Lending Updates November 2102

 

POSTED November 12, 2102

All information courtesy of Betty Hugel- WIndermere Mortgage Services, contact information below.

 

 

Last Week in Review: With the elections over, all eyes are turning toward the "Fiscal Cliff."

Forecast for the Week: Important reports on consumer spending, inflation and manufacturing hit the wires. Plus, the Fed meeting minutes will be released.

View: Malware on your computer can certainly hinder productivity. Be sure to share these important tips below.

Last Week in Review

 

"I'm free…free fallin'." Tom Petty. Now that the elections are over, one of the biggest questions facing our economy is what will happen as we approach the "Fiscal Cliff." Read on to learn what this is about–and what it could mean for home loan rates.

 

Last week, President Obama was re-elected to a second term in office and the market's take is that the Fed will continue its latest round of Bond buying (known as Quantitative Easing or QE3) until the labor market and economy improve significantly. While recent Jobs Reports have shown modest improvement in the labor market, it is still a fragile area of our economy. For instance, September's Job Openings and Labor Turnover report (JOLTS) came in at its lowest reading since April. However, the number of job openings did increase by two percent from September of 2011, signaling a ray of hope for the labor market.

With QE3 in process and the elections over, the buzzword on Wall Street as we approach 2013 is "Fiscal Cliff." What is the Fiscal Cliff and why is it significant? Essentially as we head into 2013, tax cuts for individuals and various tax breaks for businesses are due to expire, taxes pertaining to President Obama's health care law will begin, spending cuts enacted by Congress as part of the debt ceiling deal of 2011 will go into effect, and long-term jobless benefits will expire. The Congressional Budget Office (CBO) estimates that if all of these items occur, it could take an estimated $600 billion out of the U.S. economy in 2013, pushing the country into a recession.

So what does this mean for home loan rates? The issues surrounding the "Fiscal Cliff" will be talked about from now until the end of 2012 and that spells a lot of market uncertainty, which typically results in investment dollars moving from Stocks into Bonds–thereby improving home loan rates (which are tied to Mortgage Bonds). In addition, continued concerns over the debt crisis in Europe and more riots in Greece will likely keep investors in the safe haven of our Bond markets, which will also benefit home loan rates.

However, a big issue we need to continue to monitor is inflation. One of the goals of QE3 is actually to create inflation. And remember, inflation is the arch enemy of Bonds (and therefore home loan rates) as it reduces the value of fixed investments like Bonds. This is an important issue to watch in the weeks and months ahead.

The bottom line is that now is a great time to consider a home purchase or refinance, as home loan rates remain near historic lows. Let me know if I can answer any questions at all for you or your clients.

Forecast for the Week

 

The Bond Market will be closed Monday in observance of Veterans Day, but then the second half of the week heats up with news on consumer spending, wholesale and consumer inflation, and several manufacturing reports:

  • The economic data this week begins on Wednesday with the closely watched Retail Sales Report, which measures consumer spending.
  • Inflation data from the wholesale and consumer level in the form of the Producer and Consumer Price Index will be released on Wednesday and Thursday, respectively.
  • Also on Thursday, the Weekly Initial Jobless Claims report will be delivered.
  • Manufacturing data from the New York State and Philadelphia Fed Index will be delivered Thursday. The data had been weak from late spring through August, but made a comeback in September and October.

In addition, the Federal Open Market Committee (FOMC) meeting minutes will be released on Wednesday, which can cause some volatility.

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, Mortgage Bonds rebounded last week, helping home loan rates remain near record lows. I'll be watching closely to see what happens this week.

Chart: Fannie Mae 3.0% Mortgage Bond (Friday Nov 09, 2012)

 

The Mortgage Market Guide View…

 

 

Protect Yourself from Malware

Computer issues are something that most everyone has experienced–and they are certainly a big factor that can impact (and sometimes even halt) productivity during the day. Often, one of the biggest culprits for a slow or malfunctioning computer is malware.

Malware is short for "malicious software" which includes both software and viruses installed on your computer without you knowing it… and without your permission. Once on your computer, malware can slow down your computer or even crash it, take control over other software, 'spy' on your online activity, and even track your keystrokes in order to steal your login and password information.

The Federal Trade Commission's website, On Guard Online, suggests a number of ways to prevent malware from being installed on your computer–and to remove it once it is there.

First, make sure your web browser and operating system are set to update automatically. Next, use a pop-up blocker, or set your browser to stop them. And definitely don't click on pop-ups that you come across randomly surfing the web. And if you frequently download software, music, videos, or other files, make sure you do so from sites you trust implicitly–downloads are perhaps the single most frequent way to get malware on your computer.

Of course, up to date virus software is also critical to maintain. And there are even free versions like Microsoft's little known Security Essentials or AVG Anti-Virus. Both offer robust malware protection without hogging system resources on your PC.

For more tips on how to protect your computer from malware, visit On Guard Online. And don't forget to share these great resources with your clients, colleagues, and friends!

Economic Calendar for the Week of November 12 – November 16

Date

ET

Economic Report

For

Estimate

Actual

Prior

Impact

Wed. November 14

08:30

Retail Sales

Oct

-0.2%

 

1.1%

HIGH

Wed. November 14

08:30

Retail Sales ex-auto

Oct

0.1%

 

1.1%

HIGH

Wed. November 14

08:30

Producer Price Index (PPI)

Oct

0.0%

 

1.1%

Moderate

Wed. November 14

08:30

Core Producer Price Index (PPI)

Oct

0.1%

 

0.0%

Moderate

Thu. November 15

08:30

Jobless Claims (Initial)

11/10

388K

 

355K

Moderate

Thu. November 15

08:30

Consumer Price Index (CPI)

Oct

0.1%

 

0.6%

HIGH

Thu. November 15

08:30

Core Consumer Price Index (CPI)

Oct

0.1%

 

0.1%

HIGH

Thu. November 15

08:30

Empire State Index

Nov

-9.3

 

-6.2

Moderate

Thu. November 15

10:00

Philadelphia Fed Index

Nov

-1.0

 

5.7

HIGH

 

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.

 

Betty Hugel
Windermere Mortgage Services Series LLC/Kitsap
840 Madison Avenue North
Bainbridge Island, WA 98110

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Posted on November 13, 2012 at 6:45 pm
Susan Grosten | Category: Market updates

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