February 27 2006

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For the week of Feb 27, 2006 --- Vol. 4, Issue 9

Last Week in Review

“LIFE IS LIKE RIDING A BICYCLE. TO KEEP YOUR BALANCE, YOU MUST KEEP MOVING.” Albert Einstein And over the past week, the news sure kept coming…but was fairly balanced in nature, keeping Mortgage Bonds and home loan rates stable. Here’s how it all shook out. Early in the week, the Federal Reserve weighed in with their last set of “Meeting Minutes”, or commentary from the last formal meeting. Nothing overly juicy, but it does appear the Fed still has a concern about inflation, so another hike to the Fed Funds Rate on March 28th is virtually a lock, so watch for those Home Equity Line of Credit rates to bump a bit higher soon. Speaking of inflation, the Consumer Price Index (CPI) showed overall consumer prices to be on the rise, led by higher energy, food and housing costs. Because food and energy costs can be so volatile based on weather, the “Core” CPI which excludes them is heavily watched as well…it still showed increases, but was mainly in line with expectations. Additionally, geopolitical news took center stage, with substantial global turmoil during the week in areas vital to crude oil production. Shots and explosions in Eastern Saudi Arabia were part of a foiled attempt to blow up an oil refinery. Violence continues in oil-rich Nigeria. Iraq is fast approaching a civil war scenario. These current and potential interruptions in oil production are causing crude oil futures to rise – and although geopolitical concerns may help support Bond pricing in the short term on a “flight to quality” in the safe haven of Bonds – high oil prices lead to inflation, which is bad news for Stocks and Bonds alike…and therefore bad news for home loan rates if the commotion continues. CLOSE YOUR EYES…CAN YOU NOW REEL OFF AN ITEMIZED LIST OF EVERY SINGLE ITEM YOU OWN INSIDE YOUR HOME? MOST PEOPLE COULDN’T…SO IF YOUR HOME WAS DAMAGED OR DESTROYED, WOULD YOU BE PREPARED? GOOD NEWS, IT’S EASIER THAN EVER TO PROTECT YOURSELF AND YOUR FAMILY FROM THIS NIGHTMARE. OPEN YOUR EYES, AND DON’T MISS THIS WEEK’S MORTGAGE MARKET VIEW.

Forecast for the Week

So what will cause Bonds and home loan rates to bust a move and break out? The week ahead is chock-full of economic news…and it’s very likely that the flavor of news will cause Bonds and home loan rates to make a convincing move one way or the other. And we’ll be getting a nice broad look at the economy, with a read on housing, manufacturing, consumer confidence, and inflation. Remember, if the news shows continued signs of a strong, robust, growing economy…this will likely flow money into Stocks and away from Bonds, causing home loan rates to worsen. But if the news gives any indication of weakness, Bonds might be able to muscle higher and bring some improvement to home loan rates in the near term. But Bonds have lately been having a rough time improving in price, as they are being held down beneath stiff layers of “resistance”. Take a peek at the chart below…notice all the colored lines just over where the Bond is currently trading? These lines each represent the Moving Average of where Bond pricing has been in the past 25, 40, 50 and 100 days, and these lines can act as a “ceiling of resistance” when they lie overhead, holding Bonds at current levels and preventing much improvement in home loan rates. But if the coming news is weak, and helps Bonds power past this resistance, these Moving Averages become “floors of support”, that will help Bonds and home loan rates hold onto the improvement they might gain. Chart: Fannie Mae 6.0% Mortgage Bond (Friday Feb 24, 2006)

The Mortgage Market View...

SO…DO YOU “KNOW YOUR STUFF”? Just imagine the nightmare of having your home damaged or destroyed…and then add to that nightmare needing to recreate and remember all of the contents of your home for insurance and replacement purposes. Many thousands of Americans found themselves in exactly that situation last year – so ask yourself, if it happened to you, would you have been prepared? Taking the time to put together a list documenting all of the contents in your home could be a very daunting process for most. But the Insurance Information Institute has now streamlined the process for creating a home inventory list by allowing consumers to download a FREE copy of the "Know Your Stuff" software by visiting www.knowyourstuff.org. The software is very user friendly, only takes a few minutes to download, and all the information entered will be saved on your local hard drive. Using the software is super easy, as you will be prompted to provide specific information for the initial setup. Once the setup is complete, create a name for each room in your home – kitchen, living room, family room, master bedroom, etc – and begin adding items. Adding items to your room by room inventory is simple; a drop down list is available with the most common household items as well as the specific information required by insurance companies should a claim need to be filed. Want to add a picture or a receipt for a large ticket item? No problem, just upload the image. The software also has a category for donating items. Whether this is done while preparing the home inventory or in the future, just enter the item you wish to donate, print the list, and provide the list to your tax accountant at tax time. Once you have completed your home inventory, be sure to have your insurance agent review your home inventory list to insure your current policy has sufficient coverage. It is also important to save a copy of your home inventory on a CD and store the CD in a fireproof safe or safe deposit box. Or, email a copy of the inventory list to a trusted friend or family member. The time investment is well worth the effort, should you ever be faced with the unfortunate situation of filing an insurance claim. And having a detailed list of the contents of your home available may even expedite the processing of your claim. Additionally, when shopping for insurance, having an inventory list available for your insurance agent will ensure your policy provides adequate coverage for your valuable possessions. Should you need a referral for a qualified homeowner’s insurance agent, please feel free to contact me.

The Week's Economic Indicator Calendar

All times listed in the table below are Eastern. 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 February 27 – March 03 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.