No News Not Good News

In This Issue

Last Week in Review: The Fiscal Cliff saga continued in Washington, plus news on inflation and more. Forecast for the Week: A holiday-shortened week is ahead, but look for several important reports. View: Visuals are a great way to make your presentations standout. See some great tips below.

Last Week in Review

"I never worry about action, but only about inaction." Winston Churchill. And the lack of resolution in Washington regarding the Fiscal Cliff has many people worried, as the December 31 deadline is fast approaching. Read on for details. 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 are due to 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. This is the Fiscal Cliff we're heading toward. The continued uncertainty surrounding this issue has benefitted our Bond Market–and therefore, has benefitted home loan rates, which are tied to Mortgage Bonds–as investors see our Bonds as a safe haven for their money. Also benefitting Bonds and home loan rates last week was news that inflation as reported by the Personal Consumption and Expenditures Report (PCE) remains tame. Remember, inflation is the arch enemy of Bonds and home loan rates, as inflation reduces the value of fixed investments like Bonds. In other news to note last week, there was a 3.1% rise for the final reading in 3rd Quarter Gross Domestic Product (GDP). This figure was likely a result of inventory rebuilding rather than increased demand/spending. It will be important to see where readings for the 4th Quarter come in. So what does this mean for home loan rates? One of the big stories to monitor heading into 2013 is inflation. While inflation is tame now, if it does start to heat up it can do so quickly–meaning Bonds and home loan rates could be negatively impacted. However, the continued uncertainty in the markets, both here with the ongoing Fiscal Cliff saga and overseas with the debt crisis in Europe, means that investors will likely continue to see our Bond market as a safe haven for their money. This could benefit Bonds and home loan rates in the process. The bottom line 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

Chart: Fannie Mae 3.0% Mortgage Bond (Friday Dec 21, 2012) The Stock and Bond Markets will be closing early Monday and will be closed all day Tuesday for the Christmas holiday, but the second half of the week features several important reports. Economic data begins on Wednesday with the S&P/Case-Shiller Home Price Index. More housing news follows later in the week, with New Home Sales on Thursday and Pending Home Sales on Friday. We'll get a sense of how consumers are feeling on Thursday with the Consumer Confidence Report for December. Thursday also brings the weekly Initial Jobless Claims Report. Last week's report showed that Initial Jobless Claims had risen by 17,000 in the latest week to 361,000, above expectations. Note that the number reached as high as 451,000 right after Superstorm Sandy and has now returned to pre-storm levels. Rounding out the week, we'll get news from the manufacturing sector with the Chicago PMI Report. 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 benefitted from the uncertainty last week surrounding the Fiscal Cliff. I'll continue to monitor this story closely.

The Mortgage Market Guide View...

Using Visuals in Presentations Visuals are a great way to improve the effectiveness of your presentations. But there's a reason the phrase "death by Power Point" is a popular one. These tips will help you avoid committing slide-a-cide upon your audience. Be sure to use them the next time you have to give a presentation, and pass them on to your clients, colleagues, friends, and family members. Dump most of your text. Yes, you've got a lot to say, but don't say it all with text. Researchers at UC Santa Barbara discovered that people learn much more from multimedia presentations when there's less text. Representational diagrams, demonstrations, and pictures, along with greater verbal explanation from the presenter–reading text off of the slides doesn't count–is a great formula for success. Think like a graphic designer. In fact, consider hiring a professional graphic designer, especially if your presentation is important. But if you're working on a budget, follow these design guidelines as closely as you can: Direct people's vision with pictures and visual cues. Use pictures and line graphics to direct the eye to parts of the slide that will make your point the strongest way. For example, a well-placed line or arrow can point to a particular area of a photo rather than showing the whole photo with no indication about what your audience should observe. Attract the eye with shades and contrast. The eye is naturally attracted by dramatic contrast. Solid text has almost no contrast and is therefore uninteresting to look at–and therefore far less likely to get or keep the attention of your audience. White space is nice to look at, so don't fall into the trap of filling your slides with so many graphics that they compete with each other. Use size to emphasize. Simply put, the biggest thing on your slide will get the most attention. Make sure the biggest thing–whether text, graphics, or photos–is the most important thing. Economic Calendar for the Week of December 24 - December 28 Date ET Economic Report For Estimate Actual Prior Impact Wed. December 26 09:00 S&P/Case-Shiller Home Price Index Oct NA 3.0% Moderate Thu. December 27 08:30 Jobless Claims (Initial) 12/22 NA NA Moderate Thu. December 27 10:00 New Home Sales Nov NA 368K Moderate Thu. December 27 10:00 Consumer Confidence Dec NA 73.7 Moderate Fri. December 28 09:45 Chicago PMI Dec NA 50.4 HIGH Fri. December 28 10:00 Pending Home Sales Nov NA 5.2% Moderate

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