Dec

14

Last Week in Review from your Certified Mortgage Planner in Lees Summit, Overland Park and the Kansas City Metro with Pulaski Bank – Curtis Schartz.

“IT’S A RECESSION WHEN YOUR NEIGHBOR LOSES HIS JOB; IT’S A DEPRESSION WHEN YOU LOSE YOURS.” Harry S. Truman. Very true words indeed – and last week brought some market action when Fed Chairman Ben Bernanke discussed the recession, commenting that our economic recovery still faces “formidable headwinds.” As you can see in the chart below, the current recession we have been in has been the longest in nearly half a century.

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Chart: Post World War II Recessions
topweekly121409

And because negative economic comments or news causes money to flow out of Stocks and into Bonds, Bernanke’s words helped Bonds and home loan rates to improve early last week…but these improvements were short lived.

Bond prices and home loan rates responded poorly to the Treasury auctions of last week, as the Treasury instruments being auctioned off are in direct competition with Mortgage Backed Securities…and the continual record amounts of supply hitting the market requires record amounts of buying to take place as well. And remember – the Federal Reserve is winding down their Mortgage Backed Security purchasing program, so as they stretch out and ration their remaining purchases through the first quarter of next year, the reduced amount of their buying just adds to the problem.

And as with any item, when there is lots of supply and diminishing demand – Economics 101 tells us that the price of that item will subsequently go down. So as Bond prices go down, home loan rates go up – and last week saw home loan rates increase by at least .125% across the board.

Also adding to selling pressure on Bonds in the latter part of last week were several bits of good economic news. First, the Retail Sales Report for November was better than expected, marking the third monthly increase over the past four months. It appears that lower prices and good deals are helping to spur some buying activity, though it remains to be seen how this will impact retailers’ bottom lines. Consumer Sentiment was also reported quite a bit better than expected.

AND SPEAKING OF RETAIL SALES AND CONSUMER SENTIMENT – ARE YOU STILL WONDERING HOW TO WISELY SPEND YOUR HARD EARNED DOLLARS WHILE HOLIDAY SHOPPING THIS YEAR…AND STILL FEEL GREAT ABOUT HAVING GIVEN A GREAT GIFT? CHECK OUT THIS WEEK’S MORTGAGE MARKET VIEW FOR GREAT HOLIDAY GIFT IDEAS UNDER $25.

Forecast for the Week

Last week may have been a slow one when it comes to economic reports, but the week ahead is full of action, beginning with Tuesday’s Producer Price Index (PPI) Report, which measures inflation at the wholesale level. More inflation news immediately follows with Wednesday’s Consumer Price Index (CPI) Report. Remember that inflation erodes the value of the fixed income that a Bond provides, so any signs of inflation can cause Bond prices and home loan rates to worsen.

Wednesday will also bring a read on the housing market with the Housing Starts and Building Permits Report, as well as the Interest Rate Decision and Policy Statement from the Fed, following the end of their regularly scheduled Federal Open Market Committee meeting. A change in rates isn’t expected – but any comments about inflation in the Policy Statement could rattle Bonds and home loan rates.

Also important this week is a look at the manufacturing sector, via Tuesday’s Empire State Index and Thursday’s Philadelphia Fed Report. Manufacturing reports have been all over the boards lately, but a marked improvement in either of these reports could cause Stocks to move higher, and in turn, hurt Bonds and home loan rates. Also in store for Thursday is another look at the weekly Initial Jobless Claims Report. Last week’s Continuing Jobless Claims fell to the lowest level since February, and while at first blush this decline would appear to be a good thing, it is likely that the numbers are reflective of people accepting part time or seasonal work that won’t last after the holidays.

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. As you can see in the chart below, Bonds and rates worsened after last week’s Treasury auctions. I’ll be watching carefully to see if Bonds and rates can muster an improving rally this week in the face of a heavy news week.

Chart: Fannie Mae 4.5% Mortgage Bond (Friday Dec 11, 2009)
weekly121409

The Mortgage Market View…

Best Holiday Gifts for Under $25

The holiday season can be a strain on your pocketbook. Considering the current economic climate, it may be even more apparent this year than in the recent past. But there are still plenty of inexpensive holiday gifts you can give this year – even for under $25 – that will help ring in the holiday cheer!

Godiva Chocolate – Godiva offers a number of chocolate selections for under $25. It’s not only a delicious product, but receiving chocolate in a little gold box is about as iconic as receiving jewelry in a little blue box. Visit www.Godiva.com to see the various selections.

Bottle of Wine – A bottle of wine is a great gift of holiday cheer. And for $25, you can buy a nice bottle.

Christmas Tree Ornament – This gift is obviously contingent on the recipient celebrating Christmas. Nonetheless, it is a thoughtful present that can be kept forever. Depending on the ornament, some can be personalized with engraved messages, as well as the year they were purchased.

