MMG WEEKLY – WHAT ARE THEY SAYING THIS WEEK?

Forecast for the Week 

The economic calendar heats up this week. Couple that with the heart of earnings season and you have a recipe that could easily move markets.

  • Right out of the gate, Retail Sales will be reported on Monday. Consumers have been cutting back lately on fears that a global slowdown could lead to a recession here in the U.S.
  • Manufacturing data from the Empire State Index out of New York and Philadelphia Fed Index will be reported on Monday and Thursday, respectively.
  • On Tuesday, the Consumer Price Index (CPI) will be released. It is safe to say that inflation at the consumer level isn’t a problem, yet.
  • On Wednesday, Housing Starts and Building Permits will be delivered. The housing sector has seen a light at the end of the tunnel but the pain remains. Existing Home Sales are set to be released on Thursday.
  • Also on Thursday, weekly Initial Jobless Claims will be announced. This comes after last week’s reading of 350,000, the lowest reading in four years.

In addition to those reports, earnings season is well underway. That means investors will react to the data within minutes of the release. Of course, if the numbers are weak, Stocks will most likely tumble and this could support Bonds and home loan rates.

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. The chart below shows Mortgage Backed Securities (MBS), which are the type of Bond that home loan rates are based on.

When you see these Bond prices moving higher, it means home loan rates are improving — and when they are moving lower, home loan rates are getting worse.

To go one step further — a red “candle” means that MBS worsened during the day, while a green “candle” means MBS improved during the day. Depending on how dramatic the changes were on any given day, this can cause rate changes throughout the day, as well as on the rate sheets we start with each morning.

As you can see in the chart below, Bonds and home loan rates continue to reach record best levels…though they did pull back from their very best levels in the latter part of last week. I will continue to monitor all the news closely to see how home loan rates are impacted.

Chart: Fannie Mae 3.5% Mortgage Bond (Friday Jul 13, 2012)
Japanese Candlestick Chart

The Mortgage Market Guide View… 

3 Steps to Staying on Budget

In today’s economic environment, many people are paying more attention to their monthly budgets than they have in a long time. One of the best ways to reign in your budget is to get a handle on your spending habits. Share the following tips with your clients, colleagues, and family members so they can whittle down unnecessary expenses. These tips can also be applied to evaluating your business costs and expenses.

1. Take inventory. Many people can name their major expenses, but don’t remember all the little expenses that drain their wallets. To help you get a true picture of your spending, try writing down everything you spend money on during the course of a month. That means writing down not only your major expenses, but also those quick trips to the gas station, grocery store, coffee shop, movie theater, fast food restaurants, and so on. Also, if you pay for insurance or another bill on a quarterly basis, write down what the monthly expense equals.

2. Mark down your needs. Once you have all your expenses listed, it’s time to analyze them. The best place to start is by grouping your expenses using highlighters. For example, you may want to use one color to highlight “must haves” like your automobile, life insurance, utility payments and so on. Next, use a different color to highlight items that may be important occasionally, but aren’t required—such as, new clothes for work. Finally, use a different color to highlight unnecessary expenses that are nice, but could easily be cut out, such as mochas from the local coffee house. Now, you can make some purposeful decisions about what you can cut—starting with the easy items and working your way up to the important but not necessary. Don’t forget, it’s not always “either-or.” For instance, you don’t have to cut out mochas altogether; instead, you can cut down to one per week as a special treat after a busy or productive week.

3. Give yourself an allowance. Sticking to your budget is easier if you have no other option. If you have a real spending problem, you may want to give yourself an allowance to live on. For example, try taking out $50 or $70 in cash for each week and putting your credit cards and checkbook in a safe place. That way, when you spend money, you’ll actually see it leave your wallet… which means you’ll see the impact more dramatically. This forces you to make some tough decisions. After all, if you go to lunch on Wednesday, you may not be able to go to dinner on Friday night. It’ll be tough at first. But soon, it will be second nature.

Economic Calendar for the Week of July 16 – July 20

Date
ET
Economic Report
For
Estimate
Actual
Prior
Impact
Mon. July 16
08:30
Retail Sales
Jun
NA
-0.2%
HIGH
Mon. July 16
08:30
Retail Sales ex-auto
Jun
NA
-0.4%
HIGH
Mon. July 16
08:30
Empire State Index
Jul
NA
2.3
Moderate
Tue. July 17
08:30
Consumer Price Index (CPI)
Jun
NA
-0.3%
HIGH
Tue. July 17
08:30
Core Consumer Price Index (CPI)
Jun
NA
0.2%
HIGH
Tue. July 17
09:15
Capacity Utilization
Jun
NA
79.0%
Moderate
Tue. July 17
09:15
Industrial Production
Jun
NA
-0.1%
Moderate
Wed. July 18
08:30
Housing Starts
Jun
NA
708K
Moderate
Wed. July 18
08:30
Building Permits
Jun
NA
780K
Moderate
Wed. July 18
08:30
Beige Book
NA
NA
Moderate
Thu. July 19
08:30
Jobless Claims (Initial)
7/14
NA
350K
Moderate
Thu. July 19
10:00
Existing Home Sales
Jun
NA
4.55M
Moderate
Thu. July 19
10:00
Philadelphia Fed Index
Jul
-10.0
-16.6
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 without errors.
Mortgage Market Guide, LLC is the copyright owner or licensee of the content and/or information in this email, unless otherwise indicated.   Mortgage Market Guide, LLC does not grant to you a license to any content, features or materials in this email.   You may not distribute, download, or save a copy of any of the content or screens except as otherwise provided in our Terms and Conditions of Membership, for any purpose.
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