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MMG Weekly: Watch out for the big topics of housing, inflation and employment!

August 29, 2011 by  
Filed under Finance


Last Week in Review : The Fed remains optimistic but vague, despite concerns and anticipation in the markets!Forecast for the Week : Watch out for the big topics of housing, inflation and employment

View : Increase your intelligence and stay mentally active with these 3 tips!

Last Week in Review
 I’m goin’ to Jackson. See if I care .” - Johnny Cash. Last week, Fed Chair Ben Bernanke headed to Jackson Hole, Wyoming…and the markets certainly cared! The big news of the week was Bernanke’s speech at the Federal Reserve Bank of Kansas City Economic Symposium at Jackson Hole. Here’s what happened – and, more importantly, what it means to Bonds and home loan rates.Bernanke Remains Optimistic. Bernanke focused on the near-term and long-term economic situation, but his message was optimistic, stating that regardless of “the crisis and the recession, the U.S. economy remains the largest in the world.” He stated that the Fed expects “a moderate recovery” to continue and even strengthen as the country goes forward.

Easy on the talk of “Easing.” Despite the market’s concerns over the slowing economic recovery, Bernanke didn’t discuss any details about the measures that the Fed may use to help get the recovery back on track – which means there was no mention of a third round of Quantitative Easing (QE3). Instead, he stated that the Fed would continue to consider such options at its upcoming September meeting. He did, however, re-iterate that “The Fed has a range of tools that could be used to provide additional monetary stimulus.” Additionally, he ended his speech by saying: “The Federal Reserve will certainly do all that it can to help restore high rates of growth and employment in a context of price stability.”

Right back where we started. It’s interesting to note that last year when Bernanke spoke at Jackson Hole he talked about the likelihood of QE2. That speech sent both the Bond and Stock markets into a rally mode. Amazingly, the Stock market is very close to levels seen last August, which means that Stocks have given up virtually all of the gains seen from the enormous rally sparked by QE2.

Anticipation and disappointment. Stocks traded higher early last week in anticipation of Fed Chairman Ben Bernanke’s big speech on Friday at Jackson Hole, Wyoming. With the economy slumping and Stock prices falling in recent weeks, there was a growing feeling that the Fed is willing do something that would signal to the markets that they are willing to help more if needed.

After Bernanke’s speech – and his reluctance to discuss QE3 – Stocks dropped slightly, signaling investor’s disappointment in having to wait longer to see what steps the Fed may take. By late Friday, however, volatility reared its head again, as Stocks attempted to rally and Bonds gave up some of their gains.

With the Fed pushing off any meaningful discussion of its policies and options until the September meeting, this story is sure to continue impacting the markets. Until we hear exactly what the Fed will do, the markets will be forced to speculate and anticipate…which could mean more volatility. For now, the situation looks beneficial for people looking to purchase a home or refinance, as home loan rates remain near historic lows. But things can change quickly, so now is the time to take a look at the options available.

Forecast for the Week
This week heats up again with the big topics of housing, inflation and employment taking center stage:

  • The week starts off Monday morning with reports on Personal Spending and Personal Income, as well as Pending Home Sales.
  • On Monday, we’ll also see the Personal Consumption Expenditures (PCE) Index, which is the Fed’s favorite gauge of inflation. Remember, inflation is the archenemy of Bonds and home loan rates, so this will be an important report to watch.
  • Manufacturing reports will also hit this week. On Wednesday, we’ll see the Chicago PMI, which reports on manufacturing in Chicago and is a good indicator of overall economic activity. Then on Thursday, we’ll see the ISM Index, which is the king of all manufacturing indices and is considered the single best snapshot of the factory sector.
  • The big topic of the week will be employment. First up is the ADP National Employment Report on Wednesday, which measures non-farm private employment, followed by another round of Initial Jobless Claims on Thursday. In last week’s report, Initial Jobless Claims were reported higher than expected. This leading indicator of the labor market shows us that things remain weak.
  • Finally, the busy week culminates with the highly anticipated monthly Jobs Report on Friday. This report features new data regarding job growth and the unemployment rate – needless to say, this report can be a big market mover!

