This Week and Rates

This week brings us the release of five relevant economic reports in addition to another FOMC meeting. Only one of the factual reports is considered to be of high importance. In fact, most of the economic news is considered to be low or moderately important. This should help limit the possibility of significant changes to mortgage rates most days this week.

August's Housing Starts will kick-off the week's data early Tuesday morning. 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 a slight increase in new home starts between July and August. I believe we need to see a significant surprise in this data for it to have an impact on mortgage rates.

The FOMC meeting is Tuesday and is a one-day meeting. Mr. Bernanke and friends will adjourn at 2:15 PM ET. There is little possibility of seeing any type of change to key short-term interest rates. However, the post-meeting statement could very well lead to volatility during afternoon trading as investors dissect it in an effort to find when the Fed's next move may come. The wild card is how the markets react to the statement because the lack of a change to key short-term interest rates shouldn't affect afternoon trading. If we see significant weakness in stocks, the bond market may benefit as a safe-haven from the volatility. This could lead to lower mortgage rates Tuesday afternoon and Wednesday morning.

Thursday has two reports scheduled for release late morning. The Conference Board will post its Leading Economic Indicators (LEI) for August, while the National Association of Realtors gives us home resale figures. The LEI index attempts to measure economic activity over the next three to six months. It is expected to show a 0.1% rise, meaning that it is predicting a slight increase in economic activity over the next several months. A larger than expected increase would be considered negative news for bonds and could lead to a minor increase in mortgage rates Thursday.

August's Existing Home Sales report will also be released late Thursday morning. The National Association of Realtors posts this data, giving us an indication of housing sector strength by tracking home resales in the U.S. It is expected to show an increase from July's sales, however, this data probably will be neutral towards mortgage pricing unless its results vary greatly from forecasts.

The remaining two reports will be released Friday morning. August's Durable Goods Orders is the week's single most important data and will be posted early morning. This report gives us an indication of manufacturing sector strength by tracking orders for big-ticket items at U.S. factories. Big-ticket products are items that are expected to last three or more years. Analysts are expecting to see a decline in new orders of 1.3%. A larger than expected drop in orders could help boost bond prices and cause mortgage rates to drop Friday. However, a smaller decline would indicate a stronger than expected manufacturing sector and would likely help push mortgage rates higher. It is worth noting that this data is known to be quite volatile from month-to-month, so a slight or moderate difference may not affect mortgage pricing.

The final report of the week is August's New Home Sales, which is the sister release to Thursday's Existing Home Sales. It is expected to show that sales of newly constructed homes rose last month, indicating some housing sector strength. As with most of this week's data, this report will likely not have a significant impact on mortgage rates unless its readings differ greatly from for ecasts. This is the week's least important report in terms of potential impact on mortgage rates.

Overall, the most important report of the week is Friday's Durable Goods Orders and the most important day will probably be Tuesday due to the FOMC meeting. I don't believe any of this week's data has the potential to move the markets or mortgage rates heavily. However, we still may see some changes in rates day-to-day, especially if the stock markets move significantly higher or lower. If still floating an interest rate, continued contact with your mortgage professional is recommended, but this will likely be a calmer week if comparing to recent weeks.