December 5 2005

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For the week of Dec 05, 2005 --- Vol. 3, Issue 49

Last Week In Review

NO NEWS IS GOOD NEWS...BUT CAN GOOD NEWS BE BAD NEWS? Sure seemed to be the case for Bonds and home loan rates over the past week, as hot economic news poured in and left home loan rates worsened by about .125% in the aftermath. Across the board, from consumer confidence to manufacturing to GDP to jobs; the economy appears to be clicking along at a good, strong pace. A few notes of special interest: Monday’s Existing Home Sales came in a touch weaker than anticipated, with inventory levels rising to a 4.9 month average turn time on a national level. But then Tuesday’s New Home Sales report was red hot, showing much higher levels than expected. All in all – a healthy housing market that appears to be slowing, but remaining strong if prices are realistic. And after all the fanfare...Friday’s important Jobs Report number came in basically in-line with estimates, showing 215,000 new job creations with 210,000 expected. Another bit of strong news indicated by this report is that it appears the economy has weathered the effects of Hurricanes Katrina and Rita, with job growth numbers back to pre-Hurricane levels. HO-HO-HO-HOOOLY SMOKES, IS IT HOLIDAY SHOPPING TIME ALREADY? CHECK OUT THIS WEEK’S MORTGAGE MARKET VIEW FOR SOME TIPS ON HOW TO KEEP YOUR WALLET FAT AND JOLLY THROUGHOUT THE HOLIDAY SPENDING SEASON...AND PREVENT YOUR BANK ACCOUNT FROM HAVING A HOLIDAY “HANGOVER”.

Forecast For The Week

So remembering that good economic news tends to be good for Stocks, yet bad for Bonds...all the recent positive economic numbers have done a number on Bond pricing. The chart below clearly shows the worsening action over the past week, indicated by the red candles on the far right hand side. In fact, Bonds have jumped right back onto the brutal “Down Escalator” which had held Bonds captive for most of the past several months – their attempt at escape appears to have been short-lived. It’s going to take some very negative economic news...or very inflation friendly news...for Bonds to regain ground and bring improvement in home loan rates. Next week will be fairly light for economic reports, so in the absence of any major disappointment on the numbers, Bonds may just decide to continue their descent down the ugly “Down Escalator”. Chart: Fannie Mae 6.0% Mortgage Bond (Friday December 2, 2005)

The Mortgage Market View…

GETTING READY TO SHOP ‘TIL YOU DROP? Getting caught in the hustle and bustle of the holiday shopping season can be very exciting...and retailers make it even more exciting by stocking their shelves with loads of holiday goodies in hopes that your spending goal will well exceed analysts’ expectations. According to a recent survey conducted by Salary.com, most people are planning to spend about 2.4% of their salary – or about $1,037 on average – on holiday shopping. How much are you planning to spend? Before you get too caught up in the spirit...and potentially end up spending more than intended, let’s take a look at a few tips that can save you from a holiday shopping “hangover” come January. TO CHARGE OR NOT TO CHARGE? Racking up credit balances during the holiday season is common, but can make your purchases far more costly than the initial price tag indicated. If you charge that average holiday spending amount of $1,037 on a credit card and make just the minimum payment most credit cards require, it will take over 11 years to pay the balance in full! Not to mention the extra $733 dollars you’ll pay in interest. Additionally, many retailers offer discounts or bonuses for opening their store card at the time of purchase. But beware – these are typically high rate, low limit cards that can actually hurt your credit score, due to the credit scoring system seeing a “maxed out” card as well as a credit inquiry. If at all possible, pay with cash versus plastic, unless you plan to pay the balance in full shortly after the bill arrives. THINK TWICE. Be cautious of impulse buys. Before you get in line to pay for an item, ask yourself if the gift is really within your price range. If not, continue looking until you find the right item at the right price. With shelves stacked high and many enticing odds and ends displayed in stores, it is easy to purchase unnecessary items. Walk away, think about it, and then decide whether or not you really need to purchase the item. BUY NOW, PAY LATER? Exercise caution with these enticing offers. Many retailers provide a no-interest or even no-payment plan for 30, 60, 90, even 365 days. And although it may sound appealing now, think twice before you sign on the dotted line. If you do not pay the balance in full when the interest free term expires, all the interest that should have been paid over time will be added to the balance in one lump sum by the merchant. If you can’t afford to pay the balance in full when the no interest term expires, it may be better to pass on the purchase altogether. Most importantly, before you go out shopping at all, think about what you want to purchase and set a budget. In fact, check out this free holiday spending worksheet: HOLIDAY PLANNING WORKSHEET. And don’t forget to keep in mind all the decorations, parties and other special items that the holidays often entail. Keep an eye on your spending, and enjoy a financially stress free holiday season this year!

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 December 5 – December 9

The material contained in this newsletter has been prepared by an independent third-party provider. The content is provided for use by real estate, financial services and other professionals only and is not intended for consumer distribution. 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, there is no guarantee it is not without errors.

As your trusted advisor, I am sending you the MMG WEEKLY because I am committed to keeping you updated on the economic events that impact interest rates and how they may affect you.