Remember: Weak economic news normally causes money to flow out of Stocks and into Bonds, helping Bonds and home loan rates improve, while strong economic news normally has the opposite result.

As you can see in the chart below, the markets have continued their volatility. But Bonds and Home loan rates were able to finish the week strong.

That means that home loan rates are still at some of the most attractive levels we’ve seen in history. If you know someone in considering purchasing a home or refinancing, it’s an ideal time for them to review their options and see how they can benefit. All they have to do is call or email me to get started.

Chart: Fannie Mae 3.5% Mortgage Bond (Friday Aug 26, 2011)

The Mortgage Market Guide View…
3 Tips for Increasing IntelligenceWebster’s Dictionary defines intelligence as the ability to learn and understand, or to deal with new or trying situations. Simply put, it’s the degree of one’s mental sharpness.

It’s easy to believe that your intelligence is set, meaning there’s no way to “boost” your brainpower. However, many scientific studies have proven the exact opposite. A combination of lifestyle adjustments and mental exercises has been shown to not only increase intelligence, but also to improve general brain health and help prevent disorders associated with aging, such as Alzheimer’s disease.

According to most neurologists, the key is to stay mentally active, despite your age. The following five tips will help boost your mental activity and increase your intelligence.

Get Some Sleep - An adequate amount of restful sleep is an important component of brain function. While scientists argue over its effect on memory and learning, restful sleep provides energy as well as the ability to focus. Both are vital factors in achieving mental stimulation. Some studies have also shown the reverse to be true. More mental stimulation during the day equals better sleep at night.

Increase Your Exercise - Exercise brings oxygen-rich blood to the brain, an important component to overall brain health. Exercise also regulates blood sugar levels. Some recent studies have shown a correlation between impaired glucose tolerance and an undersized hippocampus, the portion of the brain that controls the conversion of short-term memory into long-term. In addition, forms of exercise such as aerobics, dance, and martial arts all require memorization and are great for promoting mental stimulation. They also help to develop the rhythm and timing circuitry that runs through multiple regions of the brain.

Play Games - Crossword puzzles, Sudoku, certain board games, and card games are great for mental stimulation. Each of them will exercise various brain functions such as lexical recall (memory for words that name things), attention, memory, logic, and pattern recognition. They are accessible to almost everyone, and some only require one player. The key here is that as you advance in skill, you should seek out harder, more challenging versions.

Mortgage Market Guide Weekly – 6/21/11

June 21, 2011 by  
Filed under Finance


For the week of Jun 20, 2011 — Vol. 9, Issue 25
“Greece is the word.”Last week, both renewed problems in Greece and inflation news dominated the headlines and made for some volatile trading. What happened, and what was the impact on home loan rates? Read on for details.In Greece, the riots continued as people protested further pay cuts and tax increases to help close their unsustainable budget deficit. Then on Friday, Greece announced some reshuffling within their Parliament and it also appears as though the country will receive some sort of bailout to meet near-term financing needs. With 20,000+ people rioting in the streets, the government had to do something to calm the markets, but the Greece story is far from over.

Shaking up the Parliament won’t fix the long-term debt problems, nor is it likely that a short-term bailout, if it happens, will help Greece avoid some sort of debt restructuring, re-profiling or outright default. One impact of the volatility in Greece is that it has caused some flight to safety buying of US Dollar denominated securities like Treasuries and Mortgage Backed Securities, upon which home loan rates are based. This helped Bonds and home loan rates last week, which was a good thing, since signs of inflation also heated up last week and Bonds and home loan rates would have likely worsened on that inflation news.

Remember, inflation is the arch enemy of Bonds and home loan rates, like Kryptonite to Superman, because inflation erodes the value of the fixed return provided by a Bond, which causes home loan rates to rise. And last week, both the Producer Price Index (which measures inflation at the wholesale level) and the Consumer Price Index (CPI) were both reported hotter than expected, with the Core CPI rising by 0.3%, which was the largest monthly increase in three years. While the Fed continues to say that the increase in inflation is transitory (i.e. short in duration, temporary or not persistent), more signs of inflation in the coming weeks and months could hinder Bonds and home loan rates from further improvements.

