak readings would be favorable for the bond market and mortgage shoppers.

The week closes with November's Industrial Production mid-morning Friday. This report gives us a measurement of manufacturing sector strength by tracking output at U.S. factories, mines and utilities. Analysts are expecting it to show a 0.4% increase in output, indicating modest manufacturing growth. A smaller than expected rise would be good news for bonds, while a stronger reading may result in slightly higher mortgage pricing. However, the CPI release is much more important to the markets than this data.

Overall, there is a high probability that we will see an active week in the financial and mortgage markets. Wednesday will probably be the most important day due mostly to the Fed events, but Thursday has two very important economic reports so we may see plenty of volatility that day also. Tomorrow is an easy choice for least important, however, we could still see an extension of Friday’s trading affect mortgage rates tomorrow also. I still believe we are due for a stock pullback that will cause a flight-to-safety in bonds, hence the optimistic approach towards interest rates. On the other hand, with so much on tap this week and a strong likelihood of several active days in the markets, it is strongly recommended that you maintain contact with your mortgage professional if still floating an interest rate.

This Week's Market Commentary

This week has five pieces of economic data set for release, including two that are considered to be highly important to the markets and mortgage rates. November's manufacturing index from the Institute for Supply Management (ISM) is the first, coming at 10:00 AM ET Monday. This index measures manufacturer sentiment and can have a considerable impact on the financial markets and mortgage rates. Current forecasts call for a small decline in sentiment from October to November. October's reading was previously announced as 51.7. A weaker reading than the expected 51.2 would be good news for the bond market and mortgage rates. A reading above 50 means that more surveyed trade executives felt business improved during the month than those who felt it had worsened. The lower the reading the better the news for bonds because waning sentiment indicates a slowing manufacturing sector and makes a broader economic recovery less likely.

The next piece of data that we need to be concerned with comes early Wednesday morning when revised 3rd Quarter Productivity numbers are posted. This index is expected to show an upward revision from the preliminary reading of worker productivity. Higher levels of productivity are thought to allow the economy to expand without inflationary pressures rising. This is good news for the bond market because economic growth itself isn't necessarily bad for the bond market. It's the conditions around an expanding economy, such as inflation, that hurt bond prices and mortgage rates. Current forecasts are calling for an annual rate of 2.7%, up from the previous estimate of 1.9%. The higher the reading, the better the news for the bond market.

October's Factory Orders will be posted late Wednesday morning. This report is similar to the Durable Goods Orders report that was released last week, except this one includes manufacturing orders for both durable and non-durable goods. This data usually isn't a major influence on bond trading, but it does carry enough importance to impact mortgage rates if it shows a sizable variance from forecasts. Analysts are expecting to see a slight decline in new orders. The larger decline, the better the news for bond prices and mortgage rates because it would signal manufacturing sector weakness. If we do see a sizable drop in new orders, the bond market could thrive, improving mortgage rates Wednesday morning.

There is no other relevant economic news scheduled for release until Friday morning. There are a couple of potentially relevant foreign central bank announcements early Thursday morning that we will be watching. Announcements from the Bank of England and the European Central Bank, which are similar to our FOMC meetings, could influence the global markets including ours. The impact will probably be minimal, but we do need to keep an eye on those announcements early Thursday.

The biggest news of the week comes Friday morning when the Labor Department posts November's Employment figures. This is arguably the most important monthly report we see. It is comprised of many statistics and readings, but the most watched ones are the unemployment rate, the number of news jobs added or lost during the month and average hourly earnings. Current forecasts call for a 0.1% increase in the unemployment rate to 8.0% while 90,000 new jobs were added to the economy. The income reading is forecasted to show an increase of 0.2%. An ideal scenario for mortgage shoppers would be a higher unemployment rate than 8.0%, a smaller increase in payrolls (or a decline) and no change in the earnings reading. If we are fortunate enough to hit the trifecta with all three, we should see the stock markets fall, bond prices rise and mortgage rates move lower Friday. However, stronger than expected readings would likely fuel a stock rally and bond sell-off that would lead to higher mortgage rates.

