June 12 2006

[Troy]

For the week of Jun 12, 2006 --- Vol. 4, Issue 24

Last Week in Review

TRYING TO SQUASH A RUMOR IS LIKE TRYING TO UNRING A BELL…meaning once the words are out there, they are out there, and are very hard to recall. And with last week's light news calendar, all ears were straining for any words from the Fed. Chairman Ben Bernanke had wanted a more open, understandable, clear Fed message - and it appears that the Fed Governors and Presidents took that message to heart, leaking their own opinions on the economy and inflation and rate hikes in just about every lecture that they give. And their words have been leading to rampant rumors and speculation in the markets over the Fed's next move due on June 29th - will they hike the Fed Funds Rate yet once again, or will they pause and provide a chance for all the recent hikes to "catch up", and be fully felt in the economy before going any further? Historically, the Fed always goes too far, especially when there's a new Fed Chair in the house. When Alan Greenspan took over as Chairman in 1987, he felt the need to show he was tough on inflation, and over seven months persistently raised the Fed Funds Rate. And most of us know what happened next…in October of 1987, the stock market crashed, unemployment rates rose and home prices began to decline in many areas of the nation. Bernanke doesn't want to repeat any mistakes his predecessor made…but being under the gun to show that he'll fight inflation, is he destined to repeat past history? He's certainly in the crosshairs of the market - and perhaps he's rethinking all this open, understandable Fed Policy business…it's probably caused him some headaches of late. And while the market tried to handicap the Fed's next move, home loan rates treaded water as the market awaits the last release of inflation-measuring news that the Fed will hear before the meeting. SO YOU JUST FOUND YOUR DREAM HOUSE…IT'S PERFECT. THE KITCHEN, THE CLOSETS, THE YARD - BUT WAIT, WHAT IF THE LOCAL SCHOOLS RANK MISERABLY? THERE'S A WAY TO KNOW BEFORE IT'S TOO LATE. READ THIS WEEK'S MORTGAGE MARKET VIEW TO FIND IF YOUR LOCAL SCHOOL GETS AN "A"…OR AN "F".

Forecast for the Week

The economic news calendar is back from its recent hiatus, with an action packed week in store. Remember that as investors, analysts, traders and the market at large tries to predict what the Fed might do next, every economic report takes on added significance. And some big hitters are in store for the week ahead, including Retail Sales – how much consumers are buying; the Producer Price Index (PPI) – inflation on the wholesale level; and the Consumer Price Index (CPI) – inflation on the retail level. Lots of information will be loaded into these reports…and that nasty “I word” - inflation - is the main focus, as the market continues to try to read the tea leaves. It’s likely that the outcome of these reports will determine whether the Fed will hike or pause on June 29th. The chart below shows how Bond prices and home loan rates have fought for improvement in recent days…but lying just in the path is a tough overhead ceiling that just might keep a lid on any gains. If the reports of the week show that inflation is contained on the producer and consumer side, it just might give Bonds the extra “oomph” they need to power through the ceiling, and help home loan rates improve. But if the news stinks of increased inflation, the ceiling will influence Bond pricing to quickly worsen and cause home loan rates to rise. Chart: Fannie Mae 6.0% Mortgage Bond (Friday Jun 09, 2006)

The Mortgage Market View...

NO MORE HOMEWORK, NO MORE BOOKS, NO MORE TEACHERS DIRTY LOOKS! This familiar chant means it is finally time for summer break…and exactly the time of year that many families will be considering making a move to a new home. Shopping for a new home can be a very exciting adventure when it comes to exploring new neighborhoods, cities, and sometimes states. But no matter how near or far, moving to a new home can still require a lot of homework. And much of that homework can be the research required to determine if that perfect neighborhood contains the right school district for your children. Researching schools and school districts can be a time consuming project, but the last thing you want to do is spend your summer researching statistics about schools. So don't let that research project consume your entire summer…sharpen your pencil, pull out your notebook, and log onto www.SchoolMatters.com to find all the answers that you need to know about any school or school district nationwide. This great site has all the statistics and information you need about local schools in your new neighborhood, to help you make decisions and ensure that your children end up in the right school. Want to know the enrollment size of the school, test scores, teacher-student ratio, English and Math proficiency percentage information? No problem, the site will provide all of that information and more. And if you want to compare schools in different locations, simply select the top schools of your choice and perform a comparison. And if your upcoming move requires relocating to a new state, you can even find out statewide educational information. Enter the state you would like more information about, hit go, and receive detailed information about the educational system, including a breakdown of how students performed on state reading and math tests as well as college prep tests, and community demographics. And even if you're not planning a move, this is interesting data to have on your home state anyways! If a move to a new school district is on the slate for your family, taking the time to do some research will help ensure the experience is a good one. And remember to forward this article on to family or friends who may be contemplating a move. They - and their kids - will thank you for it!

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 June 12 – June 16 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.