Washington All A-Twitter About Financial Reform

Jul

In This Issue

Last Week in Review: Washington has done it again, passing major financial reform legislation. Find out what this will mean for our economy… and the great home loan rates we’ve been seeing.
Forecast for the Week: A double dose of housing news is in store, and earnings season continues with reports from Goldman Sachs, Morgan Stanley, and more.
View: The web is all a “twitter” these days. Find out what the big deal is, and how “tweeting” can help you or your business.
Last Week in Review

They say the only constant is change… And more change is coming, as the sweeping Financial Regulation Bill was passed by the Senate last week and will be signed by President Obama in short order to become law. So what does this change mean… and how will it impact home loan rates? Here’s what you need to know.
The Bill calls for a new consumer protection agency and prohibits Banks from taking risky bets. While those things are important, it’s also important to realize that this legislation… over 2,000 pages worth… amazingly does nothing to address the core reasons for the financial collapse. Fannie Mae and Freddie Mac are completely left out of this legislation. The credit rating agencies, who may have played the largest role in the financial collapse, also go unmentioned.
In fact, when former Fed Chairman Alan Greenspan was asked about the Financial Regulation Bill, he noted that this was the first time the Fed was not asked to write a regulation of this kind. He also said that there are “unintended consequences” in every page of this bill.
And one consequence we’ve seen already is that corporations are hoarding cash, and are somewhat stuck like a deer in the headlights due to the uncertainty that this and other pending legislation is creating. And when corporations hoard cash, they don’t typically hire workers, and job creation is crucial to our recovery.
What all this will mean for our economy and home loan rates remains to be seen… which is why now is the perfect time to act, while home loan rates continue to be some of the best they have ever been! If you or anyone you know would like to learn more about this exceptional opportunity, please don’t hesitate to call or email. Or forward this newsletter on to anyone you think may benefit and I’d be happy to talk to them free of charge.
In other news, there hasn’t been much change on the inflation front, which is good news for Bonds and home loan rates. Remember: inflation erodes the return of an asset like a Bond… so inflation is the arch enemy of Bonds and home loan rates. Both the Producer Price Index – which measures inflation at the wholesale level – and the Consumer Price Index for June showed that inflation continues to remain tame.
However, two changes that would be welcome are in the retail sales and manufacturing areas. Retail Sales for June came in lower than expected for the second month in a row. Although details of the report were mixed, the overall indication is that consumers and businesses remain cautious on purchasing big-ticket items. In addition, the Empire State Manufacturing Index and Philly Fed Index showed that factories and manufacturing still look very sluggish overall. Changes for the better in both of these areas will be reflective of our economy growing stronger, and these are things to watch for moving forward.
All in all, the news from last week helped Bonds and home loan rates reach record levels again, and they ended the week about .125 percent better than where they began.
GROWING YOUR BUSINESS IS ALWAYS CHANGE IN THE RIGHT DIRECTION. CHECK OUT THE MORTGAGE MARKET GUIDE VIEW FOR AN ARTICLE FROM KIPLINGER.COM ON “TWEETING” YOUR WAY TO SUCCESS.
Forecast for the Week

There’s a double dose of housing news this week. Tuesday’s Housing Starts and Building Permits Reports will give us an update on the health of the new construction sector of the housing market, while Thursday we will get a read on Existing Home Sales.
Thursday also brings another Initial Jobless Claims Report, and any changes for the better in this area will be welcome! In fact, last week, the National Federation of Independent Businesses (NFIB) reported that its monthly “Small Business Optimism” index turned weaker in June. This is important to follow, because small businesses represent an important job creation engine – and the NFIB said the decrease was “a very disappointing outcome.”
In addition, earnings season continues this week and some reports to look for include IBM after the markets close Monday, Goldman Sachs before the markets open on Tuesday, and Coca Cola and Morgan Stanley before the markets open on Wednesday.
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 ended the week on an improving trend though they were unable to improve beyond a tough ceiling reflective of their best levels. I’ll be watching closely to see what happens this week.

The Mortgage Market Guide View…

“Tweets” Can Help Grow Your Business
Twitter is spreading like wildfire and companies are using it to boost sales. By Michael Doan, Kiplinger.com
You know Twitter – the social networking and microblogging service that allows people to keep in touch through “tweets” – short snippets of text sent to cell phones, BlackBerrys and PCs.
Businesses are making use of the Web format for marketing, research and customer services. Computer maker Dell sends coupons to its Twitter users. Whole Foods Market offers $25 gift cards as prizes for people who submit the catchiest messages promoting Whole Foods. Other companies send messages to foster community and build loyalty to stores and products. Uncle Sam is a player, too. The Food and Drug Administration uses Twitter to help get out the word about product recalls.
Because most Twitter messages are searchable on the Web, businesses can also use it to track customer comments and answer complaints – even offer immediate help or advice. Among firms closely tuned in to what customers are saying are Southwest Airlines, JetBlue, Comcast and Boingo, which provides Wi-Fi service at airports.
Jeremy Pepper, public relations manager of Boingo, receives and tracks all Twitter messages, blogs and other Web comments that mention the company. If, for example, someone complains to a friend about a weak Wi-Fi signal at Washington Dulles International Airport, he may get an immediate message from Pepper.
In such a case, Pepper says he’ll ask: “‘Where you are sitting…have you thought of moving? Which terminal are you in? Let me check to see if there are problems at the airport,’” he says. Once a problem is resolved, he’ll send a tweet saying he was happy to help and “have a safe flight.”
Quick, helpful responses via Twitter can go a long way to changing customers’ opinions about a firm, even turning detractors into company promoters.
Keep messages informal and conversational. “Being boring is the worst thing you can do,” says Jeffrey Mann, vice president of research at Gartner Group, an information technology research firm. Business tweets should be personalized; you may want to designate one or more employees to twitter on behalf of the company. Keep in mind that Twitter messages – limited to 140 characters each – are seen by people who choose to become “followers” of a business or an individual.
Twitter is a good tool to use at trade shows, helping to draw attendees to exhibitors’ booths as well as press conferences and receptions hosted by a company or trade group. The Oklahoma City Chamber of Commerce, for example, puts out messages about its Schmooza Palooza networking party and trade show before, during and after the event in hopes of spreading buzz about it. Results are good; attendance has grown dramatically.
Twitter is great for small businesses, too, because it’s easy and doesn’t add any expense. The only cost is the employee time it takes to write and follow others’ messages.
Consider registering your company’s name with Twitter, even if you don’t expect to use it. It’ll help prevent misuse by someone else. Go to www.twitter.com.
Reprinted with permission. All Contents ©2010 The Kiplinger Washington Editors. www.kiplinger.com.
Economic Calendar for the Week of July 19-23, 2010
Remember, as a general rule, weaker than expected economic data is good for rates, while positive data causes rates to rise.
Economic Calendar for July 19-23, 2010
Economic Calendar for the Week of July 19 – July 23
Date ET Economic Report For Estimate Actual Prior Impact
Tue. July 20 08:30 Building Permits Jun 575K 574K Moderate
Tue. July 20 08:30 Housing Starts Jun 570K 593K Moderate
Wed. July 21 10:30 Crude Inventories 7/17 NA -5.06M Moderate
Thu. July 22 08:30 Jobless Claims (Initial) 7/17 445K 429K Moderate
Thu. July 22 10:00 Existing Home Sales Jun 5.04M 5.66M Moderate
Thu. July 22 10:00 Index of Leading Econ Ind (LEI) Jun -0.4% 0.4% Low

As your trusted advisor, I am sending you the MMG WEEKLY because I am committed to keeping you updated on the economic events that impact interest rates and how they may affect you.

In the unlikely event that you no longer wish to receive these valuable market updates, please USE THIS LINK or email: curtis@kcmortgageplanner.com

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Certified Mortgage Planner, Curtis Schartz, home, Home loan, Interest Rates, kansas city, lees summit, overland park, Pulaski Bank, purchase, Refinance, shawnee

The Fed is Talking, But Will They Act?

By Curtis Schartz, CMPS

Jun

In This Issue

Last Week in Review: Fed members did a lot of talking…find out what they’re saying and what it means for home loan rates.
Forecast for the Week: Inflation, housing, and manufacturing reports are ahead. Plus, will the Euro show signs of stabilization?
View: Travel safely with these tips from Kiplinger.com on avoiding travel scams.