Also Friday is the release of December's preliminary reading to the University of Michigan's Index of Consumer Sentiment. This index measures consumer willingness to spend and can usually have enough of an impact on the financial markets to change mortgage rates slightly. Consumer sentiment or confidence is tracked because the more comfortable consumers are about their own financial situations, the more likely they are to make a large purchase in the near future. Since consumer spending makes up over two-thirds of the economy, any related data is watched closely. Friday's release is expected to show a reading of 82.4, which would be a small decline from last month's final reading of 82.7. A larger decline in confidence would be considered good news for the bond market and mortgage rates.

Overall, look for Friday to be the key day of the week simply due to the fact we are getting the monthly Employment report that day. Monday's ISM report is also considered highly important, but a level below the Employment report. Still it could be a market mover and set the tone for the markets until Friday’s data is posted. The middle part of the week is the lightest, which is a change from most weeks. I would pick Tuesday to be the least important day of the week, however, any day can bring movement in mortgage rates if the stock markets make a sizable move or something unexpected happens here or in the geopolitical arena. Therefore, I would recommend maintaining contact with your mortgage professional if still floating an interest rate and closing in the near future.

Are We Losing the Mortgage Interest Deduction?

There’s a lot of talk in the news about the financial cliff, and the expectation of both sides giving in. One item that some want to be on the table is the mortgage interest deduction. Actually, this has been brought up for quite a number of years and was brought up in 2010 as well.

What is the mortgage interest deduction

When filing out your taxes, you can deduct the amount you paid for your mortgage interest against your gross income. It’s especially loved in areas where the cost of housing is high. It’s also a way that home investors can provide savings back to their renters.

How much would I lose?

The San Jose Mercury News published an article with some charts using the 2010 rates and income levels. For Santa Clara County, the median price was $610,500, and the first full year’s interest is $16,945. This would yield a tax savings of $5,084 which could be a nice vacation.
If you’re a renter, your rent may go up if your landlord loses their deduction. These costs usually get passed along down the line.

Is there anything good about the phaseout?

Some believe that a tax deduction is inefficient and a tax credit would be a better way to help more people. This blog post at HSH.com explains in greater detail about how the mortgage interest deduction was created, and their opinion as to how it’s not helping those it should.

SFGate also explains the history and the effectiveness of the mortgage interest deduction.  Their conclusion is that it may change form, but it will always be a part of our tax structure.

So, if you’re concerned, find a professional tax advisor and review your current mortgage and taxes, then you will know a firmer number.  Contact your representatives and let them know how it will impact you.

Do you think the federal government will phase out mortgage interest deductions?

This Week's Market Commentary

This week brings us the release of six relevant economic reports for the markets to digest along with two potentially important Treasury auctions. All of the week's data is being posted over four days with tomorrow being the only day with nothing scheduled. We should see a fair amount of movement in mortgage rates this week with the most movement likely coming the middle part of the week.

Tuesday has two of the week’s more important reports scheduled. October's Durable Goods Orders is the first and will be posted at 8:30 AM ET. This data helps us measure manufacturing strength by tracking orders for big-ticket items, but is known to be quite volatile from month-to-month. It is expected to show a 0.4% decline in new orders. A larger than expected drop would be considered good news for the bond market and mortgage rates as it would indicate manufacturing sector weakness.
November's Consumer Confidence Index (CCI) will be released late Tuesday morning by the Conference Board. It gives us a measurement of consumer willingness to spend. If consumer confidence is rising, analysts believe that consumers are more apt to make larger purchases, essentially fueling economic growth. This makes long-term securities such as mortgage-related bonds less attractive to investors and usually leads to higher mortgage rates. Analysts are expecting to see a small increase in confidence from last month's level, meaning consumers were more optimistic about their own financial situations this month than they were last month. A weaker reading than the 73.0 that is expected would be good news for mortgage rates, while a stronger reading could push mortgage rates higher Tuesday.

