October 2 2006
For the week of Oct 02, 2006 --- Vol. 4, Issue 40
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"SOME PEOPLE'S MINDS ARE LIKE CONCRETE...ALL MIXED UP, AND PERMANENTLY SET" (Anonymous.) While the great thing about the economic markets is that they are never permanently set, they are often mixed up. And last week was one of those times, on a huge batch of interesting and sometimes conflicting news and headlines. Let's take a closer look at the mix of the week, and how it impacted home loan rates.
New and Existing Home Sales arrived with a conflicting read - Existing Sales a bit worse than expected, New Sales a bit better than expected - overall showing a moderate cooling in the housing sector, but no "bubble bursting". Prices appear to have flattened over the past 12 months, with some areas showing very modest increases and others showing very slight price declines.
Durable Goods Orders - Bigger ticket items that last longer than three years - came in very weak, suggesting purchases are slowing down due to the higher cost of financing. But then the Purchasing Manager's Index - which rates the health of the Manufacturing sector, which makes these products - was surprisingly strong. Personal Income and Spending came in lower than expected - but Consumer Confidence and Sentiment readings were very positive. What a mix indeed...Bond prices and home loan rates bobbed around midweek on the news, but ended up almost exactly where they began.
And that wasn't all - let's look at the inflation front, since it is the key driver of home loan rates...as well as being the largest determining factor on whether the Fed will decide to keep the Fed Funds Rate in a paused position, continue to hike, or revert to cuts in the near future.
The Federal Reserve's favorite measure of inflation is Personal Consumption Expenditure (PCE) Price Index, which came in showing inflation still remains higher than expected, and outside the range of what the Fed wants to see. The Fed wants inflation to be 1% to 2%, on a year over year basis. And the PCE, which is the Feds most important measurement of Inflation, showed a reading of 2.5%. That's a little higher than what the Fed wants, but showing signs of moving lower. Why is the PCE so important to the Fed...and to us as well? Here's the inside scoop - take this little detail to the water cooler, and impress your friends and coworkers!
PCE differs from the more widely watched CPI (Consumer Price Index) in a few important ways. CPI measures the change of the cost for a "fixed basket" of goods and services, and assumes that consumers will keep buying the exact same thing, regardless of price change, and assumes the consumer has endless resources to do so. PCE is far more accurate, because it is more realistic as to how the average shopper makes purchases. If the price of honeydew melons goes through the roof, a shopper will more than likely make substitutions, like cantaloupe...or even skip buying that item altogether, if this price has gone out of range. So let's continue to watch PCE in the months ahead to see if the Fed may be in a position to actually lower rates early next year.
REGARDLESS OF WHAT THE FED DOES AND HOW IT IMPACTS OUR FINANCES...WE ALWAYS WANT TO SAVE MONEY ON OUR PURCHASES. AND SINCE WE'RE STILL AHEAD OF THE CRAZY HOLIDAY SHOPPING SEASON, TAKE A MINUTE TO CHECK OUT THIS WEEK'S MORTGAGE MARKET VIEW FOR SOME UNBELIEVABLE SECRET SAVINGS YOU'LL BE GLAD YOU FOUND OUT ABOUT. |
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The week ahead is again full of news and events, including more news on Manufacturing, a speech by Fed Chairman Ben Bernanke on Wednesday, and the important monthly Jobs Report on Friday. Because the news of last week was so mixed, the events of this week will take added significance, as traders, analysts and armchair economists try to get a gauge on what really is happening in the economy.
The chart below shows how Bond prices have been in a clear uptrend, meaning home loan rates have been in a clear downtrend...and stand at their best levels in six months. So what would need to happen to see more improvement in home loan rates? Bond prices and home loan rates tend to benefit from weak economic news, as traders and investors move money out of the Stock market, and into the stable safety of the Bond market. On the other hand, strongly positive economic news causes money to move into Stocks, and away from Bonds, which may not provide the exciting gains that the Stock market can offer in a vibrant economy.
Bottom line: Weak economic news will help home loan rates improve, and strong economic news will generally cause home loan rates to worsen. Since the economic scene is a bit mixed at present with both some weak and strong indicators...the news this week will be very important, and likely provide the direction and tone for home loan rates for the near term.
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SHOP 'TIL YOU DROP!
If that phrase doesn't excite you - you are like millions of Americans who enjoy the convenience of shopping online. Doing your buying online is a great way to shop for anything from gadgets or the latest fashions to a quick gift for a friend...or maybe you plan to do all your holiday shopping online this year to avoid the crowds! Yet many "shop-a-holics" claim that by spending all the time scouring the stores, they are sure to get the best deals. But what if you could buy online, knowing that you got a good deal on the item...without having to invest hours of your valuable time pounding the streets, or surfing all over the internet to ensure the lowest price?
Well, wish no more.
Check out www.secretprices.com, loaded with special coupons and discounts for many popular online stores, such as Amazon, Brookstone and Sharper Image. Ever buy at Office Depot, Gap or Circuit City? The website is loaded with savings for all these companies - most of which are discounts on any purchase you make, not just for one particular item they are trying to get rid of. It's like having a personal "cyber shopper" that goes out and does the bargain shopping for you - it saves you time and money too.
Log onto the site, and click the link for "Coupon Center". If you see a particular vendor you are looking for, just click the business name, and you'll be led to a special page of their discounts. If you want to view them all - hit the link for "Latest Coupon Codes" to see a list of all the savings. You may also want to hit "Expiring Coupon Codes" to see if there are any discounts expiring soon that you'd like to take advantage of.
And don't miss hitting the link for "Latest Deals". Here you will find a wide range of special deals being offered on a wide range of products - printers for 50% off, cordless phones for 75% off...it's worth a few minutes to prowl around and see what you might be interested in! "Expiring Deals" have some hot specials too - again, worth a few minutes of browsing.
You can shop by category, with everything from books to jewelry to event tickets to clothing. Just pick the category and you can select the product from a variety of stores, compare the prices, read customer reviews, and then save even more with secret coupons and deals. And, best of all....it is safe, secure, and advertisement free. While on the site you will not be bothered by annoying pop-ups, flashing advertisement banners, or spyware.
So you don't have to shop 'til you drop - saving online is now easier than ever. And let's face it, it feels good to save money on your purchases, and saving a few bucks here and there adds up. Getting a good deal will not only save you money in the long run - but will make you feel better about purchasing the product in the first place. Know anyone else who shops? Of course you do - so feel free to pass on this article, and help them save money 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 October 02 – October 06
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01-17-2007, 11:12 PM
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