Last Week in Review

“ACTIONS SPEAK LOUDER THAN WORDS,” or so the popular saying goes. But the words from various Fed members on the actions they feel need to be taken are getting pretty loud. And what could all this potential action mean for home loan rates? Read on to learn more.
There has been growing debate among Fed members about when to begin raising the Fed Funds Rate. What is the Fed Funds Rate? It’s the lending rate banks charge each other for the use of overnight funds, and it is used as a base rate that many other lending rates are based on, for consumer and business loans. A higher Fed Funds Rate tends to slow economic activity, as it means the cost of borrowing to finance a purchase will be higher, while a lower rate helps to stimulate activity, a ripple effect that expands into all sectors of the economy. As you can see in the chart below, the Fed Funds Rate is currently at a range of 0.0-0.25%, and it has been this low for over a year to help stimulate our economy and move us from recession to recovery.
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Fed Funds Rate

If the Fed raises the Fed Funds Rate too soon, it could slow economic activity and cause a “double dip” recession. However, if the Fed waits too long to raise the Fed Funds Rate, inflation could result…and inflation concerns were a big reason for all the Fed chatter last week. Remember, inflation is the arch enemy of Bonds and home loan rates.
With mounting debt in the US and concerns that US debt will overtake GDP by 2012 – as well as the problems in Europe – there are many factors the Fed needs to consider before taking action. For instance, last week Fed Chairman Ben Bernanke said that the Unemployment Rate is likely to remain high for a while and he noted that the Fed “can’t wait until unemployment is where we’d like it to be” before tightening credit, or inflation could too easily get out of control. That said, recent reports like May’s Jobs Report and Retail Sales Report – which showed the first monthly decline since September 2009 – indicate that our economic recovery is still fragile at the moment. This means the Fed won’t want to act too quickly, either.
The next Fed Meeting is June 22-23rd, and while the Fed will most likely not raise the Fed Funds Rate at this time, more and more Fed members are expressing concerns about the current very accommodative monetary policy in place. Although home loan rates are not tied to the Fed Funds Rate, I’ll be watching this situation very carefully as it continues to unfold.
In addition, Bonds and home loan rates have benefitted lately from the situation in Europe, as global investors have sought the safe haven of our US Bonds. However, as the Euro’s freefall is finally showing some signs of stabilization, traders and investors can be very fickle in unwinding or reversing these trades pretty quickly. This could reverse the improvement we’ve seen in home loan rates, and we saw a sign of that last week. Bonds and home loan rates ended the week a bit off their best levels of the week…but are still incredibly low overall.
If you or anyone you know would like to take advantage of the exceptional opportunity that exists in the home loan marketplace at this point in history, please don’t hesitate to call or email. Or forward this newsletter on to anyone you think may benefit as well!
PLANNING A VACATION IS AN ACTION MANY OF US TAKE DURING THE SUMMER. CHECK OUT THE MORTGAGE MARKET GUIDE VIEW BELOW FOR TIPS FROM KIPLINGER FOR AVOIDING TRAVEL SCAMS.
Forecast for the Week

There will be plenty of inflation news for the Fed to gather this week, ahead of its meeting later this month. First, there’s Wednesday’s Producer Price Index, which measures inflation at the wholesale level, which will be followed by Thursday’s Consumer Price Index. As mentioned above, inflation is the arch enemy of Bonds and home loan rates, so it will be important to see what these reports reveal.
Housing, manufacturing, and job news are also in store this week, with Wednesday’s Housing Starts and Building Permits Reports (which give us an update on the health of the new construction sector of the housing market) and Thursday’s Philadelphia Fed Report (which gives us an update on the manufacturing sector).
We’ll also have another weekly Initial Jobless Claims Report. Initial Jobless Claims numbers have remained stubbornly high. The most troubling numbers in last week’s report are the additional 5.13M people claiming EUC (Emergency Unemployment Compensation), which are benefits lasting longer than 26 weeks, up to 99 weeks in total.
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 home loan rates have rallied in the last few months, helped by the uncertainties in Europe. But remember, traders are fickle, and stabilization in Europe could bring an end to this rally. I’ll be watching closely to see what happens this week.
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The Mortgage Market View

Six Travel Scams to Avoid
All of these deals are too good to be true.
By Cameron Huddleston, Kiplinger.com
The summer travel season is almost here. If you’re looking for deals, make sure you don’t become the victim of a scam when trying to score a bargain. I spoke with SmarterTravel.com contributing editor Ed Perkins to find out which scams are most common and what you can do to avoid them. Here’s his list:
1. Phony airline tickets
How it works: A Web site or travel agency offers a deal better than anyone else’s, won’t accept credit cards and instead demands direct transfer of funds. What you get is a plane ticket that’s worthless.
How you can avoid this scam: Don’t deal with an outfit you’ve never heard of. See our list of the 28 best travel sites for legitimate companies. Don’t purchase airline tickets or any travel accommodations through a group that won’t accept a credit card. If you have a dispute with a merchant — for example, you were sold a phony plane ticket — you may have an easier time working out a solution if you paid with a credit card.
2. Pay now for future travel
How it works: You’re approached to enroll in a club that will enable you to take future vacations for an upfront fee of thousands to tens of thousands of dollars. After enrolling, you try to book a vacation but are told that the location or time period you want is unavailable. Then you might be asked for more money to gain access to more upscale spots that would be available.
How to avoid this scam: Unless you know someone who participates in a particular program and is happy with the service, stay away from these clubs. Even if your friend recommends a club, do some research of your own. See Resources to Help You Check Out a Company.
3. Travel like a travel agent
How it works: You receive a promotion in the mail or e-mail telling you that you can travel like a travel agent or sell travel from your home. The group purports to be a large travel agency that will provide back-office support while you sell travel packages. For a fee (usually $495 or $4,900), you’ll receive training and a travel agent ID card that you can use when making reservations to get a special rate.
How to avoid this scam: “There’s hardly an airline or hotel that doesn’t know about these phony IDs,” Perkins says. Even legitimate travel agents have a tough time getting discounts on airfare. Toss the promotion in the trash or hit “delete.”
4. No-ticket event packages
How it works: A tour operator offers a package for a big event, such as the Super Bowl, but doesn’t actually have tickets to the event.
How to avoid this scam: Ask the tour operator if it has event tickets in hand. Of course, the representative could lie. So it’s best to buy through an organization you know.
5. Phony insurance
How it works: A travel agent sells you a “protection plan” that’s supposed to reimburse you if you have to cancel your trip. The policy, however, is unlicensed and you won’t get your money back.
How to avoid this scam: Make sure the product you’re being sold really is a licensed insurance policy. You can see a list of licensed travel insurance companies at the U.S. Travel Insurance Association site. See The Case for Travel Insurance to learn more about what travel insurance covers. You can compare policies at InsureMyTrip.com.
6. “We will sell your timeshare”
How it works: Groups charge an upfront fee to sell your unwanted timeshare. “The bottom line is they don’t,” Perkins says.
How to avoid this scam: Avoid any group that promises to sell your timeshare for a fee (other than cheap listing fee). If you have a timeshare you just can’t unload, consider posting on Craigslist with an offer to give away your timeshare for free to anyone who will take over the commitment.
Reprinted with permission. All Contents © 2010 The Kiplinger Washington Editors. www.kiplinger.com.
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Economic Calendar for the Week of June 14 – June 18
Date ET Economic Report For Estimate Actual Prior Impact
Tue. June 15 08:30 Empire State Index Jun 20.0 19.11 Moderate
Wed. June 16 10:30 Crude Inventories 6/12 NA -1.83M Moderate
Wed. June 16 09:15 Industrial Production May 0.7% 0.8% Moderate
Wed. June 16 09:15 Capacity Utilization May 74.2% 73.7% Moderate
Wed. June 16 08:30 Producer Price Index (PPI) May -0.4% -0.1% Moderate
Wed. June 16 08:30 Core Producer Price Index (PPI) May 0.1% 0.2% Moderate
Wed. June 16 08:30 Building Permits May 655K 610K Moderate
Wed. June 16 08:00 Housing Starts May 655K 672K Moderate
Thu. June 17 08:30 Jobless Claims (Initial) 6/12 NA 431K Moderate
Thu. June 17 08:30 Consumer Price Index (CPI) May -0.1% -0.1% HIGH
Thu. June 17 08:30 Core Consumer Price Index (CPI) May 0.1% 0.0% HIGH
Thu. June 17 10:00 Index of Leading Econ Ind (LEI) May 0.4% -0.1% Low
Thu. June 17 10:00 Philadelphia Fed Index Jun 17.0 21.4 HIGH

As your trusted advisor, I am sending you the MMG WEEKLY because I am committed to keeping you updated on the economic events that impact interest rates and how they may affect you.

