This Week’s Market Commentary

This week brings us the release of seven relevant economic reports for the bond market to digest. We are also heading into corporate earnings season, which could lead to fluctuations in the stock markets.

If earnings come in lighter than estimates, the stock markets may fall, leading to an influx of funds into bonds. But if earnings and forecasts are strong, the major stock indexes may rally, pulling funds from bonds and leading to higher mortgage rates.

There is no relevant economic news scheduled for release tomorrow. The first report of the week comes Tuesday morning but it is the least important one. February’s Goods and Service Trade Balance will be posted early Tuesday morning. This data gives us the size of the U.S. trade deficit, but unless it varies greatly from forecasts, it likely will not cause much movement in mortgage rates. Current forecasts show a $45.7 billion trade deficit.

The first important report will be posted early Wednesday morning when the Commerce Department will release March’s Retail Sales data. This piece of data gives us a measurement of consumer spending, which is very important because consumer spending makes up two-thirds of the U.S. economy. Forecasts are calling for a 0.5% increase in sales last month. If we see a larger increase in spending, the bond market will likely fall and mortgage rates will rise. However, a weaker than expected reading could push bond prices higher and mortgage rates lower Wednesday.

The Federal Reserve will post its Fed Beige Book report at 2:00 PM ET Wednesday. This report is named simply after the color of its cover and details economic conditions throughout the U.S. by region. Since the Fed relies heavily on the contents of this report during their FOMC meetings, its results can have a fairly big impact on the financial markets and mortgage rates if it reveals any significant surprises. Generally speaking, signs of strong economic growth or inflation rising would be considered negative for bonds and mortgage rates. Slowing economic conditions with little sign of inflationary pressures would be considered favorable for bonds and mortgage pricing.

The two Treasury auctions are scheduled for Wednesday and Thursday. There is a 10-year Treasury Note sale Wednesday and a 30-year Bond sale Thursday. We could see some weakness in bonds ahead of the sales as investing firms sell current holdings to prepare for them. This weakness is usually only temporary if the sales are met with a decent demand. The results of the auctions will be posted at 1:00 PM ET each day. If the demand from investors was strong, the bond market could rally during afternoon trading, leading to lower mortgage rates. If the sales were met with a poor demand, the afternoon weakness may cause upward revisions to mortgage pricing Wednesday and/or Thursday afternoon.

Thursday’s important data comes when the Labor Department will post March’s Producer Price Index (PPI) at 8:30 AM ET. It will give us an important measurement of inflationary pressures at the producer level of the economy. There are two portions of the report that analysts watch- the overall reading and the core data reading. The core data is more important to market participants because it excludes more volatile food and energy prices. If it shows rapidly rising prices, inflation fears may hurt bond prices since it erodes the value of a bond’s future fixed interest payments, leading to higher mortgage rates. A slight increase, or better yet a decline in prices, would be good news for the bond market and mortgage rates. Current forecasts are calling for a 1.0% increase in the overall reading and a 0.2% rise in the core data.

The remaining three economic reports will all be posted Friday morning. This first will be March’s Consumer Price Index (CPI). This index is one of the most important pieces of data we see each month. It is similar to Thursday’s PPI but measures inflationary pressures at the consumer level of the economy. If inflation is rapidly rising, bonds become less appealing to investors, leading to bond selling and higher mortgage rates. As with the PPI, there are two readings in the index that traders watch. Analysts are expecting to see a 0.5% increase in the overall readings and a 0.2% rise in the core reading. If we see larger increases, we could get higher mortgage rates Friday.

March’s Industrial Production data will be posted at 9:15 AM ET Friday. It gives us a measurement of output at U.S. factories, mines and utilities, translating into an indication of manufacturing sector strength. Current forecasts are calling for an increase in production of 0.6%. This data is considered to be only moderately important to rates, so it will take more than just a slight variance to influence bond trading and mortgage pricing.

The final release of the week is the University of Michigan’s Index of Consumer Sentiment at 9:55 AM ET Friday. Their consumer sentiment index will give us an indication of consumer confidence, which hints at consumers’ willingness to spend. If confidence is rising, consumers are more apt to make large purchases. But, if they are growing more concerned of their personal financial situations, they probably will delay making that large purchase. This influences future consumer spending data and can have a moderate impact on the financial markets. Good news would be a sizable decline from March’s 67.5 reading. Current forecasts are calling for a reading of approximately 66.0.

Overall, look for the most movement in rates the middle part of the week. The Retail Sales and CPI reports are the biggest names on the agenda. Either of them can cause significant movement in the markets and mortgage rates, so either Wednesday or Friday will probably be the most active day of the week. Look for the stock markets to influence bond trading and mortgage rates the first part of the week, but we can expect to see the most movement in rates the latter part.

