Uncertainty Helps Home Loan Rates

In This Issue

Last Week in Review: Home loan rates continue to reach record best levels,  as uncertainty here and abroad grows. Forecast for the Week: The second half of the week heats up, with news on the  housing market, consumer sentiment, Gross Domestic Product and more. View: Ever feel like you don’t have enough time to focus on important things at  the office? Read—and share with your clients, friends, and colleagues—the great  tip below.

Last Week in Review

They say that every cloud has a silver lining. And despite a slew of disappointing  economic news last week, home loan rates continue to reach record best levels.  Read on for details. The majority of economic  reports released last week  added to the uncertainty about  our economic outlook. Retail  Sales fell more than expected  while the NY State  Manufacturing Index remains at  relatively low levels. In addition,   the National Association for  Business Economics (NABE)  reported that the outlook for job  growth has fallen due to a  weakening economy. The survey  revealed that 23% on those polled in July think that US employment will rise over  the next six months, down from 39% in April.  But the economic news wasn’t all negative. Inflation at the consumer level remained  tame in July, while Housing Starts for June increased nearly 7% to 760,000. This  marks the highest level for housing starts since October 2008. Since home builders  don't start a house unless they are fairly confident it will sell upon its completion, if  not before, changes in the rate of housing starts can tell us a lot about demand for  homes and the construction outlook.  In other important news last week, Fed Chairmen Ben Bernanke was on Capitol Hill  delivering his semi-annual testimony before both the Senate and House. He  confirmed that our economy is weak, uncertainty in Europe is threatening U.S. growth,  and unemployment is stubbornly high. But perhaps more significant was what  Bernanke didn’t say: There was no mention or hint of another round of Bond buying  (known as Quantitative Easing or QE3) at the next Fed Meeting.  It’s important to remember that rumors or hints of QE3 could help Bonds (and thus  home loan rates, which are tied to Mortgage Bonds), but once an official  announcement is made, Bonds and home loan rates could suffer as Stocks would  likely rally. However, the weak economic data here and the continued problems in  Europe mean that investors will likely continue to see our Bonds as a safe haven  for their money…helping home loan rates in the process.  The bottom line is that home loan rates continue to reach historic lows,  making now a great time to purchase or refinance a home. Let me know if I can  answer any questions at all for you or your clients.

Forecast for the Week

Chart: Fannie Mae 3.5% Mortgage Bond (Friday Jul 20, 2012) Although economic news this week is rather light, some key reports will be released…and they may impact the markets and home loan rates: Economic news doesn't begin until Wednesday with data on New Home Sales. Last week, there was some hope that the housing markets were bottoming after a solid Housing Starts report, but those hopes were quickly dashed after the weak Existing Home Sales numbers. So, the markets will be looking to see what this week reveals about the housing market. Thursday we’ll see more housing news in the form of Pending Home Sales. Weekly Initial Jobless Claims will be delivered as usual on Thursday and comes after a big rise in claims last week, which was due in part to seasonal abnormalities. Durable Orders will also be reported on Thursday. The government will release the first reading on second quarter Gross Domestic Product (GDP) on Friday and the report will be critical as to the outlook for the U.S. economy. Finally, Consumer Sentiment for July will be released on Friday as well. 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 continue to improve. I’ll be watching closely to see what happens this week.

The Mortgage Market Guide View...

One Day = 1,440 Minutes By Jason Womack, Author. Productivity Coach. http://amzn.to/bestbetter Schedule "think" time on your calendar. Start with blocks of 15 minutes. I recommend you schedule five of these sessions over the next week. Consider starting with just one a day. There are two goals for this activity: Rarely do you get enough time to focus on one thing while you're at work. To get better at what you do, you MUST practice focusing. I want you to be able to hold your concentration on one topic, idea or problem for extended periods of time. During these focus sessions, you may come up with a new or different solution just because you had "time to think." If you schedule just one 15-minute block of think time a day, you'll be able to do it. (I've seen too many people try to block out an hour or two, only to have "something come up" that pulls them out for half or even all of that time.) 15 minutes...it's short enough to find, and long enough to matter! Economic Calendar for the Week of July 23 - July 27 Date ET Economic Report For Estimate Actual Prior Impact Wed. July 25 10:00 New Home Sales Jun NA 369K Moderate Thu. July 26 08:30 Jobless Claims (Initial) 7/21 NA NA Moderate Thu. July 26 08:30 Durable Goods Orders Jun NA 1.3% Moderate Thu. July 26 10:00 Pending Home Sales Jun NA 5.9% Moderate Fri. July 27 08:30 Gross Domestic Product (GDP) Q2 NA 1.9% Moderate Fri. July 27 08:30 Chain Deflator Q2 NA 2.0% Moderate Fri. July 27 08:30 Consumer Sentiment Index (UoM) Jul NA 72.0 Moderate

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