The bottom line is that home loan rates still remain near some of the best levels we’ve seen this year, and it’s important to take advantage of these levels while they remain. If you have been thinking about purchasing or refinancing a home, call or email me to learn more about why now is a great time to benefit from today’s historically low rates. Or forward this newsletter on to someone you know who may benefit.

Mortgage Market Weekly Guide – 6/13/2011

June 13, 2011 by  
Filed under Finance


For the week of Jun 13, 2011 — Vol. 9, Issue 24
Last Week in Review

They say “actions speak louder than words.” But last week, words had a big impact on the market, especially those by Fed Chairman Ben Bernanke. What did he say, and what was the impact on home loan rates? Read on for details. 

Last week, Bernanke essentially made some downbeat and economically depressing comments, saying that “the economy is still producing at levels well below its potential.” Remember that weak or negative economic news and comments normally hurt Stocks and helps Bonds, as investors will move money from Stocks to what they see as safer investments like Bonds (including Mortgage Backed Securities, upon which home loan rates are based). And that’s part of what we saw happen last week: Bonds and home loan rates improved on these negative economic comments, while Stocks weakened.

But that’s not all Bernanke said last week. He also spoke about inflation, saying, “FOMC participants currently see the recent increase in inflation as transitory and expect inflation to remain subdued in the medium term.” Why is this significant? Inflation is the arch enemy of Bonds and home loan rates, because it erodes the value of the fixed return provided by a Bond, which causes home loan rates to rise. This means that Bonds, and therefore home loan rates, typically worsen at the first sign of inflation. But Bernanke playing the role of inflation dove last week (an inflation “dove” believes inflation will have a minimal impact on the economy, the opposite of an inflation “hawk”) also helped Bonds and home loan rates improve.

So what does this mean for the markets and home loan rates in the short- and long-term? Here’s a visual that will help explain things. Imagine a child playing with a yo-yo riding on an escalator. If Bond prices are the yo-yo, you can see how they would be moving up and down like the action of the yo-yo in the short term. And this is what we are seeing right now: Bond prices and home loan rates are moving day to day in somewhat volatile fashion but continue to move in an improving trend. But just like the child will reach the end of the escalator, Bonds and home loan rates will eventually reach the end of their improving trend… and when they do they will likely worsen quickly, as history attests.

The bottom line is that home loan rates still remain near some of the best levels we’ve seen this year, and it’s important to take advantage of these levels while they remain. If you have been thinking about purchasing or refinancing a home, call or email me to learn more about why now is a great time to benefit from today’s historically low rates. Or forward this newsletter on to someone you know who may benefit.

Forecast for the Week


 

After last week’s quiet economic report calendar, this week’s calendar is jam-packed. Look for:

  • Tuesday’s Retail Sales Report: If sales turn out to be weak, this will add evidence to the belief that our economy is slowing down. And though we want the economy to improve, a weak report could help Bonds and home loan rates.
  • A double dose of inflation news with Tuesday’s Producer Price Index, which measures inflation at the wholesale level, and Wednesday’s Consumer Price Index. Will these reports coincide with Bernanke’s remarks on inflation from last week?
  • Job news with Thursday’s weekly Initial and Continuing Jobless Claims Report. Last week’s Initial Claims came in at 427,000, showing that the job market still has some work to do to get below and stay below – the psychologically significant 400,000 mark once again.
  • Thursday also brings housing news, with reports on both Housing Starts and Building Permits, and manufacturing news with the Philadelphia Fed Index, which is considered an important indicator of the manufacturing industry.
  • Rounding out the week is Friday’s Consumer Sentiment Index. This index is important because the level of consumer sentiment is directly related to the strength of consumer spending, which accounts for two-thirds of the economy.

Remember: Weak economic news normally causes money to flow out of Stocks and into Bonds, helping Bonds and home loan rates improve, while strong economic news normally has the opposite result.

As you can see in the chart below, Bonds and home loan rates continue to improve, though as discussed above, volatility remains rampant. Give me a call or send me an email if you have any questions at all about your personal situation.
———————–

Chart: Fannie Mae 4.0% Mortgage Bond (Friday Jun 10, 2011)

Japanese Candlestick Chart

The Mortgage Market Guide View…

Fun Facts – and Activities – for Father’s Day! 

