News Decked with Uncertainty

In This Issue

Last Week in Review: Uncertainty continues at home and abroad. But how were home loan rates impacted? Forecast for the Week: Look for news on manufacturing, consumer sentiment, and the all-important Jobs Report for November. View: Want to use social media more effectively for your business, without losing a lot of time in your day? Check out the ideas below.

Last Week in Review

"What we've got here is failure to communicate." And that quote from the movie Cool Hand Luke can also apply to our leaders in Washington, as they have failed to make any significant progress on the "Fiscal Cliff" issues we are facing. Read on to learn more details, and what this means for home loan rates. 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. This is the "Fiscal Cliff" we're heading toward. And while Congress and the President need to find a way to resolve these issues, the uncertainty here at home combined with continued uncertainty surrounding the debt crisis in Europe has benefitted our Bond market, as investors see our Bonds as a safe haven for their money. And since home loan rates are tied to Mortgage Bonds, they have also benefitted. Also helping Bonds and home loan rates last week was the news that inflation, as measured by the Core Personal Consumption Expenditure, remains tame. Remember inflation is the arch enemy of Bonds (and therefore home loan rates) because it reduces the value of fixed investments like Bonds. In other news to note, New Home Sales for October came in lower than expected and September's numbers were also revised lower. But there was some good news in the housing sector: Home prices in the September Case Shiller Home Price Index 20-city composite increased 3.0% from September 2011. 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

Chart: Fannie Mae 3.0% Mortgage Bond (Friday Nov 30, 2012) Manufacturing news kicks off the week, ahead of Friday's all-important Jobs Report for November. The closely watched ISM Manufacturing Index will be released first thing Monday, kicking off a week filled with important economic data. Productivity and the ISM Services Index will be reported on Wednesday. Weekly Initial Jobless Claims will be delivered on Thursday after several weeks of heightened claims due to Superstorm Sandy. Friday brings the all-important government Jobs Report, which includes Non-farm Payrolls and the Unemployment Rate. Consumer Sentiment will also be released on Friday. 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, continued uncertainty here regarding the Fiscal Cliff and in Europe regarding the debt crisis benefitted Bonds and home loan rates. I'll be watching closely to see what happens next.

The Mortgage Market Guide View...

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