| | In This Issue  | | | | | | | Last Week in Review: Events in Europe continue to dominate the economic headlines. Find out what it means for our economy and home loan rates. Forecast for the Week: A double dose of inflation data is on the way, and more news from the Eurozone is sure to be in store...plus updates on housing, manufacturing and jobless claims. View: Learn what great project could help you increase the value of your home...and will bring you enjoyment, too! | | | | | | | | Last Week In Review | | 
| | | | | | | "IT'S A SMALL WORLD AFTER ALL..." That sentiment was definitely felt in the financial markets last week, as the problems in Europe continue to dominate the headlines and influence market direction around the globe. So what exactly is going on...and what does all of this mean for our economy and for home loan rates? Read on for details. Due to financial instability in several countries in Europe - including Portugal, Ireland, Spain, and most notably, Greece - the European Central Bank along with the International Monetary Fund unveiled a $955 Billion loan package. Additionally, in a plan similar to our TARP plan in the US, the European Central Bank will purchase Bonds and private debt from the countries facing instability. However, it seems that nearly a Trillion dollars doesn't go very far these days, as the announcement didn't lead to the confidence that was hoped for. There is concern about how these already financially strapped countries will pay for all this additional debt, along with skepticism over whether Greek austerity measures will take root...and many wonder if the European bailout plan is just a temporary band-aid rather than a solution. The result continues to be a weaker Euro, as you can see in the chart below. At $1.24 per each Euro, the price is well off where it was a few months ago, when it cost nearly $1.60 for each Euro. -----------------------
Chart: Euro versus the Dollar 
Why is this important? When the Dollar was weaker, it made our imports more costly and travel to Europe more expensive. But it also made our exports far more attractive to foreign purchasers, and that has helped many of the large multi-national US corporations. As this situation is now reversing, it will likely have an adverse effect on those same multi-national corporations - which has contributed to some of the decline in Stocks we have seen. And remember: When Stocks decline, Bonds and home loan rates are typically the beneficiary. As long as the global viewpoint that the US is a safe and stable place for Bond investments continues, Bonds and home loan rates could benefit. However, because it is a small world, with many factors influencing markets, a factor that could hinder this benefit is growing inflation in China. Inflation in China could spill into the US, as the increased cost of their goods could translate into higher import prices we will pay for their products. And inflation is the arch enemy of Bonds and home loan rates, so this will be important to watch as well. As if that weren't enough activity from around the world to keep up with, the massive added supply of debt coming into our markets from our own Treasury auctions...which can also adversely impact Bonds and home loan rates...can't be ignored, either. After all the news of the week and much volatility, Bond prices and home loan rates ended the week about the same as where they began. Remember that with the news coming in fast and furious from around the globe - you can always count on me to keep you informed, and I look forward to talking with you or hearing from you anytime. IT MAY BE A SMALL WORLD, BUT HAVING A SMALL BATHROOM CAN IMPACT THE VALUE OF YOUR HOME! CHECK OUT THE MORTGAGE MARKET GUIDE VIEW FOR GREAT TIPS ON REMODELING. | | | | | | | | Forecast for the Week | |
| | | | | | | We'll get a double dose of inflation news this week, with Tuesday's Producer Price Index, which measures inflation at the wholesale level, and Wednesday's Consumer Price Index. As mentioned above, inflation is the arch enemy of Bonds and home loan rates, and any hint of inflation in these reports could impact the markets. Housing, manufacturing, and job news are also in store this week, with Tuesday's Housing Starts and Building Permits Reports (which give us an update on the health of the new construction sector of the housing market) and Thursday's Philadelphia Fed Report (which gives us an update on the manufacturing sector) and the weekly Initial Jobless Claims Report. Initial Jobless Claims numbers have remained stubbornly high and somewhat contradict the recent positive tone of the past couple of Jobs Reports. The most troubling numbers in the report are the additional 5.13M people claiming EUC (Emergency Unemployment Compensation), which are benefits lasting longer than 26 weeks, up to 99 weeks in total. This is an enormous drain on 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, recent events overseas have helped Bonds and home loan rates improve. I'll be watching closely to see what happens this week - and always feel free to forward this newsletter along to any family members, friends, clients or colleagues who would like to stay informed and advised. -----------------------
