July 31 2006

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For the week of Jul 31, 2006 --- Vol. 4, Issue 31

Last Week in Review

DING DONG…THE FED IS DEAD! OK…maybe not dead, but the chances of a Fed Funds Rate hike on August 8th are looking slimmer and slimmer. After seventeen consecutive rate hikes, it looks as if the Fed will pause at the August 8th meeting - which means the cost to finance business and personal goods and services will finally stop climbing. Including rates on Home Equity Lines of Credit! Why are they likely to pause? Last week's news shows the US economy is indeed slowing, with Gross Domestic Product (GDP) numbers for second quarter coming in lower than expected…and less than half of last quarter's number. And this low number confirms Bernanke's recent comments that the economy is slowing. And it all makes sense - the reason for the slowdown is apparently from the relentless barrage of Fed rate hikes, designed to slow things down and prevent runaway inflation, and it appears the Fed's strategy worked. The week's news showing an end in sight to the Fed hikes was good news for Mortgage Bonds, and home loan rates stabilized, or in some cases, improved slightly. And even with a moderation in the housing market, there's still no place like home. Last week also brought a read on the housing market, with New and Existing home sales numbers. The numbers were decent, not too far from expectations, and confirmed Fed Chair Ben Bernanke's recent comments that the housing market appears to be experiencing a slowdown which is "orderly". EVEN THE SCARECROW FROM THE WIZARD OF OZ HAD ENOUGH OF A BRAIN NOT TO FORWARD SPAM EMAIL. AND ALTHOUGH YOUR INTENTIONS MAY BE GOOD, JUST TO SHARE INTERESTING, FUNNY OR HELPFUL INFORMATION - THINK BEFORE YOU FORWARD AND PUT YOUR FRIENDS AT RISK. READ THIS WEEK'S MORTGAGE MARKET VIEW FOR EASY WAYS TO CHECK IT OUT.

Forecast for the Week

The week ahead is bound to be another twister, as we edge closer to the Fed's next big get-together on August 8th. And this week holds an important report that might just make the odds of another Fed Funds Rate hike clear…the monthly Jobs Report. Currently, analysts are expecting to see 145,000 new jobs created. If the number misses the mark, it will add to the feeling that the Fed may indeed pause at the next meeting. But if the number turns out to be a blockbuster…the chance of the Fed hiking again might remain in question. When determining where home loan rates may head in the coming weeks, technical indicators become less important in the face of big news headlines - like the Jobs Report number and the Fed rate decision will be. But it's still important to watch the technical factors, to gauge where we've been…and where we may be headed. The chart below shows how the 100-day Moving Average of Mortgage Bond pricing has been a wicked technical "ceiling" to break in recent months. Every time Bonds have approached it in the attempt to gain more improvement and see home loan rates decline…the ceiling has pushed Bond prices lower and home loan rates have risen. As Bond prices approach the ceiling again, the likelihood of a breakthrough higher and improvement in home loan rates will likely rest squarely upon the flavor of the news this week, most importantly, Friday's Jobs Report. Weak economic numbers or news of low inflation would be good news for Bonds and home loan rates as well. Chart: Fannie Mae 6.5% Mortgage Bond (Friday Jul 28, 2006)

The Mortgage Market View...

BELIEVE IT…OR NOT? Could it be true? Microsoft and AOL have merged…and all you need to do to help them with their market research is to forward an email? And then Bill Gates will send you a huge check to reward you for your services? And this time, it's definitely real, because the person at the beginning of the email chain named "pdiddy234" really did receive a check! It's true! Whoa. If you believe this one, there are all kinds of unsavory folks out there waiting to dish you more of the same. It's just like Mom and Dad used to tell you - if it sounds too good to be true, it probably is. Scammers, spammers, phishers…they're out there in full force, and waiting to jump into your inbox, hoping they can rope you, your friends, and your family into their nasty corral. They pull at your heart strings with notes about missing or sick children or money needed for seemingly good causes…but then may attempt to nab your personal information to take advantage of your great credit. And worse yet, they often do it so well that you feel the need to pass this "important" or dramatic information along to all of your friends, family members, colleagues, and sometimes clients. But what if you passed along information that created a financial hardship for someone you know? No matter how legitimate an email looks, it pays to do a little research and get the facts about emails before you hit forward. Let's take a look at two easy sites you can use to check those emails out…or just visit to see some of the funny, interesting, and downright scary spam emails currently floating about the net. You can get all of the dirt on the emails that you are receiving with just a few clicks of the mouse. You can visit www.truthorfiction.com to check the story out quickly and easily. Categories of topics are clearly listed, along with their determination of if the email story is indeed Truth…or Fiction. This site also lists many of the current viruses and worms traversing the internet, and gives you tools and information to help remove them. Another great site is www.snopes.com, helping you easily find out if the email you received is the truth, a hoax, or something in between. Simply hit the "Inboxer Rebellion" icon, then choose the topic that the email may fall under (e.g., boycotts, charity, missing and sick children, petitions, phishing expeditions, etc.), and each claim listed under that category will be marked with a color-coded indicator. For example: green identifies true statements, red identifies false statements, and yellow identifies statements of undetermined or ambiguous veracity. Treat the findings like driving a car, green means go and red means stop. So, if the email you receive is marked with a green dot, feel free to forward on, if red trash it, and if yellow, do a bit more research before passing it along…or do your email list a favor and just delete it. Additionally, think twice before sending the poems, stories and clips that tell the recipient to send on to more people within a certain period of time, so that they will enjoy good luck, prevent disaster, meet the person of their dreams…etc. Do your friends really appreciate receiving these? And how does this reflect back upon you? It may be all in fun, but think twice before blindly hitting forward. We all like to share valuable, interesting or funny information, or attempt to help someone who appears to be in dire need. And it is so easy to go into your address book, choose the emails of recipients and just hit forward. But taking the time to do a little research first and think twice before forwarding will save you money, time…and perhaps even a friendship.

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 July 31 – August 04 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.