Weekly Market Report 7/13/09 from Terry Heffner at Guild Mortgage

{ Posted on 10:01 AM by JR Erickson }

 

 

 

Provided to you Exclusively by Terry Heffner

 

 

 

Terry Heffner
Branch Manager
Guild Mortgage
Office:
208-321-0245
Cell:
208-599-8500
Fax:
208-445-0809
E-Mail: theffner@guildmortgage.net
Website: www.heffnerhomeloans.com

 

 

 

For the week of Jul 13, 2009 --- Vol. 7, Issue 28

 

 

Last Week in Review

 

 

"EVERY DARK CLOUD HAS A SILVER LINING...BUT LIGHTNING KILLS HUNDREDS OF PEOPLE EACH YEAR WHO ARE TRYING TO FIND IT." Larry Kersten. Now that's pessimism! Interestingly enough, in recent weeks - Traders have been searching to find a silver lining or at least a glimmer of light in the dark economic reports - trying to find something to be optimistic about. Last week - the economic report calendar was lean but volatile, as Traders sought for morsels of good news amidst the gloom. All in all - home loan rates improved slightly in the early part of the week, but then worsened towards the end of the week.

Remember first that when Stocks move lower, some of that money can move over into the Bond market, helping Bond prices move higher and home loan rates move lower. Last week, Bonds benefitted early on from Stocks trading sluggishly, partially due to other world equity markets being pressured lower under concerns for the overall global economic recovery - but the economic news calendar was thin. However, things really heated up mid-week, as earnings season kicked into gear, big Treasury auctions hit the stage, and an interesting look at the job market arrived via the Initial Jobless Claims numbers.

According to that report, the number of initial unemployment claims last week dropped off by 52,000 to come in at 565,000 new claims, better than expected and the lowest level since January. Initially, Stocks reacted with some euphoria - but then reversed lower. Why? Think about it for a minute. Is the fact that 565,000 people applying for unemployment benefits for the first time, over the course of a holiday shortened week, really such terrific news? It's like when someone is starving, and manages to find a crust of bread in the trashcan it seems great at first, until the overall reality sets back in. And so seems to go the Trader mindset lately. Starving for any morsel of good news and looking hard for a silver lining amongst the clouds, sometimes news that is really pretty bad - like 565,000 people applying for first time unemployment benefits - is initially overblown with euphoria...that then quickly wears off.

The real story is that continuing unemployment claims - which measures the number of people who still receive jobless aid after their initial week - rose by 12,000. When you add it all up, the number of Americans receiving unemployment benefits total 6.88 million, which is a new record high and more than double what it was this same time last year. The underlying problem is that companies still aren't hiring, which means the jobless rate will continue to rise. In turn, unemployment will continue to curb consumer spending and, in the big picture, will slow economic recovery.

-----------------------
Chart: Continued Unemployment Claims

Vice President Joe Biden commented over the weekend that "the administration miscalculated how bad the jobless problem would be", prompting speculation that more stimulus might be in the works during 2009. Additional stimulus would translate into more inflation and also would mean more Treasury auctions to pay for it, creating even more supply to be sopped up. Many members of Congress admittedly voted to pass the first stimulus package without even reading through it, only to now look back and discover that most of the almost $800B was not earmarked to actually stimulate the economy, but more towards social programs. This will be an important story to watch as it certainly could create a negative impact on Bonds and home loan rates down the road.

On that note, Treasury auctions caused a bit of a rollercoaster last week, as Wednesday's auction was well received, helping Bonds and home loan rates improve nicely...but Thursday's auction did poorly, causing a sharp worsening reversal for Bonds and home loan rates.

Earnings season for Stocks kicked off with mostly soft reports as expected, depicting the continued difficult economic climate. Next week, earnings season continues and will bring news from the financial sector - which is sure to be interesting and potentially market moving.

As mentioned - Bonds and home loan rates improved during the early part of the week, but started to worsen towards the end of the week - and look as if they may be ripe for some continued worsening. As always, I will continue to watch carefully - but let's talk soon if you need to make a decision regarding a home purchase or refinance, so that we can ensure you are positioned properly.

