This Week’s Market Commentary

This week brings us the release of four pieces of relevant economic news in addition to the minutes from the most recent FOMC meeting.

None of the economic reports are considered to be highly important to the markets or mortgage rates, but they do carry enough significance to influence mortgage rates if they show a wide variance from forecasts.
Nothing of importance is scheduled for today, so look for the stock markets to be a major influence on bond trading and mortgage pricing. If the stock markets open the week with sizable gains, bonds will likely suffer and mortgage rates will probably move higher tomorrow. However, more stock weakness could translate into slightly lower rates tomorrow. The mortgage market took a small turn for the worse Friday afternoon, so unless your lender revised pricing higher late Friday you may have a slight increase in rates waiting for you.

The week’s first data comes early Tuesday morning when April’s Housing Starts will be posted. This data measures housing sector strength and mortgage credit demand by tracking newly issued permits and actual starts of new home construction. It is expected to show an increase in new starts from March’s readings. Since this report is not considered to be of high importance to the bond market, it likely will have little impact on mortgage rates unless it varies greatly from forecasts.

The second report of the day is April’s Industrial Production at 9:15 AM ET. It measures manufacturing sector strength by tracking output at U.S. factories, mines and utilities. It is expected to show a 0.5% increase in production, indicating that manufacturing activity is growing.

A smaller than expected increase in output would be good news for the bond market and mortgage rates because it would indicate that the manufacturing sector is not as strong as thought. This report is equally important to the markets as the earlier housing report, so they both will likely need to show unexpected strength or weakness for them to cause a sizable movement in mortgage rates.

Wednesday’s only relevant release is the minutes of the last FOMC meeting. Market participants will be looking for how Fed members voted during the last meeting and any comments about inflation concerns in the economy and economic growth. The goal is to form opinions about when the Fed may make a move to key short-term interest rates. Since the minutes will be released at 2:00 PM ET, if there is a market reaction to them it will be evident during afternoon trading.

The National Association of Realtors will give us their Existing Home Sales report late Thursday morning. This data tracks resales of homes in the U.S. during April, giving us a measurement of housing sector strength. This type of data is relevant because a weakening housing sector makes a broader economic recovery less likely. Current forecasts are calling for a small increase in home sales between March and April. Ideally, the bond market would prefer to see a decline, indicating further housing sector weakness. A large increase in sales could lead to bond weakness and a small increase in mortgage rates Thursday morning.

The last data also comes late Thursday morning with the release of April’s Leading Economic Indicators (LEI). This Conference Board report attempts to measure economic activity over the next three to six months. It is expected to show no change from March’s reading, meaning that economic activity is likely to remain flat over the next few months. A decline would be good news for the bond market and mortgage rates, while an increase could cause mortgage rates to inch higher Thursday.

Overall, it looks like we may see a fairly calm week in mortgage rates unless something unexpected happens or the stock markets make a big move upward or downward. I can’t really label one particular day as the most important one. If the stock markets remain fairly calm, I would guess the middle part of the week will probably be the most active for mortgage pricing. However, sizable gains or losses in the major stock indexes could influence bonds and mortgage rates more than this week’s economic data can.

Understanding Your Credit Score

Your credit score is one of the biggest determining factors in your ability to get a quality loan, and it is far more complex than just a three-digit number.

Yahoo! Personal Finance recently wrote an in-depth piece about understanding the intricacies of your credit score and what it means.

According to the article, “consumer research conducted by the Consumer Federation of America and VantageScore Solutions shows that many Americans don’t really understand their credit scores.”

The lower your credit score, the higher interest you will pay on loans and any line of credit. Understanding the basics of credit scores can help you achieve your goals, including home ownership.

Click here to view the article and learn more about credit scores.

Spring Cleaning 101

It’s that time of year again – time to get rid of the clutter and clean up your home. In this video from CBS, O Magazine’s Creative Director Adam Glassman shares some tips on identifying and clearing clutter and older things you no longer need.

This Week’s Market Commentary

There are five pieces of relevant economic data scheduled for release this week that may affect mortgage rates, in addition to two important Treasury auctions.

The four most important four reports will be posted over two days, meaning the markets will have to rely on factors other than economic news for direction several days. There is no relevant data due today or Tuesday, so expect the stock markets to help drive bond trading and mortgage rates those days.

March’s Goods and Services Trade Balance report will be released early Wednesday morning. This report gives us the size of the U.S. trade deficit but likely will not have much of an impact on the bond market or mortgage pricing. It is expected to show a $47.8 billion trade deficit, but it is the least important of this week’s data and likely will have little influence on Wednesday’s mortgage rates.

The Treasury will hold a 10-year Note sale Wednesday and a 30-year Bond sale Thursday. Results of the auctions will be posted at 1:00 PM ET each day. If they are met with a strong demand from investors, we could see bond prices rise enough during afternoon trading to cause downward revisions to mortgage rates. However, lackluster bidding in the sale, meaning longer-term securities are losing their appeal, could lead to higher mortgage pricing those afternoons.

The first important piece of data this week is April’s Retail Sales, which will be released at 8:30 AM ET. It is an extremely important report for the financial markets since it measures consumer spending. Consumer spending makes up two-thirds of the U.S. economy, so this data can have a pretty significant impact on the markets. Current forecasts are calling for a 0.6% increase in sales from March to April.