Father’s Day is this coming Sunday, June 19, 2011. To help mark the occasion, here are some fun facts and a list of activities that can help you give Dad the gift of family memories.

One in a Million?

According to the US Census Bureau, there are 70.1 million fathers across the US. Although they all share the experience of fatherhood, each dad is unique. That means, your dad isn’t just one in a million; he’s one in 70.1 million!

Want to learn more fun facts about this special holiday for dads, check out the US Census Bureau’s Father’s Day Facts page.

Simple, Special, and Inexpensive Activities for Dad

Go for a hike – If your dad enjoys nature and relaxing walks, plan a hike on Father’s Day. Whether you make it an easy stroll or a more challenging climb, a hike is a great way to spend some quality time away from the chaos of everyday life. Here are some hiking tips and packing ideas that can make the day as safe as it is fun.

Visit a museum or history center – Whether your dad enjoys art or history, you’re sure to find a museum or history center in your area that will fit his interests. Plan the special day as a surprise and be sure to allow plenty of time to let Dad set the pace, so he can take his time. The American Association of Museums offers an online directory of museums near you. Try it today to search by city, state, and even the type of museum you want to visit.

Go fish – Take Dad to his favorite fishing spot for the afternoon. Of course, if Dad’s not much of a fisherman, consider pulling out a deck of cards and playing a game of Go Fish with the younger children. Take a few minutes to read the rules to Go Fish, as well as find other game ideas.

Play ball – There are plenty of baseball fields and open parks where the family can gather for a game of baseball with Dad. Whether you play a more competitive game of fastball or softball with older children or Wiffle ball with youngsters, it’ll be a day you all remember. Here’s a fun site with the official Wiffle Ball rules.

Hand over the remote – Father’s Day isn’t always sunny and warm. But even if the weather doesn’t cooperate this year, you can still make the day special for Dad. Consider curling up on the couch with your dad for a couple hours of his favorite shows or movies. You can even plan ahead by renting some of his favorite old movies as a surprise.

Fill the frames – You don’t need to spend a lot of money to give Dad the perfect gift. If you have some old picture frames around the house that are sitting in a closet or have out-of-date photos in them, consider giving them a new look. An inexpensive can of paint and some new photos of the kids can go a long way. If the children are older, consider reprinting some old photos of the kids when they were younger. Or you could even take some before and after photos of the kids by retaking photos of them today in the same place and pose of an old photo. Then combine the old and new photos using a photo editing software program or simply place the photos side-by-side in a frame. It’s a gift any dad will be sure to cherish.

Watch home movies – Don’t just limit your movie watching to Dad’s favorite Hollywood films. Instead, spend some time watching some of those home movies that feature Dad and the kids – or even older home movies of Dad when he was a kid. If you don’t have many home movies, put together a slideshow of photos; it’s easy to do and you can even add music on your computer. Of course, if technology isn’t your thing, there’s no need to worry – grab the family photo albums and gather around Dad for a couple hours of laughing and sharing.

Don’t forget Dad’s favorite meal – Whether it’s breakfast in bed or a favorite dinner, make sure you dedicate at least one meal to Dad.

Happy Father’s Day to all the dads across the country – all 70.1 million of you. And may your special day be filled with memories as unique as each of you!
————————–

Economic Calendar for the Week of June 13-17, 2011

Remember, as a general rule, weaker than expected economic data is good for rates, while positive data causes rates to rise.

