Although mortgage note rates are unchanged from Monday the accompanying closing costs are slightly worse. All in all, mortgage rates have worsened unconvincingly thus far in the week. I use the term “unconvincingly” because I still believe mortgage rates will not make a determined move until tomorrow’s all-important jobs report is released for the month of October.
Before we get into the jobs report strategy let’s cover what was released earlier today. The Commerce Department reported that the Gross Domestic Product (GDP) for the 3rd quarter grew at a 2.8% rate. This was much stronger than analysts had predicted but a closer look at the numbers suggests much of the growth could be associated with businesses stocking their inventories for the holiday season. This does not represent sustainable long-term growth.
In a separate report the Labor Department released data on jobless claims which showed that the number of people filing for claims declined for a fourth straight week. Is the labor market improving?
Tomorrow’s all-important jobs report will trump any other data released this week. Last month the report showed that 148,000 new jobs were created in September. This month the market is expecting only 120,000 new jobs for October. If the number is released in or around 120,000 it would likely still be interpreted as a weak report which would be good news for mortgage rates. If the jobs report surprises to the upside then it may mean the Fed will be less likely to keep quantitative easing in place and rates would likely rise.
Initially I thought it would make sense to float into the jobs report but given this morning’s stronger than expected read on GDP I am less convinced this is the best approach. I will take a cautiously floating stance.
Current Outlook: cautiously floating