In the unlikely event that you no longer wish to receive these valuable market updates, please USE THIS LINK or email: curtis@kcmortgageplanner.com

If you prefer to send your removal request by mail the address is:

Curtis Schartz, Certified Mortgage Planner, Pulaski Bank Home Lending, Overland Park, Kansas City, Lee’s Summit, Olathe, Leawood, Lenexa, Independence, Liberty, Parkville, Gladstone, Shawnee.

Retail Sales Spring Forward

By Curtis Schartz, CMPS

Mar

Last Week in Review

“IF WE HAD NO WINTER…THE SPRING WOULD NOT BE SO PLEASANT.” 17th-Century poet Anne Bradstreet’s words ring true not only for the seasons, but also for last week’s Retail Sales numbers. Just days before Sunday’s “spring forward” into Daylight Savings Time, the retail sector looked to be unfreezing and showing at least a little spring in its step.

As you can see in the chart below, Retail Sales for February were reported last Friday at 0.3%, which was better than the previous month’s reading and much better than the -0.2% expected. Despite the good news, however, we need to keep in mind that it will be subject to future revisions – just like we saw in Friday’s report, in which last month’s decent 0.5% reading was revised sharply lower to just 0.1%.

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Chart: Retail Sales (Month-Over-Month)

The better-than-expected Retail Sales was good news for the economy, but it could also lead to inflation trouble ahead. Remember, inflation is the archenemy of Bonds. Just last week, fears of inflation in China pressured Bonds around the globe. And here in the US, a number of Fed members have already mentioned inflation as an increasing concern.

And it isn’t just Fed officials who have been warning against inflation; investors around the globe are having increased doubts. Massive debt and massive balance sheet expansion – combined with near zero interest rates for a long period of time – will no doubt conjure a recipe for inflation.

The question is this: Once inflation rears its ugly head…will the Fed have the courage and the will to kill the monster by tightening policy, amidst enormous political pressure not to do so? As you’ll see in the Forecast section below, the next Fed meeting is taking place this week, and the Policy Statement released on Tuesday will garner intense scrutiny.

WHILE THE ECONOMY HAS BEEN SHOWING SOME SIGNS OF RECOVERY LATELY, MANY FOLKS STILL NEED HELP IMPROVING THEIR OWN FINANCIAL PICTURES. CHECK OUT THE MORTGAGE MARKET GUIDE VIEW ARTICLE BELOW FOR A VIDEO FEATURING FIVE WAYS TO GET OUT DEBT FASTER.

Forecast for the Week

There’s a lot of news on tap for this week, starting off right away Monday with the Empire State Index, Industrial Production and Capacity Utilization. These reports will give us a look at the manufacturing sector – and any bad news could certainly shake up the markets.

We’ll also see an update on the health of the new construction sector of the housing market, with reports on Building Permits and Housing Starts coming on Tuesday.

Perhaps the biggest news of the week will be the inflation news carried in the Producer Price Index on Wednesday and the Consumer Price Index on Thursday. As stated above and in the chart below, hints of inflation fears have the potential to negatively impact the markets – and can quickly drive Bond prices lower and home loan rates higher. The news from these reports will be even more interesting, since they come just after the Fed’s Monetary Policy and Fed Funds Rate decision on Tuesday…and many members of the Fed have lately been expressing their growing concerns about inflation. The Policy Statement following the Fed meeting is always dissected carefully – but with the rising fears of the inflation genie escaping the bottle, this Statement takes on even more significance.

Remember: Overall, 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, inflation fears pushed Mortgage Bonds below two key technical levels last week…and those levels now may become “ceilings of resistance” for Bonds, making it harder for them to improve.

Chart: Fannie Mae 4.5% Mortgage Bond (Friday Mar 12, 2010)

The Mortgage Market View…

5 Ways to Get Out of Debt Faster

Making smart choices with your money is always a good idea, but it’s especially important if you are working to become debt free. Check out this video from www.Kiplinger.com for 5 ways to get out of debt faster.

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 March 15 – March 19
Date ET Economic Report For Estimate Actual Prior Impact
Mon. March 15 08:30 Empire State Index Mar 23.45 24.91 Moderate
Mon. March 15 09:15 Capacity Utilization Feb 72.3% 72.6% Moderate
Mon. March 15 09:15 Industrial Production Feb 0.0% 0.9% Moderate
Tue. March 16 08:30 Building Permits Feb 602K 622K Moderate
Tue. March 16 08:30 Housing Starts Feb 570K 591K Moderate
Tue. March 16 02:15 FOMC Meeting .25% .25% HIGH
Wed. March 17 10:30 Crude Inventories 3/13 NA 1.43M Moderate
Wed. March 17 08:30 Producer Price Index (PPI) Feb -0.2% 1.4% Moderate
Wed. March 17 08:30 Core Producer Price Index (PPI) Feb 0.1% 0.3% Moderate
Thu. March 18 08:30 Core Consumer Price Index (CPI) Feb 0.1% 0.2% HIGH
Thu. March 18 08:15 Consumer Price Index (CPI) Feb 0.1% 0.2% Moderate
Thu. March 18 08:30 Jobless Claims (Initial) 3/13 450K 462K Moderate
Thu. March 18 10:00 Index of Leading Econ Ind (LEI) Feb 0.2% 0.3% Low
Thu. March 18 10:00 Philadelphia Fed Index Mar 18.0 17.6 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.
As your trusted advisor, I am sending you the MMG WEEKLY because I am committed to keeping you updated on the economic events that impact interest rates and how they may affect you.
In the unlikely event that you no longer wish to receive these valuable market updates, please USE THIS LINK or email: curtis@kcmortgageplanner.com
If you prefer to send your removal request by mail the address is:

Curtis Schartz, Certified Mortgage Planner for Pulaski Bank Home Lending, Overland Park, Kansas City, Leawood, Lees Summit, Lenexa, Olathe, Shawnee, Blue Springs, Liberty, Parkville, Gladstone, Independence.

Millions Still Seeking Nine to Five

By Curtis Schartz, CMPS

Mar

Last Week in Review

“WORKIN’ NINE TO FIVE – WHAT A WAY TO MAKE A LIVIN’…” Dolly Parton. But full time employment is nothing to gripe about these days – last week’s Jobs Report showed that there are millions of people who would love to be working full time…or even working at all. The labor market continues to struggle, though it has shown improvement from its worst levels.

As you can see in the chart below, the Jobs Report for February showed 36,000 jobs lost in February, which was better than the 68,000+ job losses that were expected. Adding to the positive tone of the report were upward revisions to the prior two month’s reports showing 35,000 fewer jobs lost. However – helping the numbers were 15,000 temporary census worker hires made by the government. Without these, actual job losses would have exceeded 50,000 for February.

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Chart: Nonfarm Payrolls

Additionally, the Unemployment Rate remained at 9.7%, better than expectations of a rise to 9.8%. But a deeper look beyond the headlines of the report showed what many consider to be the Real Unemployment Rate to be at 16.8%, a rise from last month’s 16.5%.

This rate includes both discouraged workers – those who are no longer seeking work at this time – and those who are working part-time that would rather be “workin’ nine to five” with full time employment, but are forced to accept part time out of necessity to earn whatever they can. And just last month, another nearly 500,000 people accepted part time work, citing economic reasons for doing so.

In related news, Productivity rose by 6.9% during the Fourth quarter of 2009, up from the previous reading of 6.2%. This is an encouraging report, because during an economic recovery, it is normal to see a pick up in productivity before seeing fresh job creations. Think about it – companies may start to see their business pick up, but before making the commitment of hiring new workers, they will squeeze more productivity out of their present staff. Job creations may be coming – but it appears that the labor market recovery will be slow going.