Economic Calendar for the Week of June 13 – June 17

Date
ET
Economic Report
For
Estimate
Actual
Prior
Impact
Tue. June 14
08:30
Retail Sales
May
-0.7%
0.5%
HIGH
Tue. June 14
08:30
Retail Sales ex-auto
May
0.2%
0.6%
HIGH
Tue. June 14
08:30
Core Producer Price Index (PPI)
May
0.2%
0.3%
Moderate
Tue. June 14
08:30
Producer Price Index (PPI)
May
0.1%
0.8%
Moderate
Wed. June 15
08:30
Consumer Price Index (CPI)
May
0.1%
0.4%
HIGH
Wed. June 15
08:30
Core Consumer Price Index (CPI)
May
0.1%
0.2%
HIGH
Wed. June 15
08:30
Empire State Index
Jun
10.0
11.9
HIGH
Wed. June 15
09:15
Capacity Utilization
May
77.0%
76.9%
Moderate
Wed. June 15
09:15
Industrial Production
May
0.2%
0.0%
Moderate
Thu. June 16
08:30
Jobless Claims (Initial)
6/11
421K
427K
Moderate
Thu. June 16
08:30
Housing Starts
May
540K
523K
Moderate
Thu. June 16
08:30
Building Permits
May
548K
551K
Moderate
Thu. June 16
10:00
Philadelphia Fed Index
Jun
7.0
3.9
HIGH
Fri. June 17
10:00
Consumer Sentiment Index (UoM)
Jun
73.5
74.3
Moderate
Fri. June 17
10:00
Index of Leading Econ Ind (LEI)
May
0.4%
-0.3%
Low

The material contained in this newsletter is provided by a third party to real estate, financial services and other professionals only for their use and the use of their clients. The material provided is for informational and educational purposes only and should not be construed as investment and/or mortgage advice. Although the material is deemed to be accurate and reliable, we do not make any representations as to its accuracy or completeness and as a result, there is no guarantee it is without errors.
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because I am committed to keeping you updated on the economic events that
impact interest rates and how they may affect you.

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Mortgage Market Guide Weekly – Week of June 6, 2011

June 6, 2011 by  
Filed under Finance


Last Week in Review 

 

“SLOW DOWN… YOU MOVE TOO FAST.” Maybe the economic recovery is taking acue from these 1960′s lyrics by Simon and Garfunkel, as the economic recovery seems to be in a sluggish state at the moment. And while it 

doesn’t leave too many Americans “feelin’ groovy,” there are some amazing

opportunities at hand in housing. Here’s what you need to know about the

economy and housing industry – along with one sure thing about the current

situation.

Volatility was extremely high last week – not just in the financial markets, but also in the economic reports and economic outlook. The big news of the week was the official Jobs Report, which came in well below expectations. In fact, in the private sector alone, the report indicated that only 83,000 jobs were created in May – and that number was almost 100,000 less than expected!

Although the Hourly Earnings component of the report came in a little better than expected, the overall report was just plain bad. Even for a market hungry for good news, there was no way to spin this report. Now the markets will have to wait and see if this was a one-off bad report and just a bump in the road to recovery… or if things have indeed slowed down once again.

Manufacturing slowing?

New data on the manufacturing sector of the economy also indicated a possible slowdown, as the Chicago PMI and the ISM Index – which both measure manufacturing – came in below expectations.

Rumors of a bailout lower the US Dollar.

In news across the pond, reports came out last week that Germany is putting together a plan to bailout Greece. The plan would “kick the can down the road” a little longer for Greece, allowing them more time to figure out a strategy to get their debt in order. As a result of these bailout hopes, the Euro was strengthened and the US Dollar dipped lower. Remember, a softer US Dollar helps US Stocks, as US companies benefit from stronger exports with a weakening Dollar. But a lower Dollar isn’t so good for Bonds, so this news stalled the rise of Bonds early last week.

Home prices still very affordable.

Moving from Europe back home to the US, we also received new data last week on home prices across the country. According to the 20-city Case-Shiller Home Price Index, prices were down 0.8% in March. Overall, foreclosures and bank-owned sales continue to weigh on housing – and are expected to do so for a couple more quarters. That said, the housing market is very localized, so only a local real estate professional can help you understand where home prices are at in your community – let me know if you need a referral to someone great in your area.

One thing’s for sure…

If you or someone you know is considering purchasing a home or refinancing, this is an ideal time to see how you can benefit from the current market conditions. Home prices are extremely affordable right now and home loan rates are near historic lows.

It only takes a few minutes to look at some options that fit your unique goals and situation. Call or email today to see how you can benefit from the current situation!

