Quantitative Easing is the concept of the Fed becoming a buyer of Treasuries and Bonds to try and stimulate the economy. Oftentimes, the Fed does Quantitative Easing when they are hoping to (1) create inflation and avoid a deflationary economy, (2) lower the unemployment rate, and (3) boost Stock prices.
Over the last few months, the Fed has bought large amounts of Mortgage Bonds through their Quantitative Easing program to keep home loan rates (which are tied to Mortgage Bonds) near record lows, and to help strengthen our housing market and economy overall. And the housing market has definitely seen some improvement. Last week, the National Association of Realtors reported that the national median existing single-family home price surged 10% since this time last year to $178,900. The year-over-year increase of 10% was the largest gain since the fourth quarter of 2005.
This is one of the big reasons the Fed will likely continue their Quantitative Easing program: The housing market is on the mend and stopping the program could threaten the housing recovery.
So what is the bottom line? Stocks continue to do well--at the expense of Bonds and home loan rates. However, the debt crisis continues in Europe: Spain, Italy and Greece remain in contracting economies and now France and Germany have shown negative GDP growth that was even worse than expected. This means that investors will likely continue to see our Bond market as a safe haven for their money, which could ultimately benefit Bonds--and home loan rates, which are tied to Mortgage Bonds--in the process.
The biggest take away is that home loan rates remain near historic lows, making now a great time to consider a home purchase or refinance. Let me know if I can answer any questions at all for you or your clients.
- Housing news hits the wires, with Housing Starts and Building Permits on Wednesday and Existing Home Sales on Thursday.
- We'll get a double dose of inflation news with Wednesday's wholesale-measuring Producer Price Index, followed by the Consumer Price Index on Thursday.
- Also on Thursday, Initial Jobless Claims and the Philadelphia Fed Index will be reported.
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 Mortgage Backed Securities (MBS), which are the type of Bond that home loan rates are based on.
When you see these Bond prices moving higher, it means home loan rates are improving -- and when they are moving lower, home loan rates are getting worse.
To go one step further -- a red "candle" means that MBS worsened during the day, while a green "candle" means MBS improved during the day. Depending on how dramatic the changes were on any given day, this can cause rate changes throughout the day, as well as on the rate sheets we start with each morning.
As you can see in the chart below, Bonds and home loan rates have been impacted by the rally in Stocks. However, home loan rates remain near record lows and I'll continue to monitor them closely.
How to Get More Done By Thinking Less
If you've ever felt like you can't find time to get to your list of important things, you're not alone. New York Times best selling author Tony Schwarz says almost 75 percent of workers around the world feel disengaged at work and that the "more, bigger, faster" mantra is to blame. We are busier than ever, trying to get more done with fewer resources.
Schwarz suggests everything we do--whether checking email, exercising, or resisting the temptation to eat an extra cookie--often requires thinking, and thinking takes energy. So, if you want to get more done you must actually think less.
In 1911, philosopher A.N. Whitehead wrote: "It is a profoundly erroneous truism that we should cultivate the habit of thinking of what we are doing. The precise opposite is the case. Civilization advances by extending the number of operations we can perform without thinking about them."
The answer, according to Schwarz, is to make important things automatic, what he calls a ritual. Rituals are highly specific behaviors performed at a specific time. He reports the five rituals that have made the most difference in his life are:
- Sticking to a bedtime that ensures he gets at least 8 hours of rest.
- Working out first thing in the morning, whether he feels like it or not.
- Starting his workday by doing the most important task first--decided the night before--and working only in 90-minute time blocks with a definite break in between.
- Writing down his good ideas immediately, so they aren't bouncing around in his mind all day, or worse, forgotten entirely.
- When upset by someone or something, he ritually asks how he can see the same set of facts in a more hopeful or empowering way.