April 24 2006
For the week of Apr 24, 2006 --- Vol. 4, Issue 17
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WHO'S IN THE HOUSE NOW? HU, HU, HU, HU! That's right...Chinese President Hu Jintao was in the White House last week, and his visit had the financial markets on edge. Why? Let's take a closer look, as the current situation between China and the US not only impacts home loan rates…but also the goods and services you purchase every day. Presently, there is a massive trade deficit between China and the US. How big is the deficit? To put it in perspective, aside from China - the US imports $4 worth of goods and services for every $3 we export. While this in itself represents a significant trade deficit, it's nothing when you compare it to China alone - where the US imports $18 for every $3 of exports.
This is because the Chinese currency - the Yuan - is very depressed in relation to the US Dollar, which makes Chinese goods and services very cheap in relation to what a comparable good or service would cost in the US. The US government can either force a change, by adding huge taxes and tariffs to all Chinese goods…or preferably, we can work together with China to solve the problem. If China were to agree to help reduce this massive trade imbalance, it would sure help US service providers and manufacturers, as then the Chinese equivalent would become relatively more expensive. However, the only way to do it is for the Yuan to gain strength against the Dollar...and the only way to achieve that is for the Chinese to buy less of our Bonds, which means home loan rates would rise.
Last week, there were no formal announcements as to a decision on this issue, so Traders breathed a sigh of relief. Bond prices and home loan rates improved very slightly over the course of the week, also helped along by the Fed Meeting Minutes, which indicated the long string of rate hikes may soon be coming to an end. And interestingly enough…the Minutes took analysts by surprise, due to their clarity and readability! In the past, the Meeting Minutes were so cryptic that they required quite a translation, but Bernanke is living up to his word, providing clear verbiage and transparency to the financial world.
SPEAKING OF WHO’S IN THE HOUSE…WHO’S IN YOUR HOUSE? IF A CONTRACTOR IS COMING SOON TO HELP OUT WITH A SPRING REMODELING PROJECT, BE SURE TO READ THIS WEEK’S MORTGAGE MARKET VIEW, WITH SOLID TIPS TO ENSURE YOU’LL BE WHISTLING A HAPPY TUNE AS THEY WORK. |
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A fresh week ahead…what’s in store, and what might impact home loan rates? Let’s take a look. First, a read on the health of the housing sector with the Existing Home Sales report for March on Tuesday, followed by the New Home Sales report on Wednesday. And the hits will keep on coming, as Traders will also check into Consumer Confidence, 1st Quarter Gross Domestic Product (GDP), the Employment Cost Index (ECI), and finally the Chicago Purchasing Managers Index (PMI) with a read on manufacturing.
What are Traders and analysts looking for in this alphabet soup? More than anything…signs of the “I” word, Inflation. And inflation erodes the value of a fixed return asset like a Bond, so any signs of inflation in the economy will pressure Mortgage Bond prices lower and cause home loan rates to rise. And better believe the Fed is watching too, as they contemplate their next moves and potential rate hikes ahead, with their next formal meeting coming up on May 10th.
But one look at the chart below shows that although Bond prices remain in a downtrend…meaning home loan rates are moving higher…there is some room for improvement in the coming week. It will all be based on how the news releases of the week come out, so stay tuned as these releases hit the wires.
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"GO ON…TAKE THE MONEY AND RUN…" Many people know this snappy tune by the Steve Miller Band, but it sure isn't the song you want to be singing when you've got contractors on the job in your home.
We've all heard the horror stories…contractors that "take the money and run" prior to completing jobs, provide low-ball bids and then slap homeowners with substantially higher invoices at the end, or quote unrealistic timeframes that force homeowners to wash dishes in the bathtub for twelve months versus three. With the bad reputation many contractors have, stories like these can make a homeowner cringe at the thought of embarking on a remodeling project if it entails hiring a contractor. However, not all contractors are alike, and if you invest the time to take some precautionary steps, you can avoid a nightmare and end up singing a pretty happy song. Here are a few important steps.
Before you hit the internet or start flipping through the yellow pages to find a contractor, phone friends or family members and ask for referrals. Ask questions about the reliability of the contractor, the overall satisfaction of work performed, if proposed timeframes were met, and if the contractor stuck to the budget. In addition, even if you get a great referral with the first call, continue dialing.
Obtain at least five referrals of contractors, set up meetings with each, and dig deep to find out pertinent information about the contractor and the company. Find out information about how long the company has been in business, if the company has ever operated under a different name, and if the company has ever been sued. You can search online with the Better Business Bureau, and even call your local Chamber of Commerce to see if they have any information.
Additionally, ask for references, phone all references, and set up a time to see the contractor's work if you are contemplating a large job. Include jobs done in the past so you can see if the contractor responded to issues after they had gotten paid. And since the contractor will most likely provide references for only exceptionally happy past clients, consider asking if you may contact the most recent three clients the contractor worked for…rather than just the standard reference names that they might provide normally.
If you feel comfortable with the answers you receive from contractors and their references, ask for a written estimate and review the contents carefully. Look for specific information such as detailed information about products and materials (make, model, color, brand, etc.), a clearly defined timeline and payment schedule, warranty information for work and materials, a mediation or arbitration clause, and a cancellation clause that allows a homeowner to cancel within three days of signing. For further protection and confirmation that the contract has been prepared correctly visit www.aia.org and purchase a sample contract for as little as $6.
Finally, before you sign on the dotted line, make sure the contractor and any subcontractors have all of the following in place:
License - Determine whether your state requires a contractor to be licensed or check the status of a contractor's license by clicking on the following link www.contractors-license.org. Additionally, phone the Better Business Bureau and inquire about any claims that have been filed and whether or not each has been resolved.
Liability Insurance - Confirm each contractor and any subcontractor has liability insurance. This protects the homeowner if either the contractor or his employees cause damage to the property.
Workers' compensation Insurance - Each contractor or subcontractor should have a workers' compensation policy. If the contractor does not have it and one of the workers is injured while working at the property, the homeowner can be held responsible.
Taking the above steps will not only provide you with the peace of mind that you are working with a true professional, it could save you thousands of dollars in the long run too! |
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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 April 24 – April 28
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01-17-2007, 09:12 PM
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