The Mortgage Market Guide Weekly – Week of May 16, 2011

May 16, 2011 by  
Filed under Finance


“Is the glass half empty… or half full?” That question is one many people are debating when it comes to our economy – yes, the economy is still sluggish… but the slow recovery has helped home loan rates improve. So what developed last week…and what was the impact on home loan rates? Let’s take a deeper look.
First, on the inflation front: 6.8%…that’s the current year-over-year rate of Producer or Wholesale inflation. And that is hot – very hot! And while Producer or Wholesale inflation doesn’t always get passed onto the consumer as evidenced by the relatively benign Consumer Price Index (CPI) inflation readings, at some point one of two things must happen.

Businesses who are burdened with increased costs must pass the increase to the consumer by raising prices, thus boosting consumer inflation.
If businesses aren’t in a position to raise prices because of weak consumer demand, they must absorb the increased costs…thereby lowering earnings and the ability to expand, thus furthering the present slow economic growth.
The takeaway here: One of the Fed’s goals for their second round of Quantitative Easing (QE2) was to create inflation and avoid deflation in the hopes of strengthening our economic recovery. It appears that they have been somewhat successful in this goal, as the risks for deflation have somewhat abated. But remember, inflation is the arch enemy of Bonds and home loan rates. If inflation continues to heat up, this could hinder further improvement in home loan rates.

It’s also important to note that inflation in China is also on the rise, and inflation abroad becomes inflation here in the US as we import so many items from China. China’s buying of our debt has helped keep our home loan rates relatively low for a long time. Home loan rates would likely move higher if China not only slows buying, but were to start selling some of their near $900 Billion worth of U.S. government debt holdings.

And speaking of our debt, Republicans in the U.S. House of Representatives are increasingly dismissive of Treasury Secretary Tim Geithner’s warnings that Congress must raise the debt limit prior to August 2nd or risk economic “catastrophe.” This will be an important development to watch in the weeks to come.

The bottom line is that, on the glass half full side of things, home loan rates still remain near some of the best levels we’ve seen this year.

Mortgage Market Guide Weekly – May 9, 2011

May 9, 2011 by  
Filed under Finance


“LIFE IS A MIXED BLESSING, WHICH WE VAINLY TRY TO UNMIX” – author and journalist Mignon McLaughlin. The labor market and the economy saw their own mixed blessings last week, when three different employment reports were released. Unlike Mignon McLaughlin’s quote above about life, these mixed job reports can actually be untangled. So let’s break down what we learned about employment last week…and, just as importantly, what’s going on with home loan rates.

 

After two disappointing employment reports earlier last week – in the form of the ADP National Employment Report and the Initial Jobless Claims Report – the labor market finally received some good news on Friday when the Labor Department released their official Jobs Report that showed 244,000 jobs were created in April. That was far above all expectations… and it was the biggest private job increase since 2006!

But where did this number come from… and is it accurate?

This headline number comes from the Current Population Survey, which uses the birth/death model to guesstimate the amount of jobs lost or gained in different industries – based on how many businesses were “born” or “died.” And it isn’t until we get revisions to the previous month’s reports that we get a more accurate and final number.

Furthermore, history has shown that the birth/death model used to estimate is lagging – and at the start of an improving labor market, like we are seeing, the future revisions will likely show more jobs created than previously reported. This dynamic was evident in this month’s Jobs Report, as revisions to March showed that an additional 46,000 jobs were created.

Despite the better-than-expected number of jobs created, the Unemployment Rate ticked up to 9% from 8.8%. The data for the Unemployment Rate comes from an entirely different survey – which is called the Household Survey – and is a bit contradictory to the headline news. This shows that the jobs being created simply aren’t enough to have yet made a significant dent in the number of jobless Americans.

Also in the Jobs Report, Average Hourly Earnings were reported up by 0.1% to $22.95 per hour. Hourly earnings have increased by 1.9% year over year, just not enough to create “wage-based inflation,” which is where employers have to pump up the prices of their goods and services to cover increased wages. So this was somewhat Bond-friendly news.

