May 1 2006

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For the week of May 01, 2006 --- Vol. 4, Issue 18

Last Week in Review

"I HAVE NEVER DEVELOPED INDIGESTION…FROM EATING MY OWN WORDS." Winston Churchill But the media may not feel exactly the same way, especially when housing reports came in super strong once again this week, and offered the media a full plate of their own "bubble-talk" to eat up and enjoy. News anchors were stammering when Existing Home Sales for March came in at 6.92 million homes sold…far greater than the 6.65 million projected by economists. This was followed up with New Home Sales showing their largest jump in 13 years! And the closely watched new home inventory number fell from 6.3 months to 5.5 months - matching the inventory number for existing homes - which suggests there is no overbuilding currently taking place. Later in the week, Fed Chair Big Ben Bernanke suggested that inflation appears to be controlled, and the Fed may finally be about done raising rates. Knowing that his every word is picked apart and analyzed, he went ahead and used the emotionally charged word "pause" in the same sentence with "rate hikes" before the congressional Joint Economic Committee, and the markets liked it. While analysts still don't agree on when the Fed may pause, there is beginning to be more widespread agreement that they may take a breather after another .25% hike at the upcoming May 10th meeting. While Bond prices and home loan rates had worsened slightly based on the hot housing news early in the week, Bernanke's comments were a soother, and home loan rates ended the week basically unchanged. TAX SEASON IS FINALLY BEHIND US, BUT YOUR GUARD HAS TO BE UP YEAR ROUND AGAINST SCAMMERS. THE LATEST SCAM THAT IS HITTING THOUSANDS OF AMERICANS IS A PHONY TAX REFUND, AND IT’S FOOLING EVEN THE SAVVIEST. READ THIS WEEK’S MORTGAGE MARKET VIEW, AND FORWARD ON TO YOUR FAMILY AND FRIENDS FOR THEIR PROTECTION AS WELL.

Forecast for the Week

Now the week ahead promises to be interesting, with a good look at money and economics right down at the consumer level. Monday will tell us the latest personal income and personal spending rates, which is a good read on how the typical American is doing - how much are they making, how much are they spending…and are they saving anything at all? We are a nation of spenders, with a negative savings rate at present…and it will be interesting to see how these numbers are shaping up, especially considering the recent super high prices of oil, and all of the many related products and services. In other big news - Friday will bring the monthly Jobs Report, showing how many jobs the US economy added during the month of April. Job growth continues to be strong overall, and with the next Fed meeting right around the corner, Bernanke and the team will be dissecting this report very closely. Because the job market has been so strong, they have a concern over "wage-based inflation", which means that employers need to pay more to attract and retain employees in a good job climate. The business then generally needs to raise the price of their goods or services, since they have higher wages to pay out. The price of their product moving higher in this scenario is called "wage-based inflation"…and inflation of any flavor is what the Fed is called to control. The chart below shows that Bonds are trying to stabilize, but have been on a clear downtrend in recent days, causing home loan rates to rise. If the news of this week continues to be strong and positive for the US economy, it's likely that Bonds will continue on their downtrend and home loan rates may continue to tick higher. Chart: Fannie Mae 6.0% Mortgage Bond (Friday Apr 28, 2006)

The Mortgage Market View...

THEY'RE BAAA-AAACK….and the "phish" smells worse than ever. Internet "phishing" scammers are at it again, and this time more people than ever are getting lured in. The email looks like an official update from the IRS, the senders email address looks official, the IRS logo is on the email…and the subject line would lure in any hardworking taxpayer with its tasty bait that smells of a tax refund from Uncle Sam. But watch out…even though it looks legitimate; don't let these internet thieves catch you with their hook. You could soon find yourself tangled up and struggling to rid yourself of a nasty case of identity theft. Here is the scoop: A bogus email shows up in your inbox from tax-refunds@irs.gov and has a subject line that reads "Refund Notice", appearing to be from the IRS. If you click on the email to view the contents, it will state that you are entitled to a tax refund for a specific amount of money, usually $63.80 or $163.80 for some reason. However, to obtain the refund you must complete a tax refund form by clicking on a link contained in the email. Do not click on the link…the IRS does not communicate with taxpayers via email, certainly never asks for personal identifying or financial information via email, and does not require online forms to be completed to receive a refund. This scam has been working, since everyone "does business" with the IRS, whereas some of the other common phishing scams that copy traditional financial institutions information (like Bank of America), may not even be a company that is used by the recipient. Also, since the tax system is so confusing, it's easy for someone to believe that there may be some extra refund money laying on the table at the IRS. But if you do click on the link or provide any information, these internet thieves are hoping they can capture your personal information and use it to run up charges on credit cards, apply for new loans, or even file fraudulent tax returns. If you receive an email of this type, here's what you should do to protect yourself: Delete any unsolicited emails that have "IRS" in the email address. Find out if the IRS is trying to contact you regarding a refund by calling 1-800-829-1040. If you need to visit the IRS site, go there directly by typing www.irs.gov into your web browser, never via a link within an email. If you accidentally open a bogus email, do not open attachments or click on links. They may contain malicious code that could infect your computer. Phishing is becoming more and more popular and identity thieves are becoming more sophisticated at using technology to create exact replicas of websites. With identity theft cases on the rise, it is important to use caution when opening emails that are unsolicited or unfamiliar, especially from any type of financial institution, including the good old IRS offering a "refund". It's like the old saying goes…if it seems too good to be true, it probably is.

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 May 01 – May 05 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.