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Last Week in Review: There
was important news on the labor market and the state of the economy. Find
out how home loan rates were impacted.
Forecast for the Week: In the absence of any major economic data
points and with earnings season coming to an end, investors will be looking
for the next catalyst to impact the markets.
View: The cost of getting the flu is nothing to sneeze at. Be sure
to share the important information below with clients and colleagues.
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Take
two steps forward and one step back. That popular catchphrase is
a good description of our economy of late, as good economic news continues
to be tempered by some negative reports.
There
was mixed news in the Jobs Report for January: 157,000 jobs were created,
which was below expectations, while the unemployment rate ticked up to 7.9%
from 7.8%. On the flip side, the November and December job numbers were
revised higher by 127,000. In addition, the benchmark revisions showed that
employers added 335,000 jobs in 2012, more than was originally reported.
That brought the average rate of job gains per month in 2012 to 181,000, up
from the 175,000 per month average seen in 2011.
Overall, the labor market continues to improve, but at a very slow pace.
And seeing the unemployment rate tick higher is yet another reason why the
Fed said last week that their Bond purchase program (known as Quantitative
Easing) will continue.
In other important news, Fourth Quarter Gross Domestic Product (GDP) showed
negative growth for the first time since the second quarter of 2009. While
external factors like Superstorm Sandy did have an impact on this reading,
overall growth has been limited to just 2% or so annually. This is part of
the reason why the unemployment rate remains as elevated as it is.
What does this mean for home loan rates? First, it's
important to remember three things. First, home loan rates are tied to
Mortgage Bonds, and as Bonds improve, home loan rates improve. Second,
inflation is the arch enemy of Bonds (and therefore home loan rates) as inflation
reduces the value of fixed investments like Bonds. Third, Bonds (and
therefore home loan rates) typically benefit when there is weak economic
news, as investors tend to move their money into safer investments like
Bonds.
The question is: With the Fed still buying $85 billion in Mortgage Bonds
per month, no inflation, and weak economic readings, why aren't Bonds and
home loan rates improving? The answer: Stocks had their best January in
over two decades. As long as the Fed continues to pump money into the
economy, the bias in the markets will likely be towards riskier assets like
Stocks.
However, home loan rates remain near historic lows, which means now
is still 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.
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Chart: Fannie Mae 3.0% Mortgage Bond (Friday Feb 01, 2013)
After
last week's packed economic calendar culminating with Friday's mixed Jobs
Report, this week's calendar is light.
- Look for the ISM Services Index on Tuesday.
- Weekly Initial Jobless Claims will be
reported as usual on Thursday. Last week's reading showed that initial
claims jumped 38,000 to 368,000 in the latest week.
- Also on Thursday, Q4 2012 Productivity will
be released
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 attempted to stabilize last week.
I'll continue to watch the markets closely.
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The Mortgage
Market Guide View...
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Monitor
the Flu Online
Flu season is here...and the cost of the season is nothing to sneeze at! In
fact, Americans spend approximately $4 billion on over-the-counter cold and
flu remedies. That doesn't even factor in how much time and productivity is
lost on sick-time in the workplace or co-pays for doctor visits and
prescriptions.
But with the two websites below, you can stay up to date on the latest flu
information in your area and even add your data to help others.
View Flu Activity:
You don't have to wonder if the flu is prevalent in your state or search
for long complicated reports. Each week, the Centers for Disease Control
and Prevention (CDC) produces a Flu Activity
Map. The map displays the level of flu activity across the United
States and is based on data reported from state epidemiologists. The map
also allows you to view previous weeks, so you can compare the spread of
flu activity over time.
Contribute Your Data:
On the "Flu Near You"
website, you can complete a brief weekly survey that may help all of us
learn more about the flu. When a case is reported, the map registers a
"pin" in the map - and you can even click on that pin to learn
more about the symptoms or severity of the case! The site is completely
free to use. And the information on the site will be available to public
health officials, researchers, disaster planning organizations and anyone
else who may find this information useful.
So if you're concerned about being sidelined by the flu, take a few
minutes to check out the websites above. You may even want to consider
passing the information on to your friends, family members, or even your
clients.
Economic
Calendar for the Week of February 04 - February 08
Date
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ET
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Economic Report
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For
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Estimate
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Actual
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Prior
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Impact
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Tue. February 05
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10:00
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ISM Services
Index
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JAN
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NA
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56.1
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Moderate
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Thu. February 07
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08:30
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Jobless Claims
(Initial)
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02/02
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NA
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NA
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Moderate
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Thu. February 07
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08:30
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Productivity
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Q4
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NA
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2.9%
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Moderate
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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.
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