This Week’s Market Commentary

This week brings us the release of five important economic reports in addition to two Treasury auctions that may influence rates. Only two of the five reports are considered to be of fairly high importance to the bond market and mortgage pricing. The remaining reports are considered to be of moderate or low importance and will likely not heavily influence mortgage rates.

April’s New Home Sales data will be released late Tuesday morning. This report gives us a measurement of housing sector strength and future mortgage credit demand. However, it is actually the least important release of the week and probably will not have much of an impact on mortgage pricing because it tracks only approximately 15% of all home sales. It is expected to show little change in sales from March’s level, meaning the new home portion of the housing sector was flat last month.

Wednesday has one of the week’s more important reports scheduled with April’s Durable Goods Orders being posted. This data gives us an indication of manufacturing sector strength by tracking orders at U.S. factories for big-ticket products.

It is currently expected to show a decline in new orders of approximately 2.0%, indicating manufacturing sector weakness. That would be good news for the bond market and mortgage rates, but this data is known to be quite volatile. Therefore, a small variance from forecasts would likely have little impact on mortgage rates Wednesday.

The first of two revisions to the 1st quarter Gross Domestic Product (GDP) will be released at 8:30 AM Thursday. The second revision to this report comes next month but isn’t expected to carry much importance. The GDP is the sum of all goods and services produced in the U.S. and is considered to be the best indicator of economic growth. Last month’s preliminary reading revealed a 1.8% increase in the annual rate of growth. Analysts expect a slight upward revision to this reading with the consensus being a 2.0% rate of growth. If the upward revision is much stronger than expected, we may see the bond market react negatively and mortgage rates move higher because it would mean the economy was stronger than thought last quarter.

April’s Personal Income and Outlays data is the first of two reports due Friday. It will be posted at 8:30 AM and gives us an indication of consumer ability to spend and current spending habits. An increase in income means that consumers have more money available to spend. Since consumer spending makes up two-thirds of the U.S. economy, this data can cause movement in the financial markets and mortgage rates. Current forecasts are showing a 0.4% increase in income and a 0.5% rise in spending. Weaker readings would be considered good news for bonds and mortgage rates.

The second report of the day and the last relevant data of the week will come from the University of Michigan who will update their Index of Consumer Sentiment for May. It is forecasted to show a small increase from this month’s preliminary reading of 72.4. A reading above 72.6 would be considered negative for bonds and mortgage pricing.

Overall, I think we have a fairly busy week ahead of us. The big report of the week is Wednesday’s Durable Goods Orders. If Thursday’s GDP revision varies greatly from forecasts, it can also lead to sizable changes in rates. There are also a couple of Treasury auctions that are worth noting. The 5-year Note sale is Wednesday and the 7-year Note auction will be held Thursday. Both may influence bond trading and possibly mortgage rates if they are met with an exceptional demand or if there is lackluster interest from investors.

The bond market will close early Friday afternoon ahead of next Monday’s Memorial Day holiday. With all this, there is a pretty good possibility of seeing mortgage rates change several times this week- especially if there is more volatility in the stock markets. Accordingly, please proceed extremely cautiously if still floating an interest rate.

Creative Ways to Retire Without Savings

Like many baby-boomers today, you may be faced with an upcoming retirement and a lack of a retirement savings account due to the rough economic times of the past few years.

A recent CBS MoneyWatch article tackles this problem by suggesting resourceful ways to make retirement work for you.

One bold idea is to pair up with another married, retiring couple, pooling together Social Security income for a manageable budget. Social Security income at age 66 will be $2,000 per month, with an additional $1,000 per month for the spouse, resulting in a $36,000 per year income.

If you find a like minded couple, consider moving into a three bedroom house together, making the combined household income $72,000. This is higher than the 2009 national average income.

Another tactic is to delay retirement until age 70, in which case your monthly Social Security income will increase to $2,640 per month. In this situation, your spouse would not need to delay past age 66 to receive the $1,000 per month. “You’d want to file and suspend your Social Security income at age 66, so your spouse can start the $1,000 monthly spousal benefit income at age 66,” advised the article.

At age 70, your combined income would be $43,680 per year following this plan. If you were to pair up with another married couple, that Social Security income would increase to $87,360 per year.