Wednesday’s only relevant data is October's New Home Sales report. It will give us an indication of housing sector strength, but is the week's least important release. Analysts are expecting to see little change between September's and October's sales of newly constructed homes. It will take a large change in sales for this data to influence mortgage rates, partly because this report tracks such a small portion of all home sales.

Also Wednesday, the Federal Reserve will release their Beige Book at 2:00 PM ET. This report, which is named simply after the color of its cover, details economic conditions by region. That information is relied on heavily during the FOMC meetings when determining monetary policy, so its results can influence bond trading and mortgage rates if it shows any significant surprises. More times than not, this report will not influence the markets enough to cause intra-day changes to mortgage rates, but the potential to do so does exist.

The first revision to the 3rd Quarter Gross Domestic Product (GDP) will be posted early Thursday morning. It is expected to show a sizable upward revision from last month's preliminary reading of a 2.0% annual rate of growth. The GDP measures the total of all goods and services produced in the U.S. and is considered to be the best measurement of economic activity. Current forecasts call for a reading of approximately 2.8%, meaning that there was more economic activity during the third quarter than previously thought. This would be bad news for the bond market and mortgage rates because solid economic growth hurts bond prices and mortgage rates.

Friday’s sole piece of economic data is October's Personal Income and Outlays data. This data measures consumers' ability to spend and their current spending habits. This is important because consumer spending makes up over two-thirds of the U.S. economy. It is expected to show that income rose 0.2% and that spending increased 0.1%. Weaker than expected readings would mean consumers had less money to spend and were spending less than thought. That would be favorable news for bonds and could lead to improvements in mortgage rates Friday morning.

In addition to this week's economic reports, there are two relatively important Treasury auctions that may also influence bond trading enough to affect mortgage rates. There will be an auction of 5-year Treasury Notes Wednesday 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 in mortgage rates. However, strong investor demand usually make bonds more attractive to investors and brings more funds into the bond market. The buying of bonds that follows often translates into lower mortgage rates. Results of the sales will be posted at 1:00 PM ET auction day, so look for any reaction to come during afternoon hours.

Overall, I am expecting Monday to be the least important day of the week while Tuesday will likely be the most important due to the importance of that’s day data. Thursday’s GDP could also be a market mover if it disappoints the markets or shows a much stronger than expected reading. We have seen a little pressure in mortgage rates recently as stocks climbed higher, but I suspect we could see some improvement in rates this week. This is especially true if the economic data on the calendar gives us weaker than expected results or stocks give back some of their recent gains. However, as with any active week, please maintain contact with your mortgage professional if still floating an interest rate and closing in the near future. 

This Week's Market Commentary

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. 

Are You Ready for Black Friday?

With businesses like WalMart, Target and Toys R Us announcing that they will open on Thanksgiving Day, the lines of Black Friday shopping have blurred into the Thanksgiving holiday. Amazon has announced that they will be providing Black Friday style savings that started last week and will continue on.

Some families are turning it into a tradition of eating early, napping, and then going shopping for the best deals.  For some, it’s a way of making their limited budget go farther.

Some stores hold items back and then have a large unveiling for Black Friday.  It’s still a good idea to scope out the stores, where they have merchandise, and create your plan.

So in today’s blog, we’re going to provide some resources so you can make your plan whether it’s online, or waiting in line.

BFADS

The granddaddy of all sites is bfads.net.  It was founded by a CalPoly student who would get ahold of Black Friday circulars before they were made available, and he would post them on his site.  In the beginning, companies would hit him with a cease and desist order, but over time, they realized that it was a great way to get people excited about shopping, and now, he provides the circulars starting November 1st.

 Other Resources

• blackfriday.com
• blackfriday.fm

And you can also find out more about deals on the websites of the businesses you’re interested in.

