The Greek negotiations dominated the economic news over the past week. After a lot of volatility, the net effect was that mortgage rates ended a little higher.
Greek officials and creditors did not reach an agreement prior to the key deadline of June 30, meaning that Greece was unable to repay its debts. Instead, Greek leaders scheduled a referendum for July 5 to let voters decide whether to accept unpopular reform measures required by creditors or risk an exit from the European Union. The situation remains fluid and likely will continue to produce volatility in financial markets.
In the most recent national mortgage survey by Bankrate, the average 30-year fixed-rate mortgage increased from 4.13% to 4.16% with many industry experts predicting the rate would continue to increase. However, this was before the most recent Greek financial turmoil made headlines.
The Washington Post reported that the potential prolonged Greek crisis could create a flight-to-safety in U.S. Treasury bonds, which in turn could lower rates. Typically, when bond prices increase, interest rates and yields fall. Thus, if investors start flocking to bonds, mortgage rates could decrease.
Home Sales Increase
An indicator of future home sales released this week suggested that improvement in housing market activity will continue. May pending home sales rose to the highest level since April 2006 and were 10% higher than a year ago. This is significant since the report measures contracts signed for previously owned homes, which include roughly 90% of the housing market. Strong job gains and high consumer confidence are boosting home sales.
Upcoming Key Economic Data
Looking ahead, investors will continue to watch what happens in Greece. In the U.S., the key monthly employment report is scheduled for July 2. Both job gains and wage inflation will be important. After that, ISM Services will be released on Monday. Another big labor market report, the JOLTS data, will come out on Tuesday. This measures job openings and labor turnover rates. The detailed minutes from the June 17 Fed meeting will be released on Wednesday. In addition, there will be Treasury auctions on Tuesday, Wednesday and Thursday. Mortgage markets are closed on July 3 in observance of Independence Day.
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