Lottery Tickets – This is another inexpensive gift you should consider. The idea of scratching off 25 lottery tickets can be a lot of fun. The gift gets even better if a number of the lottery tickets pay off. Tuck them inside a thoughtful card and you’re all set.

French Press Coffee Pot – Every true coffee lover should have a French Press pot. And even if they already have one, they’ll probably enjoy another one to keep in separate locations or to be used simultaneously for larger get-togethers.

A Journal and a Pen – One does not have to be a writer in order to find countless uses for a journal and a pen.

A Board Game – From single folks to families, board games provide the perfect entertainment at a gathering with friends, or even a quiet weekend night at home.

Homemade Gift Basket – Putting together a gift basket for someone allows you to tailor the gift precisely to the interests of the person who’s receiving it. Gift basket themes are limitless and can fit into any budget.

Bath and Body Gifts – Everyone can use a little bit of pampering from time to time. With the variety of scented lotions and shower gels available today, you’re sure to find something within your budget.

Times may be tough, but that doesn’t mean you need to completely forgo the tradition of holiday gift buying. You just have to be a bit more creative. Happy shopping…and happy holidays.

The Week’s Economic Indicator Calendar

Remember, as a general rule, weaker than expected economic data is good for rates, while positive data causes rates to rise.
Economic Calendar for the Week of December 14 – December 18
Date ET Economic Report For Estimate Actual Prior Impact
Tue. December 15 08:30 Core Producer Price Index (PPI) Nov 0.2% -0.6% Moderate
Tue. December 15 08:30 Producer Price Index (PPI) Nov 0.8% 0.3% Moderate
Tue. December 15 08:30 Empire State Index Dec 25.00 23.51 Moderate
Tue. December 15 09:15 Capacity Utilization Nov 71.1% 70.7% Moderate
Tue. December 15 09:15 Industrial Production Nov 0.6% 0.1% Moderate
Wed. December 16 02:15 FOMC Meeting 12/16 0.25% HIGH
Wed. December 16 10:30 Crude Inventories 12/11 NA -3.82M Moderate
Wed. December 16 08:30 Core Consumer Price Index (CPI) Nov 0.1% 0.3% HIGH
Wed. December 16 08:30 Consumer Price Index (CPI) Nov NA 0.2% HIGH
Wed. December 16 08:30 Housing Starts Nov 578K 529K Moderate
Wed. December 16 08:30 Building Permits Nov 570K 552K Moderate
Thu. December 17 08:30 Jobless Claims (Initial) 12/5 465K 474K Moderate
Thu. December 17 10:00 Index of Leading Econ Ind (LEI) Nov 0.7% 0.3% Low
Thu. December 17 10:00 Philadelphia Fed Index Dec 16.0 16.7 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 not without errors.

Dec

7

“HI HO, HI HO, IT’S OFF TO WORK WE GO!” And even those who have been feeling grumpy about the weak labor market found something to smile about last Friday. The official Jobs Report for November was released – and the improving numbers were a big surprise to the markets.

According to the Labor Department, only 11,000 jobs were lost in November, despite expectations of 125,000 jobs lost. As you can see from the chart below, this marks the least number of jobs lost in nearly two years – since December 2007. Adding to the favorable news, the Unemployment Rate improved to 10.0%, when expectations were for it to remain at the 10.2% level.

While the news was good for the economy and helped Stocks improve sharply, it wasn’t so favorable for Bonds…and as a result, home loan rates moved slightly higher on the news, continuing their worsening trend for the week overall.

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Chart: 2009 Job Growth/Losses (In Thousands)
weekly112309Last Week in Review

In other news, based on early numbers, 195 Million shoppers hit the stores and websites on Black Friday, which was up from last year’s 172 Million. Cyber Monday – the online equivalent of Black Friday – also showed an increase in web shoppers, up by 6% from last year. It appears that the shopping traffic was up, but the dollars-per-shopper may be down a bit. This might be indicative of not only consumers being conservative…but also the fact that with all the deep sales taking place to incent buyers, fewer dollars may be spent to get the very same merchandise as a year ago.

SPEAKING OF THE HOLIDAYS…YOU CAN STILL DECORATE FOR THE HOLIDAYS WITHOUT BREAKING THE BANK. TAKE A LOOK AT THE MORTGAGE MARKET GUIDE VIEW ARTICLE BELOW FOR CREATIVE, COST-EFFECTIVE TIPS FOR SPRUCING UP YOUR HOME THIS SEASON.

Forecast for the Week

The week ahead starts out a bit sleepy in terms of economic reports, with no major releases due until Thursday when the Initial Jobless Claims report and the Balance of Trade report will both arrive.

Friday will bring another shot of economic news when the Retail Sales Report – the most-timely indicator of broad consumer spending patterns – is released. We’ll also get a look at the Consumer Sentiment Index for an updated snapshot of how consumers are feeling about the economy.

