Late last month, we received some mixed news. On the one hand, reports on Personal Income and Personal Spending came in near expectations. On the other hand, however, there's more to those numbers than meets the eye.
One element that isn't getting much news is the impact of inflation on consumer incomes. For example, let's take a look at the Fed's favorite gauge of inflation--the Personal Consumption Expenditures (PCE) report, which measures inflation at the consumer level. This report met expectations last month...but only when volatile products like energy and food weren't factored in. When energy and food were added into the calculation, we actually saw a slight rise in inflation.
Now, let's go back to Personal Income to see why inflation matters. When we subtract the rise in Personal Income from the rise in inflation, we see that income actually declined slightly because prices went up more than income. And this isn't the only month that has happened. In 3 out of the last 4 months, we have seen incomes decline when we consider the impact of inflation on income. The rise in fuel prices is a big culprit in this negative trend and it highlights how high oil prices can be a detriment to the economy.
In addition, the US savings rate declined to the lowest level in nearly 3 years. The big drop coming from the pickup in spending combined with the decline in income (if you have less income and you spend more, than the increased spending comes at the expense of savings).
The bottom line is that it's nice to see increased spending, but we are going to need an increase in income in order for the increased spending to continue. That said, there's still good news for people in the market for a home or refinance. Bonds and home loan rates remain at historic levels, which means now is still a great time to purchase or refinance a home. Let me know if I can answer any questions for you or someone you know.
What is it? The Federal Open Market Committee (FOMC) consists of the seven Governors of the Federal Reserve Board and five Federal Reserve Bank presidents. The FOMC meets eight times a year in order to determine the near-term direction of monetary policy. Changes in monetary policy are now announced immediately after FOMC meetings.
When will it take place? The next meeting is scheduled to take place April 24-25, 2012.
Why does it matter? Last month's Fed Statement was not a glowing endorsement of the economy, but they did admit that things are improving in most areas except housing, which remains "depressed." While improvement in our economy is good, if this trend continues home loan rates could edge higher. Why? Because Stocks often benefit in strong economic times at the expense of Bonds (including Mortgage Bonds, which home loan rates are based on).
What to listen for this month? There are two important topics that some experts have been paying close attention to--one is the potential rise of inflation and the second is the possibility that the Fed will initiate another round of Bond buying (called Quantitative Easing or QE3). In terms of inflation, the Fed acknowledged that inflation could increase in the near-term, due to higher energy prices. Remember: higher inflation is never good news for Bonds as inflation hurts the return of a fixed investment. And we did see some hints of this. If hints of inflation pick up in the weeks or months ahead, this could hurt Bonds and home loan rates. In terms of QE3, the Fed didn't mention another round of Bond buying in last month's statement. But the markets will be keeping a close eye on the Fed this month for any hints about either of those topics.
I'll continue monitoring the Fed and any news that may impact the markets. If you have any questions about economic reports and how they impact home loan rates, please call or email me. I'm always happy to explain what's going on and how it impacts the rate you can get based on your unique situation.
The Walk/Run Combo (40 minutes): Start off this routine with 5 minutes of stretching. Five minutes (when stretching) is longer than you think, so by the time you're done, you'll be ready to move your body. Next, it's on to the cardio portion of the workout. Some of you may like jogging, but it's not necessarily something everyone enjoys. If you identify with the latter, simply replace the running with either power-walking or a combination of walking and running.
The first step is to strap an old watch to your wrist. This way you know the exact amount of time that has elapsed. Head out for a run through your neighborhood, and, as soon as you hit the 15-minute mark, turn back. Like magic, you'll be home in a half hour. Spend an additional five minutes stretching, and you're done. The entire workout has only taken 40 minutes out of your day!
Once again, this technique works well for power-walkers and for interval running. Interval running is nothing more than alternating walking with running for specific amounts of time. Start with one minute of walking followed by one minute of running and so on, until you reach 30 minutes. As you get stronger, increase the amount of running time and decrease (if you wish) the amount of walking time.
Circuit Training (30 minutes + possible drive time to a gym): This workout is great for anyone with a gym membership, as well as those who have decent weight equipment sitting around in their garage. Chances are both have gone unused because of the preconceived notion that gym workouts take several hours. Not true. Circuit training combines weight training with cardio by featuring lighter weights, more repetitions, and less time in between sets. Here's how it works: Start by picking one exercise for each body part. For example, bench press for chest, military press for shoulders, curls for biceps, sit-ups for stomach, etc. Set them up in your desired order and that becomes your "circuit." Do one set of each exercise and without resting, continue on to the next exercise. Once you've completed the circuit, rest for 3 minutes and do it again. Concentrate on using lighter weights and keeping your repetitions in the 12 to 15 range. If you get through each circuit in 8 m inutes, and you rest for 3 minutes in between, your total workout time is 30 minutes. Add a few minutes for stretching, and you're toned and ready to face the world.
Play a Sport (30 to 45 minutes): Playing a little one-on-one basketball, swimming laps, or hitting a punching bag are amazing workouts. Don't be surprised at how quickly 30 minutes will pass when you combine your workout with some type of game or sport. The downside to this type of workout, however, is it usually requires either another participant or specific equipment. Make sure you really like the sport before investing too much time, energy, or money into making it part of your regular workout.
The Anywhere Workout (10 to 30 minutes): This is a good option for those days when you're extremely busy or stuck in a location where you can't utilize the aforementioned workouts. Start by stretching for a full 10 minutes. This should be vigorous stretching where you hold each stretch for 20 seconds. After that, if you feel up to it, spend the next 10 minutes alternating sets of push-ups and various forms of sit-ups (classic sit-ups, crunches, twists, etc.). If you still have the time and energy, then do several intervals with a jump rope. This underrated cardiovascular exercise can travel anywhere, and it will work wonders on your calves.
The most important thing you should take from this article is the notion that it's not necessarily important to pick just one workout. Use all of them. If you mix up your routine, don't be surprised if you end up working out more. You may also find that it's easier to set aside a half hour of your day, every day, than it was to set aside two hours, three to four times a week.
ANSWER: We may be at the height of income tax season, but hoping you'll be getting a refund isn't the only thing you should be thinking about this time of year...especially if you're a homeowner. That's because the National Taxpayers Union (a nonprofit citizen group) estimates that between 30 and 60 percent of properties are assessed for too high of a value, resulting in an incorrectly larger property tax bill.
Taking the time to review your property tax bill could save you a nice chunk of change. And the good news is that submitting an appeal can be a fairly simple process, but make sure to take the time to fill out all forms in advance and be prepared with your documentation if there is an in-person hearing that needs to take place. To help you out, the National Taxpayers Union offers a checklist that walks you through some important steps in the process.
If you have any questions that I can help with at this time, please call or email today. It will only take a few moments to discuss what's going in the markets and how it impacts your unique goals and situation.