Saturday, February 16, 2013

Mortgage Market Guide Weekly Issue 7

Last Week in Review: There was another sign that the housing market continues to recover. Plus, chatter about the Fed.

"Ease on down the road." The song from the musical The Wiz could also apply to recent chatter in the markets, regarding whether the Fed will continue to "ease on" with their Bond buying program, known as Quantitative Easing. Read on for details and what they mean for home loan rates.

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.

Forecast for the Week: The markets are closed Monday for Presidents' Day, but important housing and inflation news will be released later in the week.

The markets are closed Monday in observance of the Presidents' Day holiday, but look for several important reports later in the week.
  • 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.
In addition, the minutes from the January meeting of the Federal Open Market Committee will be released on Wednesday at 2:00pm ET. With all the differing opinions of the Fed governors and the chatter about Quantitative Easing, this has the potential to move the markets.

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.

Chart: Fannie Mae 3.0% Mortgage Bond (Friday Feb 15, 2013)

View: Thinking less may actually help you get more done. Check out why below.

Rituals of Success
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:
  1. Sticking to a bedtime that ensures he gets at least 8 hours of rest.
  2. Working out first thing in the morning, whether he feels like it or not.
  3. 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.
  4. Writing down his good ideas immediately, so they aren't bouncing around in his mind all day, or worse, forgotten entirely.
  5. 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.
Remember, the less you have to think about your goals as you perform the steps to achieve them, the more likely you are to check them off your list.

Economic Calendar for the Week of February 18 - February 22

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.

As your mortgage professional, 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.

1 comment:

  1. Ahh...I tracked down how I found you. I was searching for some tips for property mortgage and got your post link. You are a regular contributor and that would help me a lot.
    property to rent in paphos