Your circumstances may not be right for such an arrangement, but this is just one example of creative and resourceful ways to head into retirement in this economic climate.

This Week’s Market Commentary

This week brings us the release of four pieces of relevant economic news in addition to the minutes from the most recent FOMC meeting.

None of the economic reports are considered to be highly important to the markets or mortgage rates, but they do carry enough significance to influence mortgage rates if they show a wide variance from forecasts.

Nothing of importance is scheduled for today, so look for the stock markets to be a major influence on bond trading and mortgage pricing. If the stock markets open the week with sizable gains, bonds will likely suffer and mortgage rates will probably move higher tomorrow. However, more stock weakness could translate into slightly lower rates tomorrow. The mortgage market took a small turn for the worse Friday afternoon, so unless your lender revised pricing higher late Friday you may have a slight increase in rates waiting for you.

The week’s first data comes early Tuesday morning when April’s Housing Starts will be posted. This data measures housing sector strength and mortgage credit demand by tracking newly issued permits and actual starts of new home construction. It is expected to show an increase in new starts from March’s readings.

Since this report is not considered to be of high importance to the bond market, it likely will have little impact on mortgage rates unless it varies greatly from forecasts.

The second report of the day is April’s Industrial Production at 9:15 AM ET. It measures manufacturing sector strength by tracking output at U.S. factories, mines and utilities. It is expected to show a 0.5% increase in production, indicating that manufacturing activity is growing.

A smaller than expected increase in output would be good news for the bond market and mortgage rates because it would indicate that the manufacturing sector is not as strong as thought. This report is equally important to the markets as the earlier housing report, so they both will likely need to show unexpected strength or weakness for them to cause a sizable movement in mortgage rates.

Wednesday’s only relevant release is the minutes of the last FOMC meeting. Market participants will be looking for how Fed members voted during the last meeting and any comments about inflation concerns in the economy and economic growth. The goal is to form opinions about when the Fed may make a move to key short-term interest rates. Since the minutes will be released at 2:00 PM ET, if there is a market reaction to them it will be evident during afternoon trading.

The National Association of Realtors will give us their Existing Home Sales report late Thursday morning. This data tracks resales of homes in the U.S. during April, giving us a measurement of housing sector strength. This type of data is relevant because a weakening housing sector makes a broader economic recovery less likely. Current forecasts are calling for a small increase in home sales between March and April. Ideally, the bond market would prefer to see a decline, indicating further housing sector weakness. A large increase in sales could lead to bond weakness and a small increase in mortgage rates Thursday morning.

The last data also comes late Thursday morning with the release of April’s Leading Economic Indicators (LEI). This Conference Board report attempts to measure economic activity over the next three to six months. It is expected to show no change from March’s reading, meaning that economic activity is likely to remain flat over the next few months. A decline would be good news for the bond market and mortgage rates, while an increase could cause mortgage rates to inch higher Thursday.

Overall, it looks like we may see a fairly calm week in mortgage rates unless something unexpected happens or the stock markets make a big move upward or downward. I can’t really label one particular day as the most important one. If the stock markets remain fairly calm, I would guess the middle part of the week will probably be the most active for mortgage pricing. However, sizable gains or losses in the major stock indexes could influence bonds and mortgage rates more than this week’s economic data can.

Spring Cleaning 101

It’s that time of year again – time to get rid of the clutter and clean up your home. In this video from CBS, O Magazine’s Creative Director Adam Glassman shares some tips on identifying and clearing clutter and older things you no longer need.

