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.

Market Your Service To More First-Time Home Buyers

First time real estate buyers are some of the most valuable clients out there, and the Internet is your best bet for attracting them. That's because new buyers are generally younger and spend more time doing research before entering the market, all of which adds up to more Internet use. Tech-savvy real estate professionals who can master a few new Internet marketing strategies will have a much easier time connecting with younger buyers, and building their market for the future.

Every real estate professional knows the value of first impressions, and that's why everyone wants to work with first-time buyers. Helping someone buy their first home is not just a huge responsibility, but also a marketing victory. With a successful first-time transaction, real estate professionals put themselves in a position to work with a client again in the future, and have their services referred to friends and family. But like a first home showing, that first transaction has to leave behind positive imagery and something to look forward to, otherwise the buyer will look somewhere else next time.

A strong Internet presence with a well designed, well written, and useful website is the most effective online marketing tool, and most tech-savvy Realtors will already have this. The advantage to already having a good website is that you can build on it, or use it as a central resource linking to your new marketing tools.

Many real estate professionals and developers are also realizing the benefits of online television in marketing property to younger buyers. Popular examples of this marketing tactic have included sitcom webisodes, real estate agent walk-thrus, and reality-TV style interviews with current homeowners. One online television series called Donovan Life told the story of a young professional woman who moved into a new downtown condo (the development being marketed) with her best friend. Like a television series featuring product placement, the Will and Grace-style Donovan Life managed to create a branded environment, and market a particular lifestyle. The series was a hit with younger buyers, and the development sold out quickly.

Tech savvy real estate professionals have also had a lot of success marketing to younger buyers with social networking. For example, instead of contacting leads via phone of sending mass emails, real estate professionals can simply set up a Facebook page and advertise their services. Clients tend to react well to this approach because it's more transparent, and doesn't require any personal information on their part - essentially it's the same thing as a website.

It's also important to keep in mind that these marketing tactics work well other groups besides young buyers. With more than 80 per cent of buyers and sellers using the Internet first in their real estate search, broadening your online presence is guaranteed to expand your market.

Marketing Real Estate To Generation Jones

The Baby Boomers are a well-known demographic that is moving into retirement, but real estate agents should also pay attention to the Boomer’s younger sibling, “Generation Jones” as named by historian Jonathan Pontell. Generation Jones is the demographic born between 1954 and 1965 and now comprising 25% of the U.S. population. Their roots are definitely practical, but their branches keep reaching for the sky. A balanced approach that meets both these needs is what is best to attract Jones’ formidable real estate buying power.

The Baby Boomers are the demographic of people born just post-World War II, from the 1940s to the 1960s. America was “booming” in postwar prosperity and in population. Generation Jones is the younger generation, those born in the latter half of what is known as the “Boomer years”. The term “keeping up with the Joneses” comes from this generation. They grew up with the advent of technology and in the midst of the spirit of social change. They are technologically savvy, being the first of the generations to grow up with television in the background. They want the better life that The American Dream promises, but many have yet to see that materialize.

Generation Jones is seeing retirement on the horizon, but many of them have children at home still and no plans to actually stop working. While they might retire from their jobs in the next 10-20 years, they have a lot to do right now. Many of them are looking at working beyond retirement. This may be the last larger home they purchase before they start downsizing once the last child leaves the nest.

Your real estate selling strategy has to combine genuine value with innovation to appeal to this generation’s appreciation of material goods and services. “Green” appliances and features appeal to them because they want to produce a better world while still enjoying the conveniences of today’s inventions. They want open design concepts and a flexible living space. They appreciate the tried-and-true classics, but if there’s something out there that’s better then they’re all for it.

Despite this openness to technological innovation, though, Jones can be emotionally attracted by appeals to nostalgia. Tasteful references to the 70s and the 80s – in color, design and popular culture can capture their interest. There are a number of fan sites for “retro renovation” of mid- and late-century homes and rooms. By offering information on modern renovations for retro homes, you could be in a good position to attract Generation Jones.

One thing about Generation Jones to avoid is the “B.S. Detector”. Having been a generation bombarded by ads since before they could toddle, Jones people are adept at seeing exaggerated claims and outright lies in a sales pitch. When something looks too good to be true, Generation Jones people are sure it’s not and will go the extra mile to prove their suspicions right. Be honest. If the roof is about to slide into the garden, say so.

The value of a home as a center, not just for family and financial stability, but for one’s hobbies and aspirations is a good point to take with Generation Jones. They are old enough to know that you can’t have it all, but young enough in our culture to know you can have what you’re willing to reach for. If you can lure someone from Generation Jones with genuine value while appealing to their sense of aesthetics, you are in a good position to make a sale