Bonds attempted to rally through the week, but ultimately, improvements in Stocks and positive economic news caused Bonds and home loan rates to end the week around the same levels as where they began.

ALERT! Two important deadlines are on the horizon: the Fed will stop buying Mortgage Backed Securities at the end of March (which means home loan rates may soon be on the rise), and the Homebuyer’s Tax Credit is due to expire on April 30. If you or any of your friends, family members, neighbors or colleagues want to learn more about how you can benefit from the current situation, give me a call or email – I’d be happy to explain more about the opportunity at hand.

WHILE THE LABOR MARKET HAS BEEN STRUGGLING FOR AWHILE, THE GOOD NEWS IS THAT CERTAIN CAREER PATHS ARE DEFINITELY ON THE RISE! CHECK OUT THIS WEEK’S MORTGAGE MARKET GUIDE VIEW FOR MORE DETAILS.

Forecast for the Week

It will be a quiet week when it comes to economic reports, but with the healthcare debate heating up in Washington and the Fed’s Mortgage Backed Securities Purchase program winding down, there are still plenty of events that could impact the markets and home loan rates.

On the economic report front, Thursday brings another Initial Jobless Claims Report. Last week’s Initial Jobless Claims met expectations, but the big news was that the report showed 5.7M people claiming EUC (Emergency Unemployment Compensation) benefits, which was an increase of over 207,000 from the prior week.

On tap for Friday is the Retail Sales Report, and as the most-timely indicator of broad consumer spending patterns, it is important to see how the numbers come in. In fact, last week’s Personal Consumption Expenditure report revealed that during January, consumers made less, saved less and spent more – but it remains to be seen if the increase in spending will show up in the Retail Sales Data.

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 made some improvements during the week, but the gains were capped by a rally in Stocks and positive economic data. I’ll be watching closely as always during the coming week – and please feel free to contact me anytime to learn more, or discuss your own financial and home loan situation.

Chart: Fannie Mae 4.5% Mortgage Bond (Friday Mar 05, 2010)

The Mortgage Market View…

5 Careers You May Not Have Considered…But Perhaps Should!

In the wake of last week’s employment news, now is an ideal time to take a look at careers that are expected to grow in the coming months and years. Recently, US News & World Report released the results of its study on the Best Careers in 2010. The good news is there are a lot of jobs that are on the rise – including a number of careers that many people may not have considered.

If you or someone you know is looking to make a career move in today’s challenging work environment, here are 5 careers to consider.

Meeting Planner

Overview: Despite the economic downturn, companies still need to do business…and often that means bringing people together from around the country and the world. According to US News & World Report, the need for meeting planners is expected to grow 16% by 2018.

Education and training: To get a career as a meeting planner, you’ll probably need a bachelor’s degree. But the good news is that US News & World Report found that real-world experience “may be the most important factor in getting a job.”

Security System Installer

Overview: This job entails installing security and fire alarm systems. In addition to dealing with electronics, installers are also expected to deal with local building codes, blueprints, and even clients and homeowners. As US News & World Report stated, from 2008 to 2018, the opportunities in this field are expected to climb 25%.

Education and training: While some employers may want an associate’s degree or work experience, the good news is that a number of employers will train on the job. Candidates, of course, should have an interest and basic understanding of electronics.

Plumber

Overview: Think about it. Every home and every building needs a plumber when it’s built…not to mention down the road if water problems are encountered. Combine that with the fact that many of today’s plumbers will likely retire in the next 10 years, and it’s easy to see why this career is expected to grow more than 15% before 2018.

Education and training: If you’re interested in a career as a plumber, you have a few options. You can enroll in technical or community college – or look for employers who are willing to provide on-the-job training. Finally, you can enroll in an apprenticeship program that combines classroom and on-the-job training.

Firefighter

Overview: The good news is that the need for firefighters is expected to increase about 19% according to US News & World Report. The flip side is that there will probably be a lot of competition for those jobs, since the job provides stable work with a pension.

Education and training: If you’re in the right place at the right time, you can get a job as a firefighter with only a high school degree. But, with the competition mentioned above, you’ll have a better chance with additional training and education – such as an associate’s degree, EMT training, or a college degree.

Technical Writer

Overview: If you’ve ever read a how-to manual or operating instructions, you already have some idea of what technical writers do for a living. As you might imagine, the job requires you to understand and translate complex ideas and information. However, you may not have imagined that technical writing isn’t just limited to writing. Today’s technical writers often deal with graphic design, video, and multimedia software to communicate complex ideas. If these aspects sound good to you, this may be a field worth considering – especially with an expected job growth of 18% before 2018.

Education and training: For this job, you’ll need a college degree. But you don’t necessarily need a degree in journalism or technical writing (although, it would help). The reality is that technical writers can specialize in fields such as business, science, and engineering. So if you have a degree in one of those fields and if you’re good at communicating complex ideas, you may already be qualified. An interest and experience in multimedia software as well as a course or an online certificate in technical communication can help increase your chances of landing a job.

Those are just 5 of the jobs identified by US News & World Report as the best careers for 2010. If they don’t suit your interests, you may want to take a look at the entire list on the US News & World Report website. Then, take steps to transition to your new career.

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 March 08 – March 12
Date ET Economic Report For Estimate Actual Prior Impact
Wed. March 10 10:30 Crude Inventories 3/6 NA 4.03M Moderate
Thu. March 11 08:30 Jobless Claims (Initial) 3/6 NA 469K Moderate
Thu. March 11 08:30 Balance of Trade Jan -$40.8B -$40.2B Moderate
Fri. March 12 08:30 Retail Sales Feb -0.1% 0.5% HIGH
Fri. March 12 08:30 Retail Sales ex-auto Feb 0.0% 0.6% HIGH
Fri. March 12 10:00 Consumer Sentiment Index (UoM) Mar 73.8 73.6 Moderate

Curtis Schartz, Pulaski Bank Home Lending, Lees Summit, Overland Park, Kansas City, Olathe, Parkville, Liberty, Shawnee, Leawood, Lenexa.

Weekly Update Special Video View

By Curtis Schartz, CMPS

Feb

Last Week in Review

“OPINION HAS CAUSED MORE TROUBLE ON THIS LITTLE EARTH THAN PLAGUES…” Voltaire. And lately, there have been a lot of opinions about inflation being voiced from Fed officials, respected economists, and the media. But what does all this talk really mean for our economy and home loan rates? Here’s what you need to know.

On Friday, the Consumer Price Index (CPI), which measures the prices US consumers pay, came in lower than expected for January. The chart below shows the year-over-year headline CPI at 2.6%, below expectations of 2.8%. What’s more, when volatile food and energy are removed from the equation, the “Core” Consumer Price Index was actually negative – and the last time that happened was 28 years ago.

———————–
Chart: Consumer Price Index
weeklychart1182010

So, if the CPI Report shows that inflation is currently non-existent, why are so many people expressing concern? The reality is that the factors which are currently restraining inflation pressures could easily swing the other way.

In fact, Kansas City Fed President Thomas Hoenig recently said, “Fiscal policy is on an unsustainable course. The US Government must make adjustments in its spending and tax programs. It is that simple. If pre-emptive corrective action is not taken regarding the fiscal outlook, then the United States risks precipitating its own next crisis.” And part of the crisis Mr. Hoenig is warning of is the possibility of hyperinflation, which occurs when prices rise so quickly that a currency becomes worthless.

Hoenig recently reminded us that he has a framed picture of a 500,000 German mark bill in his office…which would have purchased a home in 1921, but due to sudden inflation, wouldn’t purchase a loaf of bread just two years later. Adding to the inflation talk, recent Produce Price Index Reports, which measure inflation at the wholesale level, have shown a trend higher in wholesale inflation. January’s report, for example, was significantly higher than expected, due to rising energy costs.

Also chiming in with an opinion, Philadelphia Fed President Charles Plosser made some interesting comments regarding monetary policy and sales of assets that the Fed currently owns. Mr. Plosser stated that the Fed should begin to sell off their stockpile of Mortgage Backed Securities (MBS) as the economic recovery gains strength. With the Fed MBS buying program ending soon, and the Fed now potentially turning into a seller of MBS, Bond prices and home loan rates will very likely worsen over time. (More on this in the special “Video View” below…don’t miss it!)

