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Mortgage Market Weekly Update

By AgentImage, Monday, September 27, 2010
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Eve Robin Jarrett
MANAGING DIRECTOR
Senior Mortgage Consultant
Manhattan Mortgage
Office: 631-324-1555 x 25
Blackberry: 631-697-3366
e-Fax: 631-514-3654
Email: EJarrett(at)manhattanmortgage(dotted)com

For the week of Sep 27, 2010 // Vol. 8, Issue 39
In This Issue

Last Week in Review: The Fed met, but did their statement “charm” the markets?

Forecast for the Week: The Fed’s favorite gauge of inflation, a read on the consumer perspective of the economy and more are in store, but what will be in store for home loan rates?

View: Fall just started, which means now is the perfect time to make sure your house is ready for winter. Do you know what you need to do?

Last Week in Review

It’s been said there’s a pot of gold at the end of every rainbow. Yet, after last week’s regularly scheduled meeting of the Federal Open Market Committee, the Fed helped gold seem more “charmed” than ever. What happened, and what does this mean for home loan rates? Read on for details.

As expected, last week the Fed decided to keep the Fed Funds Rate (which is 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) at 0.25%. The Fed also reiterated that economic conditions warrant keeping the Fed Funds Rate low for an “extended period”.

But the Fed’s Policy Statement was clearly more downbeat on the economy and showed greater deflationary concerns than the previous Fed Statement. It also gave the feeling that the Fed will jump in with more Quantitative Easing (QE) if necessary. QE means the Fed is prepared to create Dollars through Treasury purchases, which in turn causes the Dollar to weaken. And last week, in response to the Fed’s statement, we saw precious metals like Gold and Silver move higher as a hedge against a weaker US Dollar.

But, the Fed’s Statement is also significant because another round of QE by the Fed could mean continued good news for Bonds and home loan rates. What’s more, last Friday, respected hedge fund manager, David Tepper, noted that the shift in the Fed’s statement also puts Stocks in an almost “no lose” position.

Why is this? Should the economy improve, Stocks go up. But should the economy weaken, and the Fed jumps in with more QE, Stocks could also benefit because more QE alongside a weaker economy brings the Dollar index down, making our exports more attractive. This will greatly help large US multi-national corporations, which have a high influence on the major US Stock indices. The Fed clearly has some big decisions to make in the coming weeks and months to help ensure our continued recovery, and I’ll be watching closely to see how Bonds and home rates are affected. Last week, for instance, Bonds and home loan rates ended the week about .125 percent better than where they began.

Another thing to note – there was a mix of housing news last week. Housing Starts rose 10.5% in August from July, which was above expectations and was the highest level in 4 months. Building Permits, a sign of future construction, gained 1.8% and were also better than anticipated. In addition, New Home Sales came in near expectations, while Existing Home Sales were slightly above expectations – but still 19% below the sales pace of a year ago. Also, the inventory of unsold homes was reported at an 11.6 month supply for existing homes and an 8.6 month supply for new homes. Remember: The level of improvement in housing is a big indication of the strength of our economic recovery.

If you or anyone you know would like to learn more about taking advantage of historically low home loan rates and a great supply of available homes, please don’t hesitate to call or email me as soon as possible. Or forward this newsletter on to anyone you think may benefit and I’d be happy to talk to them free of charge.

IT’S OFFICIALLY FALL, WHICH MEANS IT’S THE PERFECT TIME TO MAKE SURE YOUR HOUSE IS READY FOR WINTER. CHECK OUT THE MORTGAGE MARKET GUIDE VIEW FOR IMPORTANT TIPS THAT CAN HELP… BEFORE THE COLD WEATHER ARRIVES.

Forecast for the Week

Will any of this week’s reports be good luck charms for home loan rates? Wednesday’s Gross Domestic Product (GDP) Report is an important one to watch, since GDP is the broadest measure of economic activity.

Information about the Labor Market is also important these days, which is why the Labor Department has decided to delay the Jobs Report for September one week, until Friday, October 8. However, this Thursday does bring another Initial and Continuing Jobless Claims Report. Last week’s report was disappointing, as Initial Jobless Claims were above expectations and represented the first rise in 5 weeks.

Friday we’ll get a read on the consumer perspective of the economy with reports on Personal Income and Personal Spending as well as the Personal Consumption Expenditure (PCE) Index, which is the Fed’s favorite gauge of inflation. Given the deflationary concerns in the Fed’s Policy Statement last week that we discussed above, the Fed will certainly be watching this report closely.

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, while Bonds and home loan rates ended the week better than where they began, they were unable to improve above a key resistance level. I’ll be watching to see if they can break through this level this week.

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Chart: Fannie Mae 3.5% Mortgage Bond (Friday, September 24, 2010)

The Mortgage Market Guide View…

Winter’s Just Around the Corner. Are You Ready?

