Mortgage Market News for the week ending September 5, 2010

After falling for several weeks, stronger than expected economic data caused mortgage rates to turn a little higher late this week. Upside surprises in important labor market, housing, and manufacturing reports were negative for mortgage markets and positive for stocks.

Following Friday morning’s better than expected Employment report, mortgage rates moved higher. Against a consensus forecast for a decline of 110K jobs, the economy lost 54K jobs in August. Temporary census workers accounted for a loss of 114K jobs, and the private sector added 67K jobs. The June and July figures saw significant upward revisions as well. The Unemployment Rate rose to 9.6% from 9.5%, matching expectations, as the labor force grew by about 550K workers.

After several months of housing data which has failed to meet expectations, this week’s data contained relatively good news. Investors were expecting July Pending Home Sales to remain at June’s record low levels, but instead they rose 5% from June. Pending sales are a leading indicator for the housing market, so home sales may pick up a little in coming months. The chief economist of the National Association of Realtors (NAR) expects “improved affordability conditions” to boost home sales, but warned that a housing market recovery will be a “long process.”

After a busy week this week, the Economic Calendar will be very light next week. The Fed’s Beige Book will come out on Wednesday. The Trade Balance will be released on Thursday. There will be Treasury auctions on Tuesday, Wednesday, and Thursday. Mortgage markets will be closed on Monday for Labor Day.