In other news, the Empire State Manufacturing Index came in higher than expected and up from January’s reading. The report also showed business activity picking up and business leaders forecasting better economic conditions in the coming months. In addition, Housing Starts for January came in better than expected and at the highest level since July, thanks in large part to the extension of the Homebuyer Tax Credit.

Bond prices were unable to improve after falling below an important technical level this week, and as a result, home loan rates ended the week worse than where they began.

MANY PEOPLE ARE ASKING FOR OPINIONS ABOUT WHERE HOME LOAN RATES ARE HEADED…AND WHY. CHECK OUT THIS WEEK’S MORTGAGE MARKET GUIDE VIEW FOR A SPECIAL VIDEO THAT EXPLAINS HOW AND WHY HOME LOAN RATES MOVE…AND WHAT IT MEANS RIGHT NOW.

Forecast for the Week

While it’s hard to say what opinions might be uttered this week, there will definitely be plenty of news in store.

We’ll get a look at the housing market with Wednesday’s New Home Sales Report and Friday’s Existing Home Sales Report. It will be interesting to see if these reports are looking more positive, as many buyers are working to take advantage of the Homebuyer’s Tax Credit before it expires this spring. If you want to learn more about this Tax Credit and how it might help you or someone you know – don’t hesitate to get in touch with me, I can share all the details and important timelines.

Also this week, we’ll get several reads on the health of the economy with Thursday’s Durable Goods Report – which gives us an update on consumer and business buying behavior on big ticket items that last for an extended period of time – and Friday’s Gross Domestic Product Report, which is the broadest measure of economic activity.

Tuesday’s Consumer Confidence Report and Thursday’s Initial Jobless Claims Report will also be important to watch. Last week’s Initial Jobless Claims and Continuing Claims numbers were higher than expected, showing that the labor market is still struggling. The bottom line is that while some of the recent economic reports have had encouraging signs, the economy needs to create jobs and regain consumer confidence before any positive opinions on the economy will become reality.

And as if it won’t be a week jam packed full of opinions already, Fed Chairman Ben Bernanke will be weighing in with some thoughts of his own, as he testifies before Congress on Wednesday and Thursday.

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 ended the week below an important technical level. I’ll be watching closely to see if Bonds can reverse course and move higher this week, which would result in an improvement for home loan rates.

Chart: Fannie Mae 4.5% Mortgage Bond (Friday Feb 19, 2010)
weeklychart22210

The Mortgage Market View…

Rates May Be Headed Up Soon…But Why?

You’ve heard a lot over the last several months about historically low home loan rates…but lately, you’ve probably been hearing the buzz that interest rates may be heading up in the near future, due in part to the Fed ending their purchases of Mortgage Backed Securities.

All of this begs the question: How and why do rates move…and what is happening right now?

The answer involves a number of factors and can seem complex. But it doesn’t have to be!

To help you understand how interest rates move, take a look at this easy to understand video. You’ll learn what the Fed has been doing to keep rates low, as well as the connection between interest rates and Mortgage Backed Securities.

Take a look at the following video now for an easy explanation:

How Rates Move – and What it Means Right Now

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 February 22 – February 26
Date ET Economic Report For Estimate Actual Prior Impact
Tue. February 23 10:00 Consumer Confidence Feb 55.0 55.9 Moderate
Wed. February 24 10:30 Crude Inventories 2/19 NA 3.08M Moderate
Wed. February 24 10:00 New Home Sales Jan 355K 342K Moderate
Thu. February 25 08:30 Jobless Claims (Initial) 2/20 460K 473K Moderate
Thu. February 25 08:30 Durable Goods Orders Jan 1.5% 0.3% Moderate
Fri. February 26 08:30 Gross Domestic Product (GDP) Q4 5.3% 5.7% HIGH
Fri. February 26 09:45 Chicago PMI Feb 59.0 61.5 Moderate
Fri. February 26 10:00 Consumer Sentiment Index (UoM) Feb 74.0 73.7 Moderate
Fri. February 26 10:00 Existing Home Sales Jan 5.50M 5.45M Moderate
Fri. February 26 08:30 GDP Chain Deflator Q4 0.6% 0.6% HIGH

Curtis Schartz, Certified Mortgage Planner, Pulaski Bank Home Lending, Lees Summit, Overland Park, Kansas City.

Fed Bond Buying Slows Rates will begin to increase

By Curtis Schartz, CMPS

Feb

Last Week in Review

“IT AIN’T OVER TIL IT’S OVER.” Yogi Berra. And whether you find those words deeply wise or simply puzzling…The Fed has told us repeatedly that their massive purchasing program of Mortgage Backed Securities is just about over – and this translates to home loan rates rising in the near future.

As you can see in the chart below, the amounts of Mortgage Backed Securities the Fed is purchasing are slowly dwindling, as the program is set to wrap up by March 31st, and are clearly trying to ration out the remaining portion. Last week, the Fed purchased $11 Billion in Mortgage Backed Securities, which leaves them with $66 Billion to spend out of their original $1.25 Trillion allotment. So about 95% of the total has already been spent and has purchased about 3 out of every 4 home loans during the past year. When such a large buyer leaves the market, it is very likely that prices will worsen.

This is very important because as the Fed has less money to last through the remaining months of the program, their ability to keep home loan rates low via their purchasing power will wane. And those who can take advantage of currently low home loan rates do not wait, as the clock on these historically low rates is ticking.

———————–
Chart: The Fed’s Purchase of MBS (By Month)
weeklychart1182010

Also last week, Fed Chairman Ben Bernanke provided a speech on a number of topics, perhaps the most important of these being switching the Fed’s benchmark from the commonly watched and monitored Fed Funds Rate, to a new benchmark of “interest paid on excess reserves”. Banks are required to keep money on reserve with the Fed and may, from time to time, have an excess in those reserves, which the Fed can pay interest on. Since the Fed Funds Rate is only a “target rate”, banks can still lend money to other bank overnight at their own negotiated rate. Sometimes near the end of the trading day, banks have been lending their excess reserves out overnight for a rate that differs from the Fed Funds Rate, but is higher than interest on those reserves from The Fed. This undermines the Fed’s ability to set a reliable benchmark.

The Fed wants to fix this by using the amount of interest they pay as the new benchmark, since the Fed has total control of this rate, which should be right at or just under the Fed Funds Rate.

There is one major take-away from this discussion – it appears that the Fed is getting their ducks in a row as they prepare to push interest rates higher. And when they do increase rates, the Fed does not want any obstacles that may undermine their plan.

AND SPEAKING OF OBSTACLES THAT COULD CAUSE PROBLEMS…WATER DAMAGE CAN WREAK HAVOC ON YOUR HOME AND YOUR FINANCES, AND IS ESPECIALLY IMPORTANT TO WATCH OUT FOR DURING COLD WINTER MONTHS. CHECK OUT THE MORTGAGE MARKET VIEW ARTICLE BELOW FOR TIPS ON PROTECTING YOUR HOME!

Forecast for the Week

The financial markets will be closed on Monday in observance of Presidents Day, and in terms of economic reports, there won’t be much action until midweek. On Wednesday, we’ll get a look at the health of the housing industry with reports on Housing Starts and Building Permits for January.

It will be interesting to watch the housing reports over the next several months, as many people are acting to take advantage of currently low home loan rates that may be on the rise soon, as well as the potential of a juicy tax credit. Remember – the Homebuyers Tax Credit is only available on homes purchased with a contract date before April 30th, and the transaction must settle by June 30th.

We’ll also get an update on inflation this Thursday, as the Producer Price Index will be released. This index measures price changes for wholesalers, and prefaces the more important Consumer Price Index coming on Friday, which measures changes in the price paid by consumers for goods and services. These reports are both particularly important, as the Fed will be watching very carefully for any signs of inflation. If inflation begins to rise, the Fed will have no choice but to begin to hike rates to fight off the dangers that inflation could pose to our economy.

In addition to those reports, we’ll get our weekly look at employment through the Initial Jobless Claims data. Last week’s report showed some encouraging signs, but there is still a long way to go before we’ll see stabilization in the Unemployment Rate and some meaningful job creation. At the moment, 6.3 Million people remain unemployed for over six months – an increase of 5 million since the start of the recession in December of 2007. To reach the White House’s projection of a 6% unemployment rate by 2015, the US would need to create 225,000 jobs per month, every month, for the next five years. But that kind of long term job growth has never been seen before. The year 2006, was the only year in US history that had job gains average over 225,000. But that was for just a single year – doing it for five years may be too much of a stretch.