We’ve past the point of no return. The Autumnal Equinox occurred last week, and we’re now headed into the shorter, colder days of fall and eventually winter. Whether you live in a cold northern climate or a moderate southern climate, there are a number of steps you need to take to make sure your house and yard are ready for the impending winter season. By following the advice below, you can make sure your home is ready… inside and out!

What should you do outside your home?

If you live in an area with high moisture, you’ll want to apply an additional coat of sealant to wooden decks. Chances are the summer sun has caused deterioration to the deck’s protective layer, and re-sealing it will ensure that the wood won’t absorb an excessive amount of water. If your area experiences extremely low temperatures, sealing any cracks in your driveway or sidewalk is also a good idea. If you have outdoor furniture or a barbecue, you’ll want to cover them up or store them in the garage.

In terms of the shrubbery around the outside of your home, two precautionary steps will greatly improve the way it will look once winter has lifted. First, prune away any weeds or dead foliage from the base of each shrub. Next, add a layer of mulch to the surrounding ground, especially to any perennial flower beds.

Once you’ve tended to the greenery, you may want to winterize your power equipment. Fall is the perfect time for draining gas from lawn mowers and oiling any power tools. You’ll also want to drain garden hoses, roll them up, and store them in the garage. If you want to take extra precautions, drain your outdoor faucets and cut off the water. This will keep pipes from freezing and eventually bursting. If you live in an area where it snows, do yourself a favor and make sure your snow removal equipment is in proper working order.

In terms of a home’s exterior, the key word to keep in mind is “leaks.” Leaks not only allow cold air to enter your home but water as well. Start by inspecting the home’s foundation and exterior walls. Minor cracks can usually be sealed by using a caulk that’s appropriate for the temperature of your region. Special attention should be paid to the wall area around windows and outdoor faucets. Also, if you have storm windows, now is the time to install them.

The Great Indoors

It’s time to make our way inside the home, and take another look at the topic of leaks. Preventing air leaks will not only ensure a cozier home, it will also help you save on your energy bill. Start by weather-stripping all windows and doors. It sounds like a big job, but in most homes this can be accomplished in one day. Also, look for leaks around wall outlets. Once again, the appropriate caulk will do the trick when it comes to creating a proper seal. Don’t forget to check the attic or cellar for leaks as well.

Regardless of the type of heating system you have, it’s a good idea to have it checked and maintained by a professional. Clean ducts and filter replacements can go a long way when it comes to improving efficiency. Also, be sure to clean and vacuum any heating vents, and keep the flue or damper closed when your fireplace is not in use.

As far as plumbing is concerned, every homeowner should periodically check their hot water heater for leaks, no matter where they live. This is the last thing you’ll want to repair during the cold months. You may also want to consider purchasing a hot water heater blanket. It’s a $15 investment that will increase the heater’s efficiency. If you live in an area known for very cold weather, you may have a problem with pipes freezing. This can be alleviated by wrapping the pipes that are most prone to freezing with heat tape, which can be purchased at any hardware store.

Lastly, if you’ve experienced serious weather issues in past years, you may want to prepare a comprehensive emergency kit for your home. It never hurts to be prepared.

Good luck on your projects… and have a happy and safe winter!

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Economic Calendar for the Week of September 27 – October 1, 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 the Week of September 27 – October 01
Date ET Economic Report For Estimate Actual Prior Impact
Tue. September 28 10:00 Consumer Confidence Sept 52.9 53.5 Moderate
Wed. September 29 10:30 Gross Domestic Product (GDP) Q2 1.6% 1.6% Moderate
Thu. September 30 08:30 GDP Chain Deflator Q2 1.9% 1.9% HIGH
Thu. September 30 08:30 Jobless Claims (Initial) 9/25 457K 465K Moderate
Thu. September 30 09:45 Chicago PMI Sept 56.0 56.7 HIGH
Fri. October 01 10:00 Consumer Sentiment Index (UoM) Sept 67.0 66.6 Moderate
Fri. October 01 08:30 Personal Consumption Expenditures and Core PCE Aug NA 1.4% HIGH
Fri. October 01 08:30 Personal Consumption Expenditures and Core PCE Aug 0.1% 01% HIGH
Fri. October 01 08:30 Personal Spending Aug 0.3% 0.4% Moderate
Fri. October 01 08:30 Personal Income Aug 0.2% 0.2% Moderate
Fri. October 01 10:00 ISM Index Sept 54.5 56.3 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 Manhattan Mortgage Company Mortgage Weekly Update because I am committed to keeping you updated on the economic events that impact interest rates and how they may affect you.

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Eve Robin Jarrett
Manhattan Mortgage
75 Main Street, 2nd Floor
East Hampton, NY 11937

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