IF YOU'VE BEEN WATCHING THE MARKET AND CONSIDERING A MOVE OR REFI, CHECK OUT THIS WEEK'S MORTGAGE MARKET VIEW FOR INEXPENSIVE TIPS ON ADDING VALUE TO YOUR HOME.

 

Forecast for the Week

 

 

After last week's relatively slim but volatile release of stormy economic reports, things could heat up even more this week. The Producer Price Index (PPI) is due out Tuesday and will give us an idea of price changes on a wholesale level, which will set the stage for the more important Consumer Price Index (CPI) and Core CPI reports due out Wednesday. The CPI is an important measurement of inflation (and deflation) because it measures the average prices paid by consumers for goods and services. Last month's Core CPI - which excludes the volatile prices for food and energy - was reported in line with expectations, and the year-over-year number was right within the Fed's comfort zone.

Also due out this Tuesday is the Retail Sales report, which is the most-timely indicator of broad consumer spending patterns. Although Retail sales came in as expected last month with a moderate increase of 0.5%, the number will probably remain relatively weak for a while. With the negative unemployment and economic news recently, the Retail Sales numbers and Producer and Consumer Price Indexes will be important indications of the economy's direction.

The Fed Meeting Minutes will be released on Wednesday afternoon - giving an inside look at the Fed members discussion and commentary during the most recent meeting. As usual - it will be dissected carefully, as Traders look for any further clues as to the Fed's opinions on inflation, deflation, and the economy overall.

The Philadelphia Fed Index and Empire State Manufacturing survey also come out this week. Last month's reports showed manufacturing conditions continued to contract in June, but at a slower pace. Reports on Building Permits and Housing Starts cap off this week with a glimpse into the housing industries recovery.

Mixed in with this plethora of economic reports will be more earnings reports for Stocks. Although Stocks took a hit at the end of last week as Traders braced for these reports to be ugly, they still have the potential to make some noise and move the markets.

Remember: Weak or negative economic news normally causes money to flow out of Stocks and into Bonds, helping Bonds and home loan rates improve, while strong or positive economic news normally has the opposite result. As you can see in the chart below, the rally in Bonds took a hit on Thursday only to climb back a bit Friday - but Bonds are at a very precarious point, and could be due for a worsening reversal. I'll be watching the action closely as always - but if you or someone you know has not acted yet to take advantage of the current low rates available, please call or email me to get the discussion started.

Chart: Fannie Mae 4.5% Mortgage Bond (Friday Jul 10, 2009)

 

The Mortgage Market View...

 

 

5 Easy, Inexpensive Ways to Add Value and Comfort to Your Home

If you've been thinking about increasing your home's value or just making your living space more comfortable, these ideas can help you start off simply. Before you start knocking out walls and renovating your roofline, consider these ways to make a big difference...cost-effectively!

1. Spruce Up Your Curb Appeal

Buyers often decide whether to look at your house before they even get out of the car. So, before you spend a lot of time and money remodeling the inside, take a good look at the outside. Washing windows, repainting trim, planting flowers and small shrubs, trimming tree branches and overgrown bushes, fixing screens, resealing your driveway, and mowing the lawn can make a big difference. Start out by making a list of 4 to 7 simple projects and then set aside an hour or two each day. In just one week, you - and potential buyers - will be surprised how appealing and welcoming your house looks when driving up.

2. Does Your Entryway Invite People In?

A cozy first impression is crucial. Now that you've boosted your curb appeal, it's time to turn your attention inside - starting just inside the front door. To make sure your entryway invites people to come in - rather than turnaround and run - try adding a wicker chair and table outside the door along with a fresh coat of paint to your foyer.

For even more impact, replace old light fixtures and update the floor in your entryway with a throw rug or easy-to-apply self-adhesive linoleum squares. These projects are inexpensive and easy enough to do yourself in just a few hours.

