MMG Weekly: Something to sing about in 2011

 

Send to a Friend Follow Me On:

Edward F. W. Deanes Home Mortgage Consultant Wells Fargo Home Mortgage Phone: (757) 418-2064 Fax:: (866) 935-0661 edward.deanes@wellsfargo.com www.deanesgroup.com

In This Issue...               Last Week in Review: Traders were singing one minute only to scream the next. Read below to see why! Forecast for the Week: How many high-impact reports can you fit in a week? Find out below. Video View: Which credit card is right for you? Discover how to decide... plus learn about new rules that impact you!             Last Week in Review               "Wild thing! You make my heart sing!" - By The Troggs. Traders found themselves singing one minute only to be screaming the next, as Bonds saw huge swings up and down of 100 basis points on multiple days last week. Remember, home loan rates are based on Mortgage Bond prices, so huge swings in Bonds causes home loan rates to shift as well. This underscores why it's so important to work with a knowledgeable professional who understands how interconnected the market is and can help homeowners lock in at the most opportune times. To help make sense of the volatility, here's a montage of the top 5 hits last week that Traders and Bond investors appeared to be singing... and why. #1 "Monday, Monday... so good to me." - By The Mammas and the Papas Last week started out with Bond prices receiving a nice bump on Monday thanks to strong demand for the Treasury Department's auction of $35 Billion in 2-Year Notes. #2 "Bonds in low places." - To paraphrase Garth Brooks On Tuesday, the Treasury Department auctioned off another $35 Billion... this time in 5-Year Notes, which carry more inflation risk. That auction wasn't received nearly as well and sparked a sell off of Bonds. To make matters worse, the sell off was exacerbated by the ultra-thin holiday trading volume. In other words, with many Traders out of the office for the holidays, there simply weren't enough buyers in the market to offset the selling. So when prices dropped on Tuesday, the selling pressure gained momentum with each sale and the losses grew more dramatic. The end result was a drop of 100 basis points in Bond prices! #3 "I'm Back. Bonds have lifted. And raised the gifted." - To paraphrase Kid Rock What a difference a day makes! Just one day after Bonds dropped 100 basis points, the opposite happened and Bonds saw a huge upswing. How was that even possible? Bargain hunting and a strong performance by the Treasury Department's 7-Year Note auction were the catalysts behind the move, as buyers came out in droves and pushed Bonds up 119 basis points! #4 "Home sweet home!" - By Mötley Crüe Volatility wasn't the only story that hit home last week. The final S&P Case-Shiller Home Price Index for the year was also released last week. According to the report, home prices in 20 metropolitan cities fell 0.8%, which was below the 0.1% improvement that was expected and the sharpest year-over-year decline in a year. This was not a good report, and when you consider more foreclosures coming to the market, it is likely that home prices could remain under pressure for part of 2011. Stubbornly high unemployment has played a role in seeing meaningful improvement in housing. #5 "You're unbelievable!" - By EMF The volatility continued throughout the week, swinging another 54 basis points on Thursday alone. But in the end - through all the ups and downs - Bonds and home loan rates were able to finish the week strong. That means home loan rates are still unbelievably low as we start the new year. That means you still have something to sing about. Despite the overall negative trend, home loan rates are still near historic lows... at least for the time being. That may not be the case in the weeks and months ahead. Call or email today to start the process - it only takes a few minutes.             