Chart: Fannie Mae 4.5% Mortgage Bond (Friday, May 14, 2010) 
| | | | | | | | The Mortgage Market View | |
| | | | | | | Remodeling Your Bathroom: A Project Worth Investing In The economy is showing signs of recovery. In fact, just last week, Retail Sales were reported up for the seventh straight month - thanks in large part to the 6.9% gain at hardware stores and garden centers. If you've been thinking about spending some money of your own at a hardware store for a project around the house but aren't sure you can justify spending the money, we've got two words for you - bathroom remodel. The Beauty of a Bathroom - You can live without a theater room or a home office, but any house worth buying must have at least one bathroom. This may seem obvious, but take a minute to think about it. Aside from the kitchen, there is no other room that's more utilitarian. The bathroom actually has multiple uses, possibly making it the most necessary room in the house. Return on Investment - In terms of remodeling a home's bathroom, the returns can be staggering. While many home remodeling projects return only pennies on the dollar in terms of adding value to the home, some studies indicate a national average return of 90% or even more for mid-range bathroom remodels. While the amount of your return will certainly depend on many variables - it is one of the most desirable upgrades in a home, and brings amongst the highest returns. The Options are Endless - When it comes to the particular upgrades for your bathroom, the options for luxury and function are many. There are two main factors to consider: what specific upgrades will enhance your life, and how much money can you afford to spend? The following are just a few ideas of awesome upgrades that also function as sound investments: - Make It Bigger. A major trend is to expand the size of the master bathroom. Adding space to this room is a wonderful luxury as well as a potentially huge selling point. An augmented master bath allows you, as well as any potential buyers, the ability to make other additions and upgrades.
- Build for Two. One of the major issues for homeowners with only one bathroom, or couples sharing a master bath, is the inability for two people to use one bathroom simultaneously. If size permits, this problem can be alleviated with upgrades, like a double sink, a separate shower and tub, and a short wall to enclose the toilet area.
- Add a Designer Touch. From tubs and toilets to fixtures and flooring, there is literally no end to the combinations of great looks. These types of improvements are relatively inexpensive in comparison to the dramatic upgrade they give to the look and feel of your bathroom. Walls can be repainted. Old counter tops can be replaced with granite or marble, and vinyl flooring can be upgraded to tile.
- Invest in a Spa Experience. If luxury is what you're looking for, you may want to think about an oversized tub, either sunken or raised, with Jacuzzi capability. State-of-the-art showerheads can also be installed, giving you options like receiving a water massage or bathing under a rainfall. Tile floors, towel racks, and toilet seats with built-in heating elements can bring added warmth during the colder months. And don't forget the fog-free mirrors.
When it comes to updating the look and functionality of your bathroom, the sky is the limit. You could invest very little time and money by merely repainting the walls, changing out your fixtures, and doing a little decorating. You could also pull out all the stops and completely remodel an existing bathroom or even add one on. The bottom line is that a great bathroom is something you will enjoy for as long as you own your home. It may also add to the home's overall value if and when you decide to sell in the future.
Economic Calendar for the Week of May 17 - May 21 | Date | ET | Economic Report | For | Estimate | Actual | Prior | Impact | | Tue. May 18 | 08:30 | Building Permits | Apr | 680K | | 680K | Moderate | | Tue. May 18 | 08:30 | Housing Starts | Apr | 656K | | 626K | Moderate | | Tue. May 18 | 08:30 | Producer Price Index (PPI) | Apr | 0.1% | | 0.7% | Moderate | | Tue. May 18 | 08:30 | Core Producer Price Index (PPI) | Apr | 0.1% | | 0.1% | Moderate | | Wed. May 19 | 01:00 | Core Consumer Price Index (CPI) | Apr | 0.0% | | 0.0% | HIGH | | Wed. May 19 | 08:30 | Consumer Price Index (CPI) | Apr | 0.1% | | 0.1% | HIGH | | Wed. May 19 | 10:30 | Crude Inventories | 5/15 | NA | | 1.95M | Moderate | | Thu. May 20 | 08:30 | Jobless Claims (Initial) | 5/15 | 440K | | 444K | Moderate | | Thu. May 20 | 10:00 | Index of Leading Econ Ind (LEI) | Apr | 0.2% | | 1.4% | Low | | Thu. May 20 | 10:00 | Philadelphia Fed Index | May | 21.3 | | 20.2 | HIGH |
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