3. Spiff Up that Old Bathroom

Remodeling an old bathroom can make a big impact. You should start by simply de-cluttering the countertop. It's amazing how spacious even a small bathroom appears after the styling products, pictures and miscellaneous bathroom decorations are removed.

From there, you can freshen up the paint, replace that old shower curtain, add a new medicine cabinet on the wall, and even upgrade your faucet and shower head for very little money. With a little more money, you can also install a double sink or re-tile the floor.

4. Hot in the Kitchen

Renovating an outdated kitchen is practically a sure thing - as long as you don't splurge on extravagant items like hand-painted Italian tile or built-in espresso machines. Instead, focus on the basics: replacing the handles on your cabinets and drawers, freshening up the paint, installing new flooring, adding a backsplash, and painting or re-facing your existing cabinets. You can also make a dramatic impact by installing new countertops and even replacing your appliances. All of these projects will go a long way to making a new buyer feel at home.

5. Add a Second Bathroom

Perhaps no improvement makes a bigger impact on your family's comfort and your house's appeal than adding a second bathroom. The number of bathrooms is always a big sticking point for potential buyers, especially families with two or three children.

Although adding a bathroom costs more than simply fixing up your old one, it also increases the value of your house more. Plus, having that second bathroom may help you sell your house faster than if it only has one, which is an important point to consider in today's market. So, if you have a house with roughed-in plumbing just waiting for you to take the initiative, you may want to consider adding that second bathroom you've always wanted.

However, if your house doesn't have roughed-in plumbing or floor plans that called for a future bathroom, you'll definitely want to consult a Realtor to discuss how much a second bathroom will add to your home's value. After all, if you have to start moving walls and re-plumbing your house just to add a bathroom, you may find that your time and money are better spent on a handful of smaller projects that will ultimately add more impact.

Plan Ahead and Avoid Headaches

Overall, the best advice about adding value to your home is to start small, work your way up, and always plan ahead. You don't want to get halfway into a renovation only to find that you have to update your entire electrical system or that your time and effort was wasted on a renovation that doesn't add as much value as you thought. With a little planning and prioritizing, you can make your house more comfortable and valuable with very little time and money!

 

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 July 13 - July 17

Date

ET

Economic Report

For

Estimate

Actual

Prior

Impact

Tue. July 14

08:30

Core Producer Price Index (PPI)

Jun

0.1%

N/A

-0.1%

Moderate

Tue. July 14

08:30

Producer Price Index (PPI)

Jun

0.8%

N/A

0.2%

Moderate

Tue. July 14

08:30

Retail Sales

Jun

0.5%

N/A

0.5%

HIGH

Tue. July 14

08:30

Retail Sales ex-auto

Jun

0.5%

N/A

0.5%

HIGH

Tue. July 14

10:00

Business Inventories and Sales

May

-1.0%

N/A

-1.1%

Low

Wed. July 15

08:30

Consumer Price Index (CPI)

Jun

0.6%

N/A

0.1%

HIGH

Wed. July 15

08:30

Core Consumer Price Index (CPI)

Jun

0.1%

N/A

0.1%

HIGH

Wed. July 15

08:30

The Empire Manufacturing Survey - New York State

Jul

-5.00

N/A

-9.41

Moderate

Wed. July 15

09:15

Capacity Utilization

Jun

67.9%

N/A

68.3%

Moderate

Wed. July 15

09:15

Industrial Production

Jun

-0.6%

N/A

-1.1%

Moderate

Wed. July 15

10:30

Crude Inventories

7/10

N/A

N/A

-2.90M

Moderate

Wed. July 15

02:00

FOMC Minutes

June 24

N/A

N/A

N/A

HIGH

Thu. July 16

08:30

Jobless Claims (Initial)

7/11

N/A

N/A

565K

Moderate

Thu. July 16

10:00

Philadelphia Fed Index

Jul

-5.0

N/A

-2.2

HIGH

Fri. July 17

08:30

Building Permits

Jun

spanspanspan

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