Focusing on Color: Painting your World

Wherever we go, we respond to color, though its effect is often underestimated. Color use is important to us in our homes and workplaces.

If you are selling a house, you will want to choose different colors than those you might use for your own home.

If you just purchased a house, you can add some of your own personality with paint.

HGTV’s Shari Hiller says color accounts for 60 percent of our response to a room. Here is some advice.

Living room: Start with colors you love from something in the room. Consider colors from artwork, a rug, dishes, an accessory or furniture for a main color or accent. Buy two or three quarts of paint. Paint sample boards to hold up to the furniture, fabrics and surfaces you choose.

If you aren’t sure where to begin with a color, experiment in a bathroom, a small hall or area between rooms.

The dining room: Do you want the area to feel social and stimulating or be formal and quiet? Warmer, contrasting and somewhat brighter colors add to a sociable atmosphere. Deeper blue-greens and neutral colors make the dining area more formal.

The monochromatic color scheme: In any room, one color need not be boring. You can create bold or subtle variations within one color group with contrasting paint finishes. It helps to use matte finish paint for walls and slightly shiny eggshell paint for wood trim. The paint will appear to be a slightly different color. It can be attractive to paint an entire wall in a lighter or darker hue of the same color.

White or off-white tint can be a striking accent when used as trim with a monochromatic color group.
For bedrooms: Softer, cool colors and neutrals create a quiet feeling.

Children’s bedrooms: Stay away from bright and intense wall colors, which are said to lead to unrest and irritability.

For an accent color in any room, select a warmer color, more toward reds, or a cooler color more toward blues, to compliment your main color group.

Home Alarm Systems Offer Security and Peace of Mind

Home security systems used to be thought of as just for high-end homes and high-income buyers. Today, improved technology and competitive pricing have made systems more affordable. There is a system for everyone.

Besides notifying the monitoring center of a potential break-in, the systems can include features such as monitored fire protection, carbon monoxide detection, water penetration and have sump pump failure alarms.

Home video systems allow users to monitor their home from a remote location. Users can make sure their kids are fine and keep an eye on their homes.

It’s no longer necessary to have a landline telephone to ensure a system operates without fail, and it’s not necessary to have an Internet connection.

While statistics show a home without an alarm system is more likely to be burglarized, the added benefits of fire protection and other services are immeasurable. It’s about peace of mind, according to Angie Hicks, founder of Angie’s List, a nationwide provider of ratings in more than 500 categories (http://www.angieslist.com/).

Ask a prospective provider to visit your home and recommend how best to protect it. A typical system can be installed for $49 to $350, depending on the features. Monthly monitoring fees usually start at around $25.

Know the contract terms, which are usually for multiple years, and learn about any fees that are not included in the installation and monthly costs.

Lower Loan Limits Coming October 2011

At the beginning of the mortgage meltdown a couple of years ago, Congress enacted emergency legislation raising the limits on High Balance Conforming Loans.

These loans are designated “conforming,” meaning lower interest rates and typically a slightly easier transaction to get approved and closed when compared to Jumbo (or non-conforming) financing. The High Balance variety is only available in designated high cost areas, like the San Francisco Bay Area.

Currently the “temporary” limit on these loans is $729,750. This means that if you put 20% down on a $900,000 home, you can get a conforming loan in the amount of $720,000. Effective October 1, 2011 the emergency legislation expires and is not expected to be extended. This lowers this High Balance Conforming Loan to $625,500.

So, what does that mean to you? If you buy the same $900,000 home and put 20% down, your loan will now be considered a Jumbo loan. Rates on Jumbo loans are typically 1-1.5% higher, so if today you could get that loan for, say, 5% your payment would be $3865.12. The same loan amount using the Jumbo rates would be 6-6.5%, bringing your payment to $4550.89. Over 30 years, that totals over $246,000! The other option would be to put a larger down payment on the property, to the tune of nearly $100,000.

The important thing to note is that if you are looking for a loan to purchase a home, or refinance the one you already have, now is the time to move forward. The limit will remain at the higher point until the first of October, giving home buyers the spring and summer seasons to purchase a property before the high limits are gone.

To find out what the current loan limit is in your area, you can access the Fannie Mae website to see a county-by-county spreadsheet.

Higher limits have really helped people get into homes here in the Bay Area. Once those limits reduce, there will be fewer options for those trying to get into the real estate market. I’ve been talking to all my buyers and giving them fair warning that the time to move is definitely now.”

Time to Buy a New Home?

Today, you can get all of what you need and most of what you want.

When it comes to fine kitchens, more bedrooms, storage space, and great features, your chance of getting them all is better than in many previous years. How about a deck and a sunroom?