A weaker than expected level of sales should push bond prices higher and mortgage rates lower Thursday morning as it would signal that economic activity may not be as strong as thought. However, a larger increase could fuel fears of economic growth that would lead to bond selling and higher mortgage rates.

April’s Producer Price Index (PPI) will also be released early Thursday morning. It helps us measure inflationary pressures at the producer level of the economy. If this report reveals weaker than expected readings, indicating inflation is not a concern at the producer level, we should see the bond and stock markets rally. The overall index is expected to show an increase of 0.5%, while the core data that excludes more volatile food and energy prices has been forecasted to rise 0.2%. No change or a decline in the core data would be ideal for mortgage shoppers because inflation is the number one nemesis for long-term securities such as mortgage-related bonds.

Friday has the remaining two reports. The first is April’s Consumer Price Index (CPI) at 8:30 AM ET. It is similar to Thursday’s PPI report, but measures inflationary pressures at the more important consumer level of the economy. These results will be watched closely and can lead to significant volatility in the bond market and mortgage pricing if they show any surprises. Current forecasts are calling for a 0.4% increase in the overall index and a 0.1% rise in the core data reading. As with the PPI, the core data is the more important of the two readings.

The last report of the week is May’s preliminary reading to the University of Michigan’s Index of Consumer Sentiment. This index measures consumer willingness to spend, which relates to consumer spending. If consumers are more confident of their own financial situations, they are more apt to make large purchases in the near future. This report usually has a moderate impact on the financial markets though, because it is not exactly factual data. It is expected to show a reading of 69.8, which would be no change from last month’s final reading.

If it shows a large decline in consumer confidence, bond prices could rise and mortgage rates would move slightly lower, assuming the CPI does not give us a significant surprise. The CPI is much more important to the markets than the sentiment index is, so look for it to be the biggest influence on Friday’s mortgage pricing.

Overall, it likely will be another active week for mortgage rates. Besides the week’s important economic news, look for the stock markets to be a major influence on trading. The most important day of the week is Thursday with the Retail Sales and PPI reports on the agenda, but Friday’s CPI is extremely important to the bond market. It appears we will likely see the most movement in mortgage rates the latter part of the week unless the stock markets post sizable gains or losses the first part. With some very important data being posted this week, it would be prudent to be attentive to the markets if still floating an interest rate.
For the most recent daily market commentary, click here.

5 Things to Think About When Looking for Your Dream Home

While on the hunt for a perfect home, it can be immensely helpful to create a wish list of sorts. This can help you and your real estate agent obtain a clear picture of what type of home would best suit you.
Some things to consider:

1. Move-in ready or fixer-upper?
Making a home “your own” can make fixer-uppers an attractive option, along with the lower cost. Making a mark on your new home via renovations. Take some time to think about what homeownership means to you, and whether you are interested in renovation.

2. Upgrades
Certain upgrades in a home, such as marble or granite counters, are often coveted by buyers. Consider what type of upgrades are important to you – energy-efficiency, professional grade appliances, luxury tiling? Make a list and show your Realtor.

3. The Yard
What type of backyard are you looking for, and how important is it to you? Think about low versus high maintenance yards, the amount of space you’d like, and what kind of yard would best suit your lifestyle.

4. Swimming Pools
For some homebuyers, having a swimming pool can be a dealbreaker. If this is something that you really desire in your dream home, make that clear to your real estate agent so that they can narrow the search for you.

5. Schools in the Area
Last but certainly not least, the quality of the schools in the area of a dream home should be an important thing to research. Ask your Realtor for information about schools in the area of your search, and comparisons between them. This information is easily obtained, and real estate agents will be more than happy to show you school scores and more. Also consider private schools, if that is an option for your family.

Blood Drive Coming Soon

Mortgage California will be holding a blood drive on May 13 at our company headquarters in Los Gatos. Every three seconds, someone is in need of blood, and by donating, you can save lives.

The drive, run by Blood Centers of the Pacific, will be held on Friday May 13th from 10 am to 2 pm at 16780 Lark Avenue in Los Gatos.

To sign up for this live-saving event, call our front desk at (408) 355-2000. You can also sign up online by going to www.bloodheroes.com, click “Donate Blood,” and enter the Sponsor Code princeton.

If you have any questions, feel free to e-mail Laurie De Mello at lauriedemello@rmrfinancial.com

Four Ways to Spice Up an Open House

Open houses are a great way to meet potential clients, and showcasing the home in an attention-getting way can cement potential sellers’ confidence in the Realtor.

1. Take advantage of branding opportunities.
Water bottles on hot days with a custom label can be a great source of advertising. A picture of the house with contact information on the bottle is not only fun, but a way to keep both the home and the Realtor in the mind of the visitor after the open house.

2. Go beyond the basics with food.
You may have heard the age-old technique of baking cookies in the home to infuse it with the scent of homemade treats. However, food at an open house can be another way to stand out. It can encourage people to stay longer and strike up a conversation. Think outside the box – ice cream, chocolate fountains with strawberries, or lattes from an espresso machine.

3. Don’t forget the music.
Having music softly playing enhances the atmosphere and detracts from an empty feeling in the home and makes it more inviting. Soft jazz or other non-lyrical music can be played from an iPod and dock system. Have it centrally located so the music is heard throughout the home.

4. Consider the early evening
A recent Realtor Magazine article suggested holding open houses not only on Sundays, but during twilight hours. This way, people can visit the home directly after work, expanding the potential buyer pool.