Forecast for the Week               The new year kicks off with a bang, as nearly all of the reports due out this week are rated as having the potential for a high impact on the markets! We start off right away Monday morning with the ISM Index. This is the king of all manufacturing indices and is considered the single best snapshot of the factory sector, so it has the potential to move the markets if it doesn't meet expectations that it will come in better than the prior reading. Tuesday brings us the first release of FOMC Minutes of the year. Although the Fed has already released its policy statement, the markets will be examining the minutes closely for indications of the Fed's thinking regarding important topics like inflation, rates, and the overall economy. We'll also see some important employment news this week. First up is the ADP National Employment Report on Wednesday, which measures non-farm private employment. The report is expected to show fewer jobs created in December than the previous reading of 93,000 jobs created in November. The ADP Report will be followed the next day with another round of Initial Jobless Claims on Thursday. In last week's report, Initial Jobless Claims was reported at the lowest level since July 2008. That was good news for the labor market, but we still need to see if this report was skewed by the holidays or if it was the start of a trend lower in new unemployment claims. The big news of the week will be the release of the all-important Jobs Report this Friday. The Average Work Week and Unemployment Rate are expected to hold steady, while Hourly Earnings and Non-Farm Payrolls are expected to rise. 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. The important thing to note in the chart below is that the overall trend for Bond prices has been downward, which is not good for home loan rates. But last week, Bonds were able to finish strong, which demonstrates that there are opportunities to benefit from positive shifts in the market and low home loan rates despite the overall negative trend. If you or someone you know has been thinking about purchasing or refinancing a home, call or email today to discuss your goals and how you can take advantage of these nice bumps in the Bond market. ----------------------- Chart: Fannie Mae 4.0% Mortgage Bond (Friday, December 31, 2010)             The Mortgage Market Guide View...               Which Card is Right for You? These days, most people use at least one credit card and many of us use more than one. And while it's certainly important to avoid amassing large amounts of debt, it's also important to make sure you pick the right credit card for you. The following video from Kiplinger.com contains tips that can help you do just that. -------------------------- Economic Calendar for the Week of January 3-7, 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 January 03 - January 07 Date ET Economic Report For Estimate Actual Prior Impact Mon. January 03 10:00 ISM Index Dec 58.0   56.6 HIGH Tue. January 04 02:00 FOMC Minutes 12/14       HIGH Wed. January 05 08:15 ADP National Employment Report Dec 100K   93K HIGH Wed. January 05 10:00 ISM Services Index Dec 55.6   55.0 Moderate Thu. January 06 08:30 Jobless Claims (Initial) 01/01 405K   388K Moderate Fri. January 07 08:30 Non-farm Payrolls Dec 132K   39K HIGH Fri. January 07 08:30 Unemployment Rate Dec 9.8%   9.8% HIGH Fri. January 07 08:30 Hourly Earnings Dec 0.1%   0.0% HIGH Fri. January 07 08:30 Average Work Week Dec 34.3   34.3 HIGH             Thank you,   Edward Deanes     This information is accurate as of the date posted and is subject to change without notice. All of the views and comments are mine and do not represent Wells Fargo.   The material contained in this newsletter has been prepared by an independent third-party provider. The content is provided for use by real estate, financial services and other professionals only and is not intended for consumer distribution. 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, there is no guarantee it is without errors.   As your trusted advisor, I am sending you the MMG WEEKLY because I am committed to keeping you updated on the economic events that impact interest rates and how they may affect you.   Mortgage Market Guide, LLC is the copyright owner or licensee of the content and/or information in this email, unless otherwise indicated.   Mortgage Market Guide, LLC does not grant to you a license to any content, features or materials in this email.   You may not distribute, download, or save a copy of any of the content or screens except as otherwise provided in our Terms and Conditions of Membership, for any purpose.