The recent Housing Affordability Index by the National Association of Realtors is 173.8, or about 40 points lower than in 2008.

How to Qualify

 The average price for a single-family home in the index is $170,300. To qualify for that purchase at an interest rate of 5.09 percent, buyers would only need a family income of $34,512.

Another interesting way to look at affordability was shown recently in The Wall Street Journal. The Journal reported that the cost of a home now is equivalent to about 19 months of total income for an average family.

Previously, home prices averaged about 24 months of an individual or family income. That means more buyers can afford a home right now.

While the affordability numbers are a good indication, the number of available homes is also a plus. Home buyers can find many in their price range to choose from. Why should they pay high rents when they could be accumulating equity?

What Mortgage Brokers Say

Home ownership is a smart choice when you have reached a stable situation in your life. According to mortgage brokers, that means you have decided on a life path and are taking steps to achieve it, and your income is secure.

When you aren’t moving to another city in the next several years, and you have savings for a down payment, you are ready to move forward with your housing plans.

An idealized vision of how life should be will help you choose a home, but the mortgage brokers say the basic facts to justify The American Dream should be in place.

This Week’s Market Commentary

This week brings us the release of little relevant economic data for the markets to digest. We will, however, see the minutes from the last FOMC meeting.

There are no important monthly economic reports scheduled for release this week, so look for the stock markets to heavily influence bond trading and mortgage rates.

There is nothing of relevance scheduled for today or Tuesday morning, but Fed Chairman Bernanke will be speaking at a financial conference in Georgia tomorrow evening. Whenever he speaks, the markets pay attention and this one will be no different.

However, since the speech is at 7:15 PM ET, we won’t see its impact on the financial and mortgage markets until Tuesday morning. I don’t believe that his words will cause too much movement this time, but the potential does exist, especially since it is an extremely light week in terms of economic releases and other relevant events. Therefore, we should be attentive to what he says.

The first important event comes Tuesday afternoon when the Fed releases the minutes of their last FOMC meeting. Market participants will be looking at them closely. They give us insight to the Fed’s current thought process and individual Fed member opinions.

Any surprises in the 2:00 PM ET release, particularly about inflation or when the Fed may start raising key interest rates, could cause afternoon volatility in the markets Tuesday and possible changes in mortgage pricing.
The only other data worth mentioning is the weekly release of unemployment figures Thursday morning. This data usually does not impact mortgage rates much, but due to the lack of other data on the calendar this week’s update could influence rates. Analysts are expecting the Labor Department to announce that 385,000 new claims for unemployment benefits were filed last week. This would be a small decline from the previous week. The larger the number, the better the news for the bond market and mortgage rates.

Overall, there are several variables that could make this week very quiet or quite rocky for mortgage shoppers. Tuesday’s FOMC minutes could very well be a major market mover or a complete non-factor. In other words, we may have a very calm week ahead of us, or we may see rates move noticeably several days. With no important economic data to drive trading and mortgage rates, bonds may move with stocks.

This means large stock gains could lead to bond selling and higher mortgage rates. But stock weakness could lead to mortgage pricing improving for the week.

The “Mom Cave”

It’s new, it’s fun, and it’s strictly personal!
Now that the “man cave” has become an established custom in homes, women have taken the cue to establish a spot of their own. Forget men’s huge TVs, theater chairs and eating spots, where they do manly, messy, sporting things. A woman’s personal place is entirely different.

Whether it was formerly a guest room, a place next to the family room in the basement, or any unused space, the “mom cave” is generally filled with personal mementos and comfort items. It’s a room they can call their own.
Many women, not just moms, are taking over a space in their homes and turning it into a haven where they can relax and pursue personal interests. Decorators are applauding the trend.

Here’s what’s needed to create the cave: A place to sit, storage space, an area to do what they want to do, such as scrapbooking, and space for occasional visitors. The walls can be decorated with old or new photographs in fun frames, and bright wall colors or fancy wallpaper served as a background.

New York designer Elaine Griffin embraces the concept and recently partnered with Homegoods in Manhattan to show the new decor and space suggestions. She says the mom cave is where a woman, who nurtures everyone else, goes to nurture herself.

Griffin loves color. She says mom caves should be fun, feminine and highly personalized. They should include a reading place, probably with a nice throw on the arm of a chair, or a chaise lounge, a bookcase painted in a bright color, a fancy area rug, and maybe boxes of brightly-colored file folders and lamp shades that reflect a woman’s tastes.

If they don’t have a whole room, Griffin suggests taking over a spot, such as under a stair landing, for a sanctuary using narrow console tables, a rug and armchairs. Or part of the family room or dining room could be captured for their own.