May 22 2006

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For the week of May 22, 2006 --- Vol. 4, Issue 21

Last Week in Review

THE SURVEY SAYS? Inflation remains a concern…a big one. Two important economic reports hit last week, and they both reeked of inflation. The Producer Price Index showed that wholesale producers of goods are experiencing higher costs, and right on its heels, the Consumer Price Index showed that those increased costs are being passed onto consumers…like you and me. And inflation is bad news for home loan rates, because inflation is the arch-enemy of Mortgage Bonds, which home loan rates are based on. This is because higher inflation erodes the buying power of the fixed payment that Bond investors receive over time. So in order to compensate for increased inflation…Bond investors require a higher rate of return…meaning home loan rates move up. And that's exactly what's been happening since the beginning of 2006, as we've seen home loan rates rise about .50% due to higher inflation. Bonds and home loan rates aren't the only ones who count inflation as an enemy - the stock market also took a nasty turn for the worse. The Dow came within 80 points of an all-time high, before dropping almost 500 points on the fears of inflation. The NASDAQ also took a ride lower, finally breaking an eight session losing streak last Friday…and narrowly averting the worst consecutive losing streak in over 20 years! AND SPEAKING OF NASTY RIDES, FANS OF THE HBO SHOW "THE SOPRANO'S" KNOW THAT BOBBY BACCALA SHOULD HAVE DONE A LITTLE RESEARCH ON THE WEB BEFORE TAKING HIS FAMILY TO A THEME PARK…WHERE HIS FAMILY WAS INJURED WHEN THE TEA CUP RIDE WENT OFF TRACK. THIS UNFORTUNATE INCIDENT HAPPENS MUCH TOO OFTEN IN REAL LIFE, SO READ THIS WEEK'S MORTGAGE MARKET VIEW TO LEARN HOW TO KEEP YOUR FAMILY SAFE DURING YOUR SUMMER ADVENTURES.

Forecast for the Week

And the wild ride will probably continue next week, with lots of twists and turns coming up on the economic news calendar. We’ll get the latest read on the health of the Housing market with New and Existing Home Sales numbers, as well as a piñata full of other reports. These reports take on added significance, and their results may cause more market volatility. Everyone is watching to see if the whiffs of inflation remain in the wind in an attempt to get an answer to the big question of if the Fed will continue to raise rates, or instead take a pause. The chart below shows how Bond prices have been on an ugly track lower recently. The news of the coming week will determine if home loan rates will continue to worsen. Chart: Fannie Mae 6.0% Mortgage Bond (Friday May 19, 2006)

The Mortgage Market View...

Memorial Day is quickly approaching, and that marks the start of the summer vacation season. It also means many families will be paying a visit to an amusement park. The rides can be a lot of fun....but before you jump on that roller coaster, Ferris wheel, or the famous tea cup ride, you may want to jump on the web first, and find out the scoop on your favorite amusement park. With just a few clicks of the mouse you can find out everything you want - and don't want - to know about popular theme parks in the United States, Canada, Europe, Asia, and Australia, simply by visiting www.themeparkinsider.com. Once on the site, hit the "Safety" link and view a complete list of verified accident reports, reports awaiting verification, and learn tips on how to keep you and your family safe on theme park rides. Additionally, click on the "Browse Parks" link and review the ratings and reviews of popular theme and amusement parks, or browse the top ten favorite parks, best attractions, best roller coasters, and even the "most disliked" attractions, so you don't get stuck wasting your time waiting in line for a bad ride. You can even look up your favorite theme or amusement park and learn the history, get directions, find out the best time to visit, where to purchase tickets, review safety reports specific to the park, and view the list of attractions and their ratings. You can also research dining options, shop hotels, and review featured articles like "How to Save Money with Theme Park Deals and Discounts". Summer is short, so do your research now and enjoy the ride!

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 22 – May 26 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.