This Week’s Market Commentary

There are five pieces of relevant economic data scheduled for release this week that may affect mortgage rates, in addition to two important Treasury auctions.
The four most important four reports will be posted over two days, meaning the markets will have to rely on factors other than economic news for direction several days. There is no relevant data due today or Tuesday, so expect the stock markets to help drive bond trading and mortgage rates those days.
March’s Goods and Services Trade Balance report will be released early Wednesday morning. This report gives us the size of the U.S. trade deficit but likely will not have much of an impact on the bond market or mortgage pricing. It is expected to show a $47.8 billion trade deficit, but it is the least important of this week’s data and likely will have little influence on Wednesday’s mortgage rates.
The Treasury will hold a 10-year Note sale Wednesday and a 30-year Bond sale Thursday. Results of the auctions will be posted at 1:00 PM ET each day. If they are met with a strong demand from investors, we could see bond prices rise enough during afternoon trading to cause downward revisions to mortgage rates. However, lackluster bidding in the sale, meaning longer-term securities are losing their appeal, could lead to higher mortgage pricing those afternoons.
The first important piece of data this week is April’s Retail Sales, which will be released at 8:30 AM ET. It is an extremely important report for the financial markets since it measures consumer spending. Consumer spending makes up two-thirds of the U.S. economy, so this data can have a pretty significant impact on the markets. Current forecasts are calling for a 0.6% increase in sales from March to April.
A weaker than expected level of sales should push bond prices higher and mortgage rates lower Thursday morning as it would signal that economic activity may not be as strong as thought. However, a larger increase could fuel fears of economic growth that would lead to bond selling and higher mortgage rates.
April’s Producer Price Index (PPI) will also be released early Thursday morning. It helps us measure inflationary pressures at the producer level of the economy. If this report reveals weaker than expected readings, indicating inflation is not a concern at the producer level, we should see the bond and stock markets rally. The overall index is expected to show an increase of 0.5%, while the core data that excludes more volatile food and energy prices has been forecasted to rise 0.2%. No change or a decline in the core data would be ideal for mortgage shoppers because inflation is the number one nemesis for long-term securities such as mortgage-related bonds.
Friday has the remaining two reports. The first is April’s Consumer Price Index (CPI) at 8:30 AM ET. It is similar to Thursday’s PPI report, but measures inflationary pressures at the more important consumer level of the economy. These results will be watched closely and can lead to significant volatility in the bond market and mortgage pricing if they show any surprises. Current forecasts are calling for a 0.4% increase in the overall index and a 0.1% rise in the core data reading. As with the PPI, the core data is the more important of the two readings.
The last report of the week is May’s preliminary reading to the University of Michigan’s Index of Consumer Sentiment. This index measures consumer willingness to spend, which relates to consumer spending. If consumers are more confident of their own financial situations, they are more apt to make large purchases in the near future. This report usually has a moderate impact on the financial markets though, because it is not exactly factual data. It is expected to show a reading of 69.8, which would be no change from last month’s final reading.
If it shows a large decline in consumer confidence, bond prices could rise and mortgage rates would move slightly lower, assuming the CPI does not give us a significant surprise. The CPI is much more important to the markets than the sentiment index is, so look for it to be the biggest influence on Friday’s mortgage pricing.
Overall, it likely will be another active week for mortgage rates. Besides the week’s important economic news, look for the stock markets to be a major influence on trading. The most important day of the week is Thursday with the Retail Sales and PPI reports on the agenda, but Friday’s CPI is extremely important to the bond market. It appears we will likely see the most movement in mortgage rates the latter part of the week unless the stock markets post sizable gains or losses the first part. With some very important data being posted this week, it would be prudent to be attentive to the markets if still floating an interest rate.
For the most recent daily market commentary, click here.

5 Things to Think About When Looking for Your Dream Home

While on the hunt for a perfect home, it can be immensely helpful to create a wish list of sorts. This can help you and your real estate agent obtain a clear picture of what type of home would best suit you.
Some things to consider:
1. Move-in ready or fixer-upper?
Making a home “your own” can make fixer-uppers an attractive option, along with the lower cost. Making a mark on your new home via renovations. Take some time to think about what homeownership means to you, and whether you are interested in renovation.
2. Upgrades
Certain upgrades in a home, such as marble or granite counters, are often coveted by buyers. Consider what type of upgrades are important to you – energy-efficiency, professional grade appliances, luxury tiling? Make a list and show your Realtor.
3. The Yard
What type of backyard are you looking for, and how important is it to you? Think about low versus high maintenance yards, the amount of space you’d like, and what kind of yard would best suit your lifestyle.
4. Swimming Pools
For some homebuyers, having a swimming pool can be a dealbreaker. If this is something that you really desire in your dream home, make that clear to your real estate agent so that they can narrow the search for you.
5. Schools in the Area
Last but certainly not least, the quality of the schools in the area of a dream home should be an important thing to research. Ask your Realtor for information about schools in the area of your search, and comparisons between them. This information is easily obtained, and real estate agents will be more than happy to show you school scores and more. Also consider private schools, if that is an option for your family.