Although the Jobs Report was mixed, the overall positive tone does validate that the labor market is gradually improving. As the labor market improves, so will the economy and housing – and with that, interest rates will gradually rise as well. In the short run, the recent rise in Bonds is encouraging. However, after such a strong run higher, it would not be surprising to see more downside follow through in Bonds – which could mean higher home loan rates. The good news is that home loan rates recently reached some of the best levels so far in 2011 – and rumors on Friday that Greece may leave the European Union helped Bonds, as traders sought a safe haven.

That means a window has opened up… but there’s one important point you should understand.

It’s important to note that the last time rates hit this level, they jumped significantly higher from here. What’s more, signs of inflation are beginning to creep into our economy, which never bodes well for home loan rates. And if the rumors of Greece leaving the European Union turn out to be untrue (as Greece has stated), the safe haven bounce we saw last Friday could quickly be erased. That’s why it’s important to take action now.

It doesn’t cost anything to check out your situation, and the choice of moving forward or not will be up to you. Don’t miss this window of opportunity to save significantly on your monthly budget. Call or email today to take a look.

The Mortgage Market Guide Weekly – Week of May 2, 2011

May 3, 2011 by  
Filed under Finance


“SLOW AND LOW, THAT IS THE TEMPO…” Just like these lyrics from the “Beasties Boys” song, slow and low have been the tune for the Bond market recently, as we’ve seen our slow economy cause home loan rates to move lower recently. What’s been happening, and where are the economy and rates headed? Read on to learn more.

 

The search for answers begins with last week’s regularly scheduled meeting of the Federal Open Market Committee (FOMC), which was followed on Wednesday by the historic, first-ever Fed Chairman’s Press Conference. Here’s a summary of the main points that Fed Chairman Ben Bernanke shared:

  • Bernanke said the downtick expected in Gross Domestic Product (GDP) is “transitory,” and that the economy’s temporary sluggishness is somewhat a result of high Oil prices, which he believes is also temporary in nature.
  • Inflation has picked up in recent months but long-term inflation remains subdued.
  • Bernanke was also crystal clear in saying the Fed will complete the $600 Billion of Quantitative Easing 2 (QE2) purchases through June, as originally planned.

So what does all of this mean for home loan rates in the short and long term?

An important factor to keep in mind is the US Dollar, which continues to decline. With QE2 and the dollar printing presses going full steam through the end of June – we should expect the “greenback” to erode further, and how the US Dollar performs after QE2 may have a meaningful effect on the Bond market and home loan rates. A persistent weak US Dollar is ultimately not good for Bonds or home loan rates, as a continued decline would make US dollar denominated assets like Treasuries and Mortgage Bonds (to which home loan rates are tied) less attractive. A weak Dollar is also inflationary; however, it does make our exports less expensive.

The bottom line is this: In the short term, Bond prices are close to a position to break out higher, which would lower home loan rates further still. However, in order for this to happen, the Bond must break above a tough level of technical resistance. Longer-term, how the economy performs post-QE2 will determine which way Bonds and rates are headed at that point, but it’s most likely they’ll trend higher.

If the economy, which still has stubbornly high unemployment and millions out of work, doesn’t pick up on its own post-QE2, then the Fed will continue its accommodative monetary policy as much as it can to avoid inflation. This is to support the economy and push Stocks higher still…but this would have a further negative effect on the US Dollar, as well as Bonds and home loan rates.

If you have been thinking about purchasing or refinancing a home, call or email me to learn more about why now is a great time to benefit from today’s historically low rates. Or forward this newsletter on to someone you know who may benefit.

The Mortgage Market Guide Weekly – Week of April 25, 2011

April 25, 2011 by  
Filed under Finance


WHEN IT RAINS, IT POOR’S… With the US already facing tough decisions over its national debt, the credit rating firm Standard and Poor’s last week cut its credit outlook on the US from stable to negative. Standard & Poor’s also said the US’s AAA credit rating could be cut within two years, if headway isn’t made in closing the budget gap. This is important because countries have credit ratings, just like individuals.