MMG Weekly: Where are rates headed - and why?

 

Send to a Friend Follow Me On:

Edward F. W. Deanes Home Mortgage Consultant Wells Fargo Home Mortgage Phone: (757) 418-2064 Fax:: (866) 935-0661 edward.deanes@wellsfargo.com www.deanesgroup.com

In This Issue               Last Week in Review: Are rates going to come back? Here's a break down of possible scenarios! Forecast for the Week: Get ready for a busy week. Find out what you should watch. View: Know someone in college or headed there soon? Watch the video below for tips to avoid unexpected college costs.             Last Week in Review               "Where do we go from here?" That question from Alicia Keys? song is on the minds of many Americans, as they wonder where home loan rates are headed after the recent negative news for Bonds. Last week, Congress was busy at work on negotiations to extend the Bush-era tax cuts. That news kept a lid on any improvement for Bonds and home loan rates, due to the prospect of an ever-increasing deficit. And adding to the troubles for Bonds and home loan rates last week was news that inflation is growing in China... and growing fast. How does that impact us? Remember, it's a global economy, so Bond prices all over the world worsen on news of inflation, which is bad for home loan rates. So the big question is: Will home loan rates go back down? Although rates are still near historic lows, they have been headed up... and indications are that those unbelievably low home loan rates may be behind us. In fact, there are only a few things that would bring back the lows that we saw in early November: If the tax cut package doesn't get passed, it would be very bad news for the economy and Stock market - but it would help interest rates. If the Fed's recent round of Quantitative Easing falls on its face and doesn't meet its mission of creating inflation, boosting Stock prices, lowering unemployment and creating consumer demand - Bond prices could make some gains as the threat of deflation reemerges. But this is a long shot. If the financial problems in Europe worsen significantly - which would drive investors into the safe haven of the US Bond market - it could help Bond prices, but probably only modestly. Realistically, the chances of these events happening are unlikely - and in the end, rates may see some brief and fleeting improvements, but many experts believe they will likely continue to creep up over time. And when you include the stimulative action of extending the present tax rates and adding further cuts, it's tough to see Bonds or home loan rates improving much. The good news is that home loan rates are still extremely attractive and are still near historic lows for now. If you or someone you know has been thinking about purchasing or refinancing a home, NOW is the time to call or email to get started.             Forecast for the Week               Get ready for a busy week of economic reports and news that could impact home loan rates! We'll start off Tuesday morning with the Retail Sales report for November, as well as the Fed's final FOMC Meeting and Policy Statement of the year coming on Wednesday. We'll also see new inflation reports starting on Tuesday with the Producer Price Index (PPI), which measures inflation at the wholesale level. The very next day, we'll see the Consumer Price Index (CPI) with a look at inflation on the consumer level. With all of the recent talk over inflation concerns in the future, it will be important to see what these reports reveal - since inflation is the archenemy of Bonds and home loan rates. We'll also get a dose of manufacturing news in the Empire State Index, which looks at New York State's manufacturing sector, and is a good gauge of manufacturing overall. On Thursday, we'll also see the Philadelphia Fed Index, which is another important manufacturing report. Those two indices have the potential to impact the market, since they indicate the health of the manufacturing sector in the US. Thursday brings the Initial and Continuing Jobless Claims Report. Last week, Initial Jobless Claims came in at 421,000, which was below expectations. That was encouraging news, but we still need to see consistent readings below 400,000 before real confidence in the labor market can take hold. Finally, we'll see more housing news this week, when reports on Housing Starts and Building Permits in November are released on Thursday. 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. The chart below shows the recent direction of Bonds - and, therefore, home loan rates. The important thing to note is the downward trend, which shows how Bond pricing and therefore home loan rates continued to worsen last week. Fortunately, there's still time to lock in at near historic lows. It only takes a few minutes to see if this makes sense for you, or one of your friends, family members, neighbors, clients or coworkers. Call or email today, and I'll be happy to help right away. ----------------------- Chart: Fannie Mae 4.0% Mortgage Bond (Friday, December 10, 2010)             The Mortgage Market Guide View...               Surprise: More College Expenses! Here's How to Avoid Them... College tuition costs are staggering these days - and so are some of the college-related expenses that you may not be expecting. Watch this video from Kiplinger.com on unexpected college expenses to come up with ways to avoid those indirect costs. Whether you're planning to send a child to college soon or you know a student in college this year that has already experienced some of these unexpected costs, this video is invaluable! -------------------------- Economic Calendar for the Week of December 13-17, 2010 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 December 13 - December 17 Date ET Economic Report For Estimate Actual Prior Impact Tue. December 14 08:30 Producer Price Index (PPI) Nov 0.5%   0.4% Moderate Tue. December 14 08:30 Core Producer Price Index (PPI) Nov 0.2%   -0.6% Moderate Tue. December 14 08:30 Retail Sales Nov 0.8%   1.2% HIGH Tue. December 14 08:30 Retail Sales ex-auto Nov 0.6%   0.4% HIGH Tue. December 14 02:15 FOMC Meeting 12/14 Unch   0.25% HIGH Wed. December 15 08:30 Empire State Index Dec 3.0   -11.14 Moderate Wed. December 15 08:30 Core Consumer Price Index (CPI) Nov 0.1%   0.0% HIGH Wed. December 15 08:30 Consumer Price Index (CPI) Nov 0.2%   0.2% HIGH Wed. December 15 09:15 Industrial Production Nov 0.3%   0.0% Moderate Wed. December 15 09:15 Capacity Utilization Nov 75.0%   74.8% Moderate Thu. December 16 08:30 Jobless Claims (Initial) 12/11 425K   421K Moderate Thu. December 16 08:30 Housing Starts Nov 545K   519K Moderate Thu. December 16 08:30 Building Permits Nov 558K   550K Moderate Thu. December 16 10:00 Philadelphia Fed Index Dec 12.5   22.5 Moderate Thu. December 16 10:00 Index of Leading Econ Ind (LEI) Nov 1.2%   0.5% Low             [mmgwDisclosure]   The material contained in this newsletter has been prepared by an independent third-party provider. The content is provided for use by real estate, financial services and other professionals only and is not intended for consumer distribution. 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, there is no guarantee it is without errors.   As your trusted advisor, I am sending you the MMG WEEKLY because I am committed to keeping you updated on the economic events that impact interest rates and how they may affect you.   Mortgage Market Guide, LLC is the copyright owner or licensee of the content and/or information in this email, unless otherwise indicated.   Mortgage Market Guide, LLC does not grant to you a license to any content, features or materials in this email.   You may not distribute, download, or save a copy of any of the content or screens except as otherwise provided in our Terms and Conditions of Membership, for any purpose.