Things to Remember

• Create your list of who you’re buying for.  If it’s clothing, make sure you have their sizes and color preferences as items may not be returnable.  It could be exchange only.  And if it is returnable, it will only be for the amount you paid.
• See if you can shorten your list.  Talk with your friends about exchanging cookies or letters of how much you appreciate one another.
• Decide on your budget and be firm on it.  It’s easy to get caught up in the moment of what appears to be a great deal, but you don’t want the credit card hangover in January.
• Consider bringing only one credit card or the cash in your budget.
• If you bring someone else, help each other to stay on target.
• Make sure you budget something for yourself.   After all, you’re the one out there.
• Be safe.  If there’s a donnybrook over the last Giggle Me Something Doll, you really don’t want to be a part of it.  Better to wait and pay a bit more later then pay for medical bills now.  And watch out for crowds that surge. You don’t want to fall down and get stepped on.
• There will always be jerks.  Remember to breathe and don’t lower yourself to their level.
• Bring water to stay hydrated.
• Wear comfortable shoes.

And don’t forget to plan in Cyber Monday when companies have additional sales!

Do you save up to buy something major during black friday?  Or do you just do your holiday shopping?  Or do you stay home and enjoy the quiet day?

This Week's Market Commentary

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.

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. 

This Week's Market Commentary

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. 

Being Safe on Halloween

If you have kids, you probably have been dealing with them planning their Halloween costume since last April. Unfortunately, this years, we’re forecast to have a bit of rain. So don’t hesitate to recommend wearing a sweater under that costume, otherwise, it will be a short trip out, and then just as quickly, they will be begging to go back out since they don’t want to miss out.

Keeping Your Trick or Treater Safe and Happy

Make rule number one that everyone has to walk, not run. Rule number two is to stay together. Rule number three is no eating any candy until you get home and let a responsible adult look through the candy. If they cannot follow these rules, then you will take them home right away.  And then follow through.  These three are probably the most important rules.

Make sure the child has eaten a healthy meal and uses the bathroom before getting into their costume.  Nothing brings tears faster then a costume that got grease or tomato stains before everyone can see them in it.

Have each child carry something that lights up such as a lantern, glow bracelets or light up shoes.

Do not cross the street between cars.  Try to stick to well lit corners and crosswalks.  If this isn’t possible in your neighborhood, stay together, be very aware of cars, and cross in a group.

Plan your route in advance and review it in the daylight for potential hazards. Sometimes, the street gets torn up, or there’s a sidewalk that has been pushed up because of a tree root. Additionally, consider working out with a neighbor having a “bathroom break” along the way if you intend to be out for more than an hour.

Be in a familiar area. Some kids prefer to go to neighborhoods where there are more houses rather then apartments because some people with houses convert their garages into haunted houses. And that is a lot more fun. But again, check the area in daylight first.

Avoid costumes that drag on the ground as they could trip a child, or get caught on bushes.

Pick costumes that are bathroom friendly.

Make sure any mask allows full visibility and breathing. Don’t hesitate to cut larger holes if needed.

Only carry flexible props that won’t cause injury if the child accidentally falls on it.

Only trick or treat at houses that are lit (or are obviously creepily lit for atmosphere). If the house has off porch lights, the residents do not want to participate, and the kids should respect that.

Keep track of time, and don’t trick or treat after 9pm, unless your neighborhood has a special understanding.

Keeping Everyone Safe

If you don’t have kids but enjoy passing out candy and being delighted by the costumes, here are some tips for making it safer for them to visit your home.

Ensure that you have a well lit door, and make the house appear inviting.

Clear the walkways of debris and other objects. Also, consider moving hoses, flower pots, extension cords, etc. out of the way.

Provide packaged candy rather then homemade treats.  Most parents will  not let their children keep anything that looks homemade or tampered with.

Secure your pets. You don’t want Fluffy running outside, and kids certainly don’t want an animal running at them.

Two Final Thoughts

First, no matter what, drive slowly through neighborhoods.  Don’t be in a hurry.  Also, if you’re an adult going to an adult party, ensure that you have a designated driver.

