Locking Bias

Economic conditions appear to be improving, as was evidenced by this morning’s ADP employment report.  ADP reported 238,000 new jobs created, significantly outpacing expectations that were pegged at 205,000.  In addition, last month’s report was revised 14,000 higher, adding additional proof of a strengthening employment market.  This report increases the likelihood that Friday’s official BLM Employment Report will be stronger than expected, which will certainly be bad for interest rates.  Purchase applications fell by 1% last week, with a year over year decline of 20%.  This is a troubling report, and further indication that the national housing market is cooling.  As the purchase market cools, home value appreciation will likely slowdown from recent highs.

Yesterday’s recommendation to lock before the day ends turned out to be a good suggestion.  Today will bring a 10 year note auction at 1:00 pm eastern, and the Fed Minutes will be released an hour later.  Recent history tells us that Fed Minute releases tend to push mortgage rates higher.  We are going to suggest locking in before the release to avoid the potential volatility that may come immediately after.