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Weekly Mortgage Update, February 15, 2011

February 15, 2011

For the week of Feb. 14, 2011– Vol. 9, Issue 7

In This Issue…

Last Week in Review: Uncertainty in Egypt and in the Bond market make for a back-and-forth week! Read below to see how Bonds and home loan rates fared.

Forecast for the Week: This week’s schedule picks up with big reports on sales, manufacturing, and inflation. Find out what you need to watch!

View: If you don’t live close enough to an elderly parent to help with daily money tasks, what can you do to help them? Here’s your answer!

Last Week in Review

“Should I stay or should I go now? If I go there will be trouble, and if I stay there will be double!” - The Clash. The unrest in Egypt has been boiling for the past few weeks, as protestors took to the streets and Egyptian President Hosni Mubarak contemplated whether to stay in power… or step down.

And any time there’s uncertainty, there is sure to be movement in the markets. For example, oil prices rose Thursday morning after rumors spread through the media that Mubarek would step down later that night. In the end, Mubarek didn’t officially step down until Friday morning, at which point the streets of Cairo erupted in celebration, oil moved lower again, and the Stock market ticked up in hopes that the uncertainty in Egypt would soon be a memory.

Of course, Cairo wasn’t the only place that has been reacting to uncertainty lately – and we don’t have to look any further than Mortgage Bonds and home loan rates as an example. To say that Bonds have had a rough time lately would be a bit of an understatement, as Bond pricing and home loan rates worsened very significantly over the past week and a half. By the end of last week, however, Bonds looked like they were beginning to stabilize… at least for now.

Impacting Bonds last week were a number of remarks by Fed members, including Fed Chairman Ben Bernanke who spoke on Capitol Hill, saying it will take several more years before the unemployment rate returns to a more normal level, and that lawmakers need to act to reduce the country’s deficit.

The recent tough times for Bonds and home loan rates underscores the current opportunity… rates are still relatively low, but gradually creeping higher. This makes now an ideal time for consumers to take advantage of the still historically low rates. If you or someone you know is in the market for a new home or to review your home loan, now’s the time to act.

Forecast for the Week

After last week’s slow schedule of economic reports, we’ll see some influential reports this week… that have the potential to really move the markets.

  • We’ll start off Tuesday morning with the January report of Retail Sales, which is considered a timely indicator of broad consumer spending patterns.
  • We’ll also see manufacturing news this week with Tuesday’s Empire State Index, which looks at New York State’s manufacturing sector and is a good gauge of manufacturing overall. Then on Thursday, we’ll see the Philadelphia Fed Index, which is another important manufacturing report. Those two indices have the potential to impact the market, since they indicate the health of the manufacturing sector in the U.S.
  • More news is headed our way on Wednesday with the Producer Price Index (PPI), which measures inflation at the wholesale level. Then, the very next day on Thursday morning, we’ll see the Consumer Price Index (CPI) with a look at inflation at the consumer level. In light of last week’s news about inflation concerns around the globe – including in China and Brazil – it will be important to see what these reports reveal. Remember, inflation is important to keep an eye on because it is the archenemy of Bonds and home loan rates.
  • Wednesday will also bring more housing industry news with reports on the number of Housing Starts and Building Permits in January.
  • Finally, the busy week of reports caps off Thursday with the Initial Jobless Claims report. Last week’s report showed that Initial Jobless Claims hit the lowest weekly reading since July 2008. Overall, the labor market appears to be slowly gaining positive traction… and further improvement will lead to an improvement in the housing market, but also higher rates over time.

Remember: Weak economic news normally causes money to flow out of Stocks and into Bonds, helping Bonds and home loan rates improve, while strong economic news normally has the opposite result.

As you can see in the chart below, Bonds and home loan rates have had a tough time recently, but were able to stabilize at the end of last week. In the end, Bonds and home loan rates finished the week just slightly below where they started, but home loan rates are still near historic lows for now.

Chart: Fannie Mae 4.0% Mortgage Bond (Friday Feb 11, 2011)

The Mortgage Market Guide View…

Help Elderly Parents From a Distance

If you don’t live close enough to mom and dad to help them with daily money tasks, there are professionals who can.

By Cameron Huddleston,

Regular readers of the Kip Tips column know that I’ve written a lot about helping parents with their finances because I have had to help my mother, who is diagnosed with Alzheimer’s disease, with hers. In the March issue of Kiplinger’s Personal Finance magazine, I write in detail about how to manage your parents’ money when they no longer can.

What do you do, though, if you’re three states away from Mom or Dad and can’t be there every day to help?

Children who don’t live near their parents and can’t be there to monitor the mail or take over the bills may be able to hire a geriatric-care manager or daily money manager. Check the Web sites of the National Association of Professional Geriatric Care Managers and American Association of Daily Money Managers to locate one of these professionals.

The adult-protective-services office where your parents live should have