Second, do consider looking into safe trick or treating events that towns and shopping malls host.  It could be a better and safer experience if your neighborhood isn’t the best for trick or treating.

What was your favorite Halloween costume?

This Week's Market Commentary

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.

Rental Property As Retirement Income

Is now a good time to invest in property for passive income when you retire?  And is it even a good idea for you?

Look before you leap

The Chicago Tribune had an interesting analysisback in May that counseled that loan requirements have changed dramatically over the last 5 years, and that the investor must have realistic expectations with the focus on long-term rather then flipping.  Purchasing an investment property as a rental can provide you with a steady stream of income.  There are still tax benefits with real estate investments, and you should talk to a professional to find out how it would impact your situation.

Real estate investments also mean that you will be a landlord, and either you need to handle finding tenants and repairs, or you need to hire a management company which will reduce your profits.  But you get to sleep through the night if a pipe bursts or the tenant gets locked out.

How much income?

Rents are set by where you live.  Usually, rents will go up, but the costs involved with owning the rental property will stay fairly flat especially if you choose a fixed rate mortgage.  Some investors clear $200-1000/month for one rental home.

Some landlords will increase rents every year or two, while others increase only when changing tenants.  If your mortgage stays the same, your income will increase over the years.

There will always be people looking for rentals.  If you have a clean home in a safe neighborhood, people will pay to rent it providing you with a passive income stream.

What should I be aware of?

Renters can leave with two weeks notice, and in some cycles, it’s difficult to replace them.  Always keep six months of expenses on hand per property so you’re not caught needing to sell the investment in a down market.

Always hire an inspector to rule out any large repairs such as foundation, roof or structure of the home.

Research monthly costs.

Talk to your Realtor® about comparable home sale prices in that area to have a good understanding of your investment.

Investopedia has a great article on Tips for the Prospective Landlord. One of the best tips is to ensure your leases are legal as this could have a long term impact if you end up with a bad tenant.  Also, the tip to join the Landlord’s Association in your area is helpful as you will learn a lot from seasoned investors.

What should I look for?

Look for a larger property in case you want to renovate or add on.

Single-family homes in a good school district rent more easily.

Look for properties that can generate positive cash flow of at least 6% above costs.

If you’re new to investing, consider purchasing properties close to where you live to keep tabs on the investment even if you use a property management company.  When you’re comfortable, consider looking into purchasing properties where you wish to retire.

 So, to sum up…

Talk to a tax advisor to understand any tax implications rental property will have.  Find a reputable Realtor® and call your mortgage broker to find the best options for you.

To read more about things to look for and how to plan, read The income property: Your late-in-life retirement plan on Yahoo. The more knowledge you  have, the easier the process will be.

Have you purchased an income generating property or are you looking into one?

This Week's Market Commentary

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.

This Week's Market Commentary

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.

The week kicks off with the release of an extremely important piece of economic data early tomorrow morning. September's Retail Sales report that measures consumer spending will be posted at 8:30 AM ET tomorrow. This data is very important to the markets because consumer spending makes up over two-thirds of the U.S. economy. Therefore, any related data is considered to be highly important. If we see weaker than expected readings in this report, the bond market should respond favorably and mortgage rates should drop tomorrow. However, stronger than expected sales would fuel optimism about the economy and would likely lead to a stock rally that hurts bonds prices and pushes mortgage rates higher. Current forecasts are calling for a 0.7% increase in sales. Good news for the bond market and mortgage pricing would be a much smaller increase.

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

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 bond market is closed Monday in observance of the Columbus Day holiday and will reopen Tuesday morning. The stock markets are open for trading, so their movement is worth watching as a sizable move up or down in the major indexes may influence bond trading and mortgage pricing early Tuesday morning. I suspect many mortgage lenders will be closed tomorrow, as will U.S. banks. If anyone is open for business and does post rates tomorrow, you can expect to see an increase of approximately .125 of a discount point from Friday's morning pricing due to weakness in bonds late Friday afternoon.

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.