Remember: Weak economic news normally causes money to flow out of Stocks and into Bonds, helping Bond prices and home loan rates improve, while strong economic news normally has the opposite result.

As you can see in the chart below, Bond prices fell early last week due to weak results from the Treasury auctions, but were able to rally towards the end of the week. When Bond prices are moving higher, home loan rates are improving – so I’ll be watching out to see if the current ground can be held. If you have any questions about how home loan rates move – and if an opportunity exists that would benefit you – please don’t hesitate to call or email me.

Chart: Fannie Mae 4.5% Mortgage Bond (Friday Feb 12, 2010)
weeklychart21510

The Mortgage Market View…

Keeping Your Home Safe from Water Damage

Preventing water damage in your home is important at any time of year, but particularly in the winter when the cold weather can wreak havoc on plumbing. Here are some tips to make sure your water bill is as low as it should be…and that your home is as safe and dry as it needs to be:

Pay attention to your bill: Major fluctuations in water usage from one month to the next could mean that you have a problem. Taking just a few minutes to look at your bill each month could make a big difference in your wallet!

Inspect appliances: While much of your home’s plumbing can be hidden behind walls and cabinets, most of your appliances that use water can be easily inspected for potential leaks. Each month, take the time to inspect areas around your water heater, dishwasher, refrigerator, washing machine, sinks, and toilets. If any hoses or seals appear old or damaged, replace them. Also, inspect and repair obvious caulking and tile grout damage. It’s a small price to pay for what could be expensive repairs later.

Inspect the sewer line: Clear away build-up and roots from around your sewer line. Obstructions in this area could create major plumbing problems in the future.

Check your water pressure annually: This is easier than it sounds. Simply purchase a pressure gauge and attach it to the hose faucet. Normal results should range from 45 to 65 pounds per square inch (psi). A reading above 65 psi is considered high and could lead to problems down the line.

Find and fix leaks quickly: Make a habit of checking the main fixtures regularly so that when something out of the ordinary occurs you will notice it and take action immediately. Sometimes, however, slow water leaks aren’t very obvious. A great way to discover hidden leaks is to look for stains in areas where water is often used. For example, if you see even small stains on the cabinet floors beneath the sink in the kitchen or bathrooms, you could have a problem. Warm spots in the floor or tiles could also be an indication of hidden water damage.

Before a vacation: The worst thing to come home to after a great vacation is major water damage. Consider turning off your water while you’re gone. For many homeowners there is a separate shut-off valve for the home that doesn’t affect your irrigation system.

The bottom line is that a little time and effort can make a big difference when it comes to keeping your home safe and dry, and your expenses at a minimum!

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 February 15 – February 19
Date ET Economic Report For Estimate Actual Prior Impact
Wed. February 17 08:30 Building Permits Jan 615K 653K Moderate
Wed. February 17 02:00 FOMC Minutes 1/27 HIGH
Wed. February 17 09:15 Industrial Production Jan 0.8% 0.6% Moderate
Wed. February 17 09:15 Capacity Utilization Jan 72.6% 72.0% Moderate
Wed. February 17 08:30 Housing Starts Jan 580K 557K Moderate
Thu. February 18 08:30 Producer Price Index (PPI) Jan 0.8% 0.2% Moderate
Thu. February 18 08:30 Core Producer Price Index (PPI) Jan 0.1% 0.0% Moderate
Thu. February 18 10:00 Index of Leading Econ Ind (LEI) Jan 0.5% 1.1% Moderate
Thu. February 18 10:00 Philadelphia Fed Index Feb 17.0 15.2 HIGH
Thu. February 18 08:30 Jobless Claims (Initial) 2/13 430K 440K Moderate
Fri. February 19 08:30 Consumer Price Index (CPI) Jan 0.3% 0.1% HIGH
Fri. February 19 08:30 Core Consumer Price Index (CPI) Jan 0.2% 0.1% HIGH

Curtis Schartz, Certified Mortgage Planner, Pulaski Bank Home Lending, Lees Summit, Overland Park, Kansas City, Olathe, Leawood, Liberty

World News Brings New Perspective

By Curtis Schartz, CMPS

Jan

Last Week in Review

“WHAT DO WE LIVE FOR, IF IT IS NOT TO MAKE LIFE LESS DIFFICULT FOR EACH OTHER?” George Eliot. The current crisis in Haiti certainly puts this sentiment into perspective. For information on how you can help, see the View article below.

Last week it was reported that the inflation measuring Consumer Price Index (CPI) for December came in lower than expected. Overall, CPI for all of 2009 was fairly tame. But as you can see in the chart below, the closely watched Core CPI, which strips out volatile food and energy, rose to 1.8% year-over-year in December after hitting a multi-year low of 1.4% in August.

———————–
Chart: Core Consumer Price Index
weeklychart1410

So what does this mean for Bonds and home loan rates?

Clearly, inflation is tame at the moment…but slowly trending higher. The Fed will be watching this data very carefully in the coming months, as they seek to time perfectly the exit from what is essentially a zero rate environment. The Fed will likely err on the side of keeping the Fed Funds Rate lower for longer than they perhaps should, in order to avoid a “double dip” recession…but that will likely lead to more inflation down the road. Remember, Bonds and home loan rates hate inflation – so home loan rates are likely to trend higher as more inflation creeps into the economy.

Speaking of the Fed, they stepped up their Mortgage Backed Security (MBS) buying in the latest week, purchasing $14B in MBS, whereas the most recent prior purchases were around $9.5B. The Fed now has $113B left of their $1.25T allotted commitment, with the buying program set to wrap up on March 31st. The Fed’s purchases have helped home loan rates stay historically low – and although there has been some buzz about an extension of the program, it seems unlikely that will come to fruition. When the Fed purchases stop, home loan rates will be very susceptible to moving higher – so if we have not talked yet about your own home loan situation, or if you know of a friend, family member, neighbor or coworker who might like some advice, let’s be sure to connect very soon…time is of the essence.

The next Federal Reserve Policy Statement will be coming on January 27th, and they have gone out of their way to mention in the last several statements that the MBS buying program will not continue. Count on me to be listening closely when the Fed releases this next Statement, as this will help further gauge what home loan rates have in store.

In other news, Retail Sales for December came in well below expectations and were down from the 1.8% increase seen in November. While this suggests weakness in the Retail sector, it has to be taken with a grain of salt, as it is likely that frigid temperatures and snowy conditions throughout much of the country were contributing factors to the decline. Overall, 2009 was a very tough year for retail. Retail Sales for 2009 dropped 6.2% compared with 2008, which was the biggest decline on record, dating back to 1992.

There was some good news, however, on the manufacturing front, as the Empire State Manufacturing Index was reported above estimates, indicating manufacturing expansion in New York state and parts of New Jersey and Connecticut.

For the week overall Bonds were able to break above important technical levels, and home loan rates ended the week slightly better than where they began.

Forecast for the Week

The markets will be closed on Monday in observance of the Martin Luther King, Jr. holiday, but plenty of news will follow later in the week. Wednesday brings more news from the inflation front, with the Producer Price Index (PPI) Report, which measures inflation at the wholesale level. Wednesday will also bring a read on the housing market, with the Housing Starts and Building Permits Report.

There’s also more manufacturing news ahead on Thursday with the Philadelphia Fed Report. Also in store for Thursday is another look at the weekly Initial Jobless Claims Report…so it’s sure to be an interesting week, with a variety of data for the markets to absorb.

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 home loan rates improved last week, largely due to tame inflation numbers and a decline in Stocks. In fact, Bonds were actually able to power through a tough technical “ceiling of resistance” at the 200-day Moving Average…but it remains to be seen if they will hold their gains. I’ll be watching closely to see if Bonds and home loan rates can build on their positive momentum in the coming week.

Chart: Fannie Mae 4.5% Mortgage Bond (Friday Jan 15, 2010)
weeklychart1182010

The Mortgage Market View…

A Helping Hand for Haiti

The catastrophe in Haiti cries out for all of us to do whatever we can to help. But many of us aren’t sure exactly how to help or which organization to entrust with a donation.