But what does all this mean? Let’s break it down…
First of all, it’s important to note that the downgrade to the credit outlook was a long time coming, and Traders in the pits even joked that S&P is late to the party with this call. For more information about different countries credit ratings – as well as your own state’s credit ratings – check out thisCredit Ratings Link.
All joking aside, this is a serious issue, as the last thing the US wants to endure is an outright credit downgrade. That would make the interest expense on the US debt even more burdensome – and, remember, we are all on the hook for this debt and the carrying costs.
But if this was a long time coming, what sparked the change in outlook? The S&P cited the wide political divide amongst Congress as a major hurdle to meaningfully lower the federal budget deficit. Both parties want to lower the deficit but there is stark disagreement on how to get there. Hopefully, the S&P’s actions will spark a fire in Congress to get serious and get something done.
How does this issue impact Bonds and home loan rates?
The national debt concerns won’t be addressed easily, especially when you remember that the country is approaching the debt-ceiling limit on May 16th. So in the immediate future, this will make for more volatility in the markets as headlines gyrate both Stocks and Bonds. Bonds are in an even tougher spot in the long term – and here’s why:
First… if the US government is successful in taking action to lower the budget deficit and avoid an outright credit downgrade, then we should expect a longer duration of accommodative Fed monetary policy, as the Fed doesn’t want an economic slowdown to recreate a “deflationary” environment. If things do slowdown significantly, we may start hearing debate for a QE3 (or a third round of Quantitative Easing), which would not be good for Bonds and home loan rates.
Second… if the US debt received an outright downgrade, it would be really bad for Bonds. As it stands now, this doesn’t seem likely and you shouldn’t be overly alarmed. But, it’s important to understand what is at stake here. The bottom line is that with some extra belt tightening as a result of this issue, we could expect to see slower economic growth in the future, as government spending would have to slow immensely to help close the budget gap.
That said… home loan rates remain historically low right now. However, there are a lot of headwinds for Bonds down the road and last week’s credit outlook downgrade was just another one.
Now’s the time to learn more about these issues and see how you can take advantage of the current low home loan rates and affordable home prices. It only takes a few minutes to look at your specific situation. Call or email to get started.

Mortgage Market Guide, Week of April 19, 2011

April 19, 2011 by  
Filed under Finance


April 19, 2011

In this Issue…

Last Week in Review: How do you sort out seemingly contradictory data and the impact on the market? Read below to find out.

Forecast for the Week: How is the housing industry holding up? And what does the labor market look like? We’ll see this week.

View: Monday, April 18 is tax day! Did you know you can get freebies and other specials on tax day? Find out where below.

Click here to read the full article…

Whistle While You Work

January 15, 2011 by  
Filed under Finance



“Whistle while you work.” Snow White.That’s something more people have been able to do lately, as the labor market continues to steadily improve. Here’s what December’s Jobs Report showed… and what it means for home loan rates.

The Labor Department reported that 103,000 jobs were created in December, and private job growth was 113,000. While these numbers were below the recently ramped up expectations, they do show that the trend in the labor market is improving. Also noteworthy are the upward revisions to the prior two months readings, showing 70,000 more jobs created than had been previously reported.

And yet, the real shocker in the report was a significant decline in the unemployment rate to 9.4%, which is the lowest unemployment rate since May of 2009.

So what did we learn from this Jobs Report?

  1. While positive news, this Jobs number was still soft enough to support the Fed continuing on their plans for a full dosage of QE2 for the economy… and this won’t be good for Bonds and home loan rates, as it carries along some real inflation threat down the road.
  2. The recent tax package and lower tax rate extensions have not yet had enough time to be seen or felt in the economy, so those factors should help provide further improvement in the labor market in future months… but also will create inflation – bad news for Bonds and home loan rates.

The bottom line for right now is that the familiar chant “Don’t Fight the Fed” continues to ring true. The Fed is intent on creating inflation, lowering the unemployment rate and raising Stock prices…and they have already been somewhat successful. QE2 will likely keep coming until the employment picture improves significantly, and this is all going to be unfriendly for Bonds and home loan rates ahead.

So what should you do if you have been thinking about purchasing or refinancing a home? The good news is that home loan rates are still extremely attractive right now, so call or email me now to get started. Or forward this newsletter on to someone you know how may benefit from today’s historically low rates.

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