Condo Ownership Sensible in SF, San Jose and Oakland

The San Jose Mercury reported that data shows that buying condos, versus renting, makes financial sense in San Francisco, San Jose, and Oakland in this current market.

A study done by Trulia of the nation’s fifty largest cities focusing on rent-versus-buy price analysis revealed that these Bay Area cities, especially San Jose, ownership is less expensive.

They calculated a rent-to-buy ratio of cost, and any city with a rent-to-buy ratio of 15 or below means that it is less expensive to buy. San Jose’s ratio is 12-1.

Oakland and San Francisco, where renting is cheaper, can make more financial sense to buy depending on the situation. Oakland has a ratio of 16, and San Francisco 19.

To read more about the math behind the study, read the San Jose Mercury article here, or you can take a look at Trulia’s entire report of the fifty biggest cities in the country here.

This Week’s Market Commentary

There are only four relevant economic reports scheduled for release this week, but two of them are considered to be highly important to the financial and mortgage markets. Unlike many Mondays, the week kicks off with important data being posted today. The Institute for Supply Management (ISM) will post their manufacturing index for April late this morning.

This is one of the first important economic reports released each month and gives us an indication of manufacturer sentiment. A reading above 50 means that more surveyed trade executives felt business improved during the month than those who felt it had worsened. This points toward more manufacturing activity and could hurt bond prices, pushing mortgage rates higher. Analysts are expecting to see a reading of 59.7, which would be a decline from March’s level of sentiment. The lower the reading, the better the news for bonds and mortgage rates.

March’s Factory Orders data is Tuesday’s only relatively important data. It will be released at 10:00AM, giving us a measure of manufacturing sector strength. It is similar to last week’s Durable Goods Orders, except this report includes non-durable goods such as food and clothing. Generally, the market is more concerned with the durable goods orders like refrigerators and electronics than items such as cigarettes and toothpaste. This is why the Durable Goods report usually has more of an impact on the financial markets than the Factory Orders report does. Still, a noticeably smaller increase than the 1.9% that is expected could push mortgage rates slightly lower. But, a much larger increase in new orders could lead to slightly higher mortgage pricing Tuesday.

There are no relevant government reports or events scheduled for Wednesday, meaning non-economic factors such as stock prices will probably have the biggest influence on bond trading and mortgage rates that day. Generally speaking, a stock rally pulls funds from bonds, leading to bond selling and higher mortgage rates. However, stock selling makes bonds more appealing to investors. When the funds are shifted into bonds to escape the volatility in stocks, we often see mortgage rates move lower. If the major stock indexes remain calm Wednesday, mortgage rates should follow suit.

The Labor Department will release its 1st Quarter Productivity and Costs data early Thursday morning. This information helps us measure employee productivity in the workplace. High levels of productivity help allow low-inflationary economic growth. If employee productivity is rapidly rising, the bond market should react favorably. However, a decrease could cause bond prices to drop and mortgage rates to rise Thursday morning. It is expected to show a 1.0% increase in productivity.

Friday brings us the release of the almighty monthly Employment report, giving us April’s employment statistics. This is where we may see a huge rally or major sell-off in the bond market and potentially large changes in mortgage rates. The ideal situation for the bond and mortgage markets would be an increase in the unemployment rate and a much smaller number of payrolls added to the economy during the month than was expected.

Just how much of an improvement or worsening in rates depends on how much variance there is between forecasts and actual readings. This could turn out to be a wonderful day in the mortgage market, but it also carries risks of seeing mortgage rates move higher if the Labor Department posts stronger than expected readings. Current forecasts are calling for the unemployment rate to remain at 8.8% and that approximately 183,000 jobs were added during the month.

Overall, I believe Friday will be the most important day of the week with the employment data being posted. It can easily erase the week’s accumulated gains or losses in mortgage rates if it shows any surprises. We may actually see a noticeable change in rates tomorrow also if the ISM index shows favorable or unfavorable results. The middle part of the week will likely be the calmest, but I still suggest proceeding cautiously if still floating an interest rate. This would be a good week to maintain contact with your mortgage professional if you have not locked a rate yet.

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