January 23 2006

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For the week of Jan 23, 2006 --- Vol. 4, Issue 4

Last Week in Review

IT’S A SMALL WORLD AFTER ALL...and news from around the globe impacted our financial markets this week, a great example of how unexpected events from all over the world can cause changes in home loan rates. The biggest news headline was Osama bin Laden, apparently crawling out from his cave long enough to offer a "truce" to the US, accompanied by threats of stepped up attacks. Iran’s nuclear program is causing some major concerns, and continued civil unrest in oil-rich Nigeria is causing crude oil prices to rise above $67/barrel. Because negative geopolitical news tends to send investors toward the perceived safe haven of Bonds on a “flight to quality”, Bonds have been moving slightly higher on the news and home loan rates are stabilizing at present levels. And right here at home, the Stock market had a brutal week as Dow components General Electric and Citigroup released disappointing earnings reports. Because Stocks and Bonds generally compete for the same investment dollar, downward movement in Stocks tends to benefit Bonds. In the Housing Sector, the rate of new home construction and the number of new building permits cooled off from their record pace, but are still very strong by historical measures. BUT SPEAKING OF IT BEING A SMALL WORLD...IT’S EVIDENTLY BIG ENOUGH THAT THE IRS CAN’T LOCATE 87,000 TAXPAYERS WHO ARE DUE OVER $75 MILLION IN REFUNDS FROM LAST YEARS TAX RETURNS! THEY WANT YOU TO HAVE IT, SO IF YOU ARE NOT ABSOLUTELY SURE YOU RECEIVED YOUR FEDERAL TAX REFUND DURING 2005, IT JUST MIGHT BE WORTH YOUR TIME TO LOOK...YOU COULD BE ONE OF THE LUCKY ONES WHO ARE ACTUALLY GLAD THE IRS FOUND YOU! READ THIS WEEK’S MORTGAGE MARKET VIEW.

Forecast for the Week

Take a look at the chart below, showing that Bond prices have been in a clear uptrend, bringing improvement in home loan rates. In fact, Bonds have been trading in this channel since early December, but have now reached a level that hasn’t been breached consistently in well over a year. Will Bond prices keep moving higher, causing home loan rates to drop? Or will they be forced down lower once again, causing home loan rates to increase? It will likely take a strong catalyst to force the next move...so let’s peek at what might be waiting around the corner. Further news and information on Osama’s threats could support Bonds and home loan rates to hold their present levels in a continued “flight to quality”... News on the housing market is due this week, but aren’t likely to cause big motion in Bonds and home loan rates unless the numbers are a real surprise... Stocks and Bonds compete for the same investment dollar, so if Stocks continue their slide lower, Bonds may edge higher sending home loan rates lower...but if Stocks rebound, Bonds may come under selling pressure thereby sending home loan rates higher... And Traders are already gearing up for the next Fed meeting and predicted rate hike on January 31st – Uncle Alan Greenspan’s last Fed meeting before Big Swinging Ben Bernanke takes the reins. Will Big Al give some market-moving commentary in his historic final statement? We’ll all have to wait and see... Bottom line? There may be some surprises in store, so keep tuned to the news, remembering that positive economic and geopolitical news tends to be bad for Bonds and home loan rates, and negative economic news and events tends to bring improvement in Bond pricing and home loan rates. Chart: Fannie Mae 6.0% Mortgage Bond (Friday Jan 20, 2006)

The Mortgage Market View...

SHOW ME THE MONEY...PLEASE! If you are one of the thousands of individuals who filed a tax return during 2005 and never received your hard-earned refund, Uncle Sam wants you! The Internal Revenue Service is looking for 87,000 people to hand last year’s refunds to...which were returned to the IRS as undeliverable by the postal service. And the refunds are nothing to sneeze at either. There is over $75 million dollars waiting to be claimed, with the average tax refund check at $871. If you moved in 2005, it could be worth your while to take the time to research if you had a refund coming your way. Researching is easy and can be done with a few clicks of the mouse. However, before you run to your computer, pull out your 2004 tax return as you will need some specific information from the return itself. Once you have the return in your hands, simply visit www.irs.gov and hit the link “Where’s My Refund”? You will be prompted to enter the following information: Social Security Number or Tax Identification Number Filing status (i.e., single, married filing joint return, married filing separate return, etc.) Exact refund amount (listed on page 2 of your Federal Income Tax Return) The above information must be the same as documented on your tax return. If you enter the wrong information, the system will not be able to process your request. Note that you can only perform the online inquiry if you did not receive your check within 28 days of the original IRS mailing date. Additionally, once you complete all screens and have obtained your refund status, be sure to close the browser so that anyone with access to your computer can’t get a hold of your social security number.

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 January 23 – January 27 Date ET Economic Report For Estimate Actual Prior Impact

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.