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Mortgage Outlook for Week of August 1, 2011

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Mortgage rates were suppressed last week by jittery markets focused on the ongoing debt ceiling debate. While there is a talk of a debt ceiling resolution this morning, there are still concerns about the details of implementing such a solution and whether or not the damage has already been done to world confidence in the United States’ credit worthiness.

Even if a debt ceiling resolution is in place, there is rampant speculation that the United States AAA credit rating is in jeopardy. There is even greater speculation about the aftermath that would occur, should the United States have its credit rating downgraded.

Manufacturing Sector Report Disappoints

The ISM Manufacturing index fell to 50.9 in July, down 4.4 points from June in data released by the Institute for Supply Management. The index fell to 50.9 in July, down 4.4 points from June, marking the sector’s slowest growth since July 2009. Analysts want to see a reading above 50 as that is the level where the manufacturing sector is considered to be growing. While the index has been above that level for two years straight, a reading of only 50.9 shows that growth is very flow, which disappointed analysts.

“The U.S. ISM manufacturing report for July is a shocker and strongly suggests that the disappointing performance of the economy in the first half of the year was not just temporary,” Paul Dales, senior U.S. economist with Capital Economics, said in a research note.

How Are Mortgage Rates Affected?

Continuing negative economic data as we have seen over the past months paints a picture of an economy that is struggling. This means that investors are more likely to flee stocks and push their money towards safer vehicles like bonds, which which can translate into lower mortgage rates. The data is bad, but for current or prospective home owners, it has extended a window of extremely low mortgage rates. Since rates are not expected to stay at these low rates, now may be the opportunity you have been looking for to lock in a new low rate for your existing or future mortgage.

Economic Calendar for Week of August 1, 2011

  • Monday – Construction Spending
  • Tuesday – Personal Income & Outlays Report
  • Wednesday – Factory Orders, ADP Employment Report
  • Thursday – Initial Jobless Claims, ISM Non-Manufacturing Index
  • Friday – Unemployment Rate, Consumer Credit

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