In addition to these reports, the markets will be watching the latest round of Treasury auctions. This week’s auctions include longer-term maturities such as 10-year Notes and 30-year Bonds that compete with Mortgage Backed Securities or Mortgage Bonds. So as we’ve been seeing of late, the auctions could cause some volatility, depending on how well they are received.

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.

As you can see in the chart below, Mortgage Bonds hit a high for 2009 on November 27th, but traded lower last week due to financial news and a better-than-expected Jobs Report.

Chart: Fannie Mae 4.5% Mortgage Bond (Friday Dec 04, 2009)
weekly12709

The Mortgage Market View…

Budget-Friendly Decorating Tips

The holiday season is a costly time of year. There are gifts to buy, parties to prepare for, and any number of other miscellaneous expenses. One expense that can really add up is the money put toward holiday decorations. Here are some budget-friendly decorating tips that go easy on your wallet while also making your home look and feel beautiful.

The Nose Knows

We associate the holidays with certain scents. Pine, cinnamon, and cloves seem to top the list. If your family celebrates Christmas, you’ve most likely got the pine part covered with your fresh Christmas tree. If you don’t celebrate Christmas, or if you’re partial to an artificial tree, you can ask your local Christmas tree lot about the branches they’ve trimmed off of trees and have no use for. Freebees like these can be used to adorn mantles, decorate coffee tables, or may be tastefully strewn across a dining room table. They add a splash of color and a fresh pine scent without the presence of a tree.

Regarding the scent of either cinnamon or cloves, there are several ways to achieve it. Two of the easiest and least expensive methods are the use of potpourri and scented oils. Strategically place two or three such items around the house, and you’ll be immediately transported into the holiday mode.

Lighting Is Everything

The good news is that achieving the proper holiday lighting doesn’t require you to purchase any expensive fixtures. Instead, start with candles and lots of them. Candlesticks, votives, tea lights, and pillar candles all have the ability to create mood through incandescence. Candlelit dinners seem to look and taste better, and movie watching in a candlelit room adds ambience to the experience.

The bad news about candles is if you shop for them in the wrong place, you can rack up a hefty bill in no time at all. If you’re thinking about burning a lot of candles this holiday season, it can easily turn into one of those unnecessary expenses. For an array of inexpensive candles, look no further than your local Ikea store. If that’s not a possibility, simply log onto www.ikea.com and browse the nearly 100 different types of candles they have to offer.

Color, Color, Color

The holidays are all about color. If you celebrate Christmas, red, green, and white will serve as your color palate. If Hanukkah is your holiday, it’s all about blue, silver, and white. And if Kwanzaa is your celebration, look no further than red, green, and black. If none of these options work for you, there are always fall colors like brown, orange, and yellow.

Whatever your color choice may be, it is important to incorporate it into every room. Tablecloths and cloth napkins can provide the color in your dining room. In terms of the living room, pillows and throw blankets can serve as your holiday color accents. Even holiday gifts awaiting their opening can be wrapped in the appropriate colored paper. In terms of the rest of your home, be creative. Just make sure to utilize the colors that represent whatever holiday you are celebrating.

The Sound of Music

Music is decoration for the ears. Most of us have some sort of holiday-themed music somewhere in our collection. If not, pick up 3 or 4 compilation CDs that illustrate the holiday you are celebrating or look for 24-hour holiday-themed music stations through your cable or satellite service. Play these (on a lower volume) whenever you have a gathering in your home, or simply feel like getting into the spirit of the season.

But don’t stop there. Genres like soft jazz or classical music are also great to pipe into your living room during your gatherings. They add a soothing sophistication to any holiday event.

With just a little creativity, your home can look, smell, and sound just like you want it to this holiday season…without breaking the piggybank!

The Week’s Economic Indicator Calendar

Remember, as a general rule, weaker than expected economic data is good for rates, while positive data causes rates to rise.
Economic Calendar for the Week of December 07 – December 11
Date ET Economic Report For Estimate Actual Prior Impact
Wed. December 09 10:30 Crude Inventories 12/4 NA 2.09M Moderate
Thu. December 10 08:30 Jobless Claims (Initial) 12/5 NA 457K Moderate
Thu. December 10 08:30 Balance of Trade Nov -$37.1B -$36.5B Moderate
Fri. December 11 08:30 Retail Sales Nov 0.5% 1.4% HIGH
Fri. December 11 08:30 Retail Sales ex-auto Nov 0.5% 0.2% HIGH
Fri. December 11 10:00 Consumer Sentiment Index (UoM) Dec 68.0 67.4 Moderate

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 not without errors.

Contact Curtis Schartz, Certified Mortgage Planner at Pulaski Bank with any questions.
816-347-1678 x-307