To help you make sure your donation makes as big a difference as possible, consider donating to AmeriCares, which is one of the many fine organizations helping Haiti through disaster relief. AmeriCares is in the business of disaster relief and has an extensive network on the ground in Haiti, so your money will go to get supplies directly to those stricken instead of setting up infrastructure. You can learn more about them and donate at http://www.americares.org.

Obviously, the current economy presents challenges for many of us, but if you are able to help, your donation will go a long way. Whether it is through AmeriCares, or some other organization of your choice, any assistance you provide can help ease the suffering of those in need.

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 January 18 – January 22
Date ET Economic Report For Estimate Actual Prior Impact
Wed. January 20 08:30 Building Permits Dec 585K 584K Moderate
Wed. January 20 08:30 Core Producer Price Index (PPI) Dec 0.2% 0.5% Moderate
Wed. January 20 08:30 Producer Price Index (PPI) Dec 0.0% 1.8% Moderate
Wed. January 20 08:30 Housing Starts Dec 580K 574K Moderate
Wed. January 20 10:30 Crude Inventories 1/15 NA NA Moderate
Thu. January 21 08:30 Jobless Claims (Initial) 1/16 NA NA Moderate
Thu. January 21 10:00 Index of Leading Econ Ind (LEI) Dec NA 0.9% Low
Thu. January 21 10:00 Philadelphia Fed Index Jan NA 20.4 HIGH

Curtis Schartz, Certified Mortgage Planner with Pulaski Bank Home Lending. Serving Overland Park, Lees Summit, Leawood, Olathe, Shawnee, Liberty, Parkville, and the Kansas City Metro.

A Volatile Week Ends a Volatile Year

By Curtis Schartz, CMPS

Jan

Last Week in Review

“We will open the book. Its pages are blank. We are going to put words on them ourselves. The book is called Opportunity and its first chapter is New Year’s Day.” Edith Lovejoy Pierce. And as we begin a New Year, fresh with opportunity – here’s what you need to know about the last week of 2009.

The holiday shortened week had some fireworks, and not just those ringing in the New Year. The Treasury Department auctioned a whopping $118 Billion in T-Notes last week, and the added supply helped bring on some volatility in Bonds. And although the financial markets in general have been quite volatile of late anyways, the potential for increased volatility is typically greater during a holiday week. This is because trading volume levels decrease, and with fewer traders and investors pushing transactions, it opens the door for exacerbated market moves, as one large trade can cause prices to rise or fall more sharply.

In fact, volatility was present through a good part of 2009 – not to mention the last decade. As you can see in the chart below, Stocks experienced a roller coaster ride during 2009, hitting Bear market lows in March…only to soar 60% higher since March 9th.

———————–
Chart: Dow Jones Industrial Average
weekly121409

Meanwhile, 2009 also brought some of the best home loan rates ever seen in the history of the US, but things have worsened over the last month. This is in part because the Federal Reserve is winding down their Mortgage Backed Security purchasing program…right at a time when there is an increased volume of Mortgage Backed Securities coming to market.

So why are there more coming to market right now? It takes about four months for home loan originations to become securities – and summer originations were light, allowing the decreased Fed purchases during the fall to still help handle the flow of Mortgage Backed Securities coming to market at that time. But loan origination volume increased in late summer and early fall, due to lower home loan rates as well as the perceived expiration of the Home Buyer Tax Credit, which has since been extended. This increased volume of home loans are now securitized and hitting the markets, at a time when the Fed is buying less.

As with any item, when there is lots of supply – in this case, the increased volume of Mortgage Backed Securities – and diminishing demand – i.e. the Fed buying less and less – Economics 101 tells us that the price of that item will subsequently go down. And as Mortgage Backed Security or Mortgage Bond prices go down, home loan rates go up, which is what we saw happen throughout December. While rates were able to end last week at about the same place as they began the week, they did worsen about .50% from the beginning of December to the end.

THE NEW YEAR IS THE PERFECT TIME FOR A FINANCIAL CHECK-UP, SO MAKE SURE TO GET IN TOUCH WITH ME TO SEE IF STILL LOW HOME LOAN RATES COULD BENEFIT YOU OR SOMEONE YOU KNOW. AND SPEAKING OF SMART FINANCIAL DECISIONS, CHECK OUT THIS WEEK’S MORTGAGE MARKET VIEW FOR GREAT TIPS ON SAVING MONEY DURING THE COMING YEAR.

Forecast for the Week

The first major economic report of the New Year will come on Friday, with the Labor Department’s official Jobs Report for December. Last month’s Jobs Report showed that only 11,000 jobs were lost in November, despite expectations of 125,000 jobs lost. This marked the least number of jobs lost in nearly two years, since December 2007. In addition, the Unemployment Rate improved to 10.0%, when expectations were for it to remain at the 10.2% level.

Remember, though, that we need to create an additional 125,000 jobs each month just to keep up with population growth…so there is still quite a ways to go before we’re out of the woods on the employment front. And while last week’s Initial Jobless Claims number showed that new Unemployment Claims were reported at the lowest weekly reading since July of 2008, the holidays and large snowfall in many parts of the country may have prevented people from getting out to the unemployment office to file their claims…so this may well have skewed the reading. The bottom line is that the labor market is a key component to our economy’s recovery, so both Thursday’s Initial Jobless Claims number and Friday’s Jobs Report will be important to watch.

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, Bond prices have been on a worsening trend of late, meaning home loan rates have moved higher. As the New Year begins, remember you can count on me to be watching closely as always – and I look forward to hearing from you or any of your friends, family members, neighbors or coworkers with any questions you might have.

Chart: Fannie Mae 4.5% Mortgage Bond (Friday Jan 01, 2010)
weeklychart1410

The Mortgage Market View…

“Resolve” to Stop Wasting Money

The New Year is the perfect time to take a look at your spending habits and “resolve” to avoid wasting money where you don’t have to. Here are some main areas that many of us waste money unnecessarily…and some simple steps to ensure a bright financial 2010.

Meals at the Workplace
Working Americans spend an average of $6 when they buy their lunch at work. The average cost drops to $2 when we bring our lunch from home. That’s a difference of $4 a day, or $20 a week, or over $1,000 a year. Consider adding this savings to your savings account, and after just a few months you’ll really see the difference add up.

Utilize the Public Library
By obtaining a library card, you can save on books, magazines, and especially DVD rentals. If you average 3 DVD rentals a month, you’re spending approximately $144 a year. That’s $144 that could be deposited into your bank account. For every book you check out, find out what it would have cost if you’d bought it. Deposit that amount into your account, too.

Don’t be Afraid to Ask for Discounts
If you’re paying bills or buying items such as airline tickets based solely on the price you’re quoted, you could be wasting money. Many companies provide discounts on goods and services but only for those customers who request them. It never hurts to ask so start asking.

Save Gas
Consult the owner’s manual of your car and learn about the manufacturer’s recommendations for optimal gas mileage. Put the suggestions into action and see what happens. After a month, you should be able to see if you’re spending less on fuel. Take the savings and stash it away.

Sell Your Junk
Come Springtime, go through your closets, garage, and CD collection. Figure out which items you no longer use. You can either hold a garage sale or locate stores which buy and sell used merchandise, and sell the items to them.

Do Away with Disposable
From razors and batteries to paper towels and plastic bags, your home is filled with products which are meant to be thrown away. Most of these disposable items have either a permanent or semi-disposable counterpart. Switching over to these more durable items can yield a savings of $4 a week or $200 a year.

Get the Most Out of Your Utilities
Many of us are overspending on our utility bills for no other reason than our own apathy. If you haven’t already switched over to low-flow shower heads and toilets it’s probably time to do so. Also, get into the habit of turning off lights when not in use. Did you know that most utility companies offer a free online energy audit? This way you can see exactly where you’re wasting money.

Here’s to a bright financial future in 2010!

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 January 04 – January 08
Date ET Economic Report For Estimate Actual Prior Impact
Mon. January 04 10:00 ISM Index Dec 54.0 53.6 HIGH
Tue. January 05 10:00 Pending Home Sales Dec -3.0% 3.7% Moderate
Wed. January 06 10:00 ISM Services Index Dec 50.5 48.7 Moderate
Wed. January 06 10:30 Crude Inventories 12/31 NA -1.54M Moderate
Thu. January 07 08:30 Jobless Claims (Initial) 1/02 445K 432K Moderate
Fri. January 08 08:30 Average Work Week Dec 33.2 33.1 HIGH
Fri. January 08 08:30 Hourly Earnings Dec 0.2% 0.1% HIGH
Fri. January 08 08:30 Non-farm Payrolls Dec Zero -11K HIGH
Fri. January 08 08:30 Unemployment Rate Dec 10.1% 10.0% HIGH

Curtis Schartz, Certified Mortgage Planner for Pulaski Bank – Lees Summit, Kansas City, and Overland Park

Recession or Depression

By Curtis Schartz, CMPS

Dec

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.

———————–
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

Labor Market Geats a Dose of Happy News

By Curtis Schartz, CMPS

Dec

“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.

———————–
Chart: 2009 Job Growth/Losses (In Thousands)
weekly112309 Last 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

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

Labor Market Not Looking Optimistic Yet

By Curtis Schartz, CMPS

Nov

Last Week in Review

“BOTH OPTIMISTS AND PESSIMISTS CONTRIBUTE TO OUR SOCIETY. THE OPTIMIST INVENTS THE AIRPLANE, AND THE PESSIMIST – THE PARACHUTE.” G.B. Stern. The media’s recent analysis of the economy has run the gamut of late, some optimism, some pessimism…but also some confusion as they attempt to decipher recent economic reports, particularly relating to the job market. Let’s look at a few of the recent reports, and get behind the headlines to decipher what they really mean.

Last week’s Initial Jobless Claims Report showed that 505,000 people filed for unemployment benefits, which was about what was expected, and represented a ten month low for the report. The Continuing Jobless Claims Report, which indicates the total number of people collecting unemployment benefits, fell by 39,000 to a total of 5.61 Million.

———————–
Chart: Continuing Unemployment Claims
topchart112309

The media often spins this data as good news – but the labor market remains in exceptionally tough shape. The Continuing Claims number declining from a record high of 6.82M in June to last week’s 5.61M is the result of only two potential things happening: People are finding jobs and no longer need unemployment benefits, or they have been unemployed for so long that their benefits are running out before they’ve been able to find a job. With a 10.2% Unemployment Rate looking like it will move higher still, it is most likely the latter. Another clear sign of a very troubled labor market was back on November 6th, when President Obama signed a bill that will extend unemployment benefits by an additional 20 weeks…there would be no reason to do this if jobs were being created.

In other news, October Retail Sales were weak overall, which is concerning for several reasons. One somewhat overlooked impact is that tax receipts from retail sales help both the individual states and the country as a whole. If the consumer doesn’t spend – perhaps due to job loss or lower family income – and there are therefore less tax receipts from retailers, the government runs an ever-deeper budget deficit. The only way to get out of a deficit is to either raise other taxes or cut spending – and neither option is very popular. Many states are in poor fiscal shape because of soaring budgets and lower tax receipts.

There aren’t any easy answers – but it’s clear that the labor market needs to see some serious improvement for the economy to recover in a significant way.

Bonds and home loan rates were unable to hang onto improvements made in the earlier part of the week, and ended the week around the same levels as where they began.

THANKSGIVING IS THE PERFECT DAY FOR REMEMBERING ALL THE WONDERFUL THINGS YOU HAVE TO BE GRATEFUL FOR. CHECK OUT THIS WEEK’S MORTGAGE MARKET VIEW FOR SOME FUN FACTS ABOUT HOW THANKSGIVING BECAME A NATIONAL HOLIDAY.

Forecast for the Week

It may be a shortened work week due to the Thanksgiving holiday, but there will still be plenty of action in store. Both Monday’s Existing Home Sales Report and Wednesday’s New Home Sales Report will give us a read on the housing market. With many homebuyers jumping into the market to take advantage of the Homebuyer’s Tax Credit – which was recently extended until June 30, 2010 and expanded to include certain qualifying existing homeowners – it will be especially interesting to see what these reports reveal. Let me know if you have any questions on the Tax Credit, or if you’d like to learn how it might benefit you or someone you know.

We’ll also get several reads on the economy this week, first with Tuesday’s Gross Domestic Product (GDP) Report, which is the broadest measure of economic activity. Following will be Wednesday’s Durable Goods Report, which gives an update on consumer and business consumption and buying behavior via data on items that are “non-disposable”, like appliances, cars, cameras, etc. Wednesday also brings the Fed’s favorite gauge of inflation, the Core Personal Consumption Expenditure (PCE) Index, found within the Personal Income Report.

More auction action…the Treasury will auction $118B in securities this week, starting with a record $44B in 2-Year Notes on Monday, a record $42B in 5-Years on Tuesday, and another record – $32B in 7-Years on Wednesday. This is an enormous amount of supply, and the market’s ability to digest it all will be tested.

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 recently neared their best levels of the year, but were unable to make further improvements. Rates are likely to be moving higher in the coming months – so give me a call to discuss how the current rate climate might work in your favor, before these great rates slip away.

Chart: Fannie Mae 4.5% Mortgage Bond (Friday Nov 20, 2009)
weekly112309

The Mortgage Market View…

A Brief History of Thanksgiving

Thanksgiving Day is now a favorite American holiday…but did you know it took awhile to catch on as an annual tradition?

According to scholars, the first known Thanksgiving took place on September 8, 1565 in Saint Augustine, Florida when Spanish settlers held a Mass of Thanksgiving after arriving safely in the New World. English settlers in the Virginia Colony held a similar day of thanks in 1619. Two years after that, the colonists at Plymouth Plantation celebrated the most famous Thanksgiving, during 1621.

It wasn’t until October 3, 1789, that it actually became a holiday, when then President George Washington proclaimed a day of Thanksgiving…but just for that year. In 1795, Washington again proclaimed a day of Thanksgiving, and President John Adams also declared Thanksgivings in 1798 and 1799.

After a decade and a half without the celebration taking place at all, President James Madison renewed the tradition in 1814, and even went so far as to declare the holiday twice in 1815!

In 1863, President Abraham Lincoln finally proclaimed the last Thursday of November as a national day of Thanksgiving that should take place every year. Years later, President Franklin Roosevelt stated that Thanksgiving should always be celebrated on the fourth Thursday of the month – as opposed to landing on the occasional fifth Thursday.

In observance of the holiday, both the Stock and Bond markets will be closed on Thursday, November 26th, and on Friday the 27th, the Bond market will close early at 2:00 pm ET, while the Stock market will close at 1:00 pm ET.

I wish you and your family a safe and happy Thanksgiving holiday!

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 November 23 – November 27
Date ET Economic Report For Estimate Actual Prior Impact
Mon. November 23 10:00 Existing Home Sales Oct 5.70M 5.57M Moderate
Tue. November 24 08:30 Chain Deflator Q3 0.8% 0.8% Moderate
Tue. November 24 10:00 Consumer Confidence Nov 47.5 47.7 Moderate
Tue. November 24 08:30 Gross Domestic Product (GDP) Q3 3.0% 3.5% Moderate
Wed. November 25 08:30 Personal Income Oct 0.2% 0.0% Moderate
Wed. November 25 10:30 Crude Inventories 11/20 NA -0.887K Moderate
Wed. November 25 10:00 New Home Sales Oct 405K 402K Moderate
Wed. November 25 10:00 Consumer Sentiment Index (UoM) Nov 66.5 66.0 Moderate
Wed. November 25 08:30 Durable Goods Orders Oct 0.5% 1.0% Moderate
Wed. November 25 08:30 Jobless Claims (Initial) 11/21 500K 505K Moderate
Wed. November 25 08:30 Personal Consumption Expenditures and Core PCE Oct 0.1% 0.1% HIGH
Wed. November 25 08:30 Personal Spending Oct 0.5% -0.5% Moderate
Wed. November 25 08:30 Personal Consumption Expenditures and Core PCE YOY NA 1.3% HIGH

Curtis Schartz
Certified Mortgage Planner
Pulaski Bank Home Loans
Office: 816-347-1678 x-307
Cell: 913-707-1525
Website: www.KCMortgagePlanner.com

Curtis Schartz's blog, the home of Kansas City's premier Certified Mortgage Planner

Expert advice from a trusted mortgage advisor

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Recession or Depression

Labor Market Geats a Dose of Happy News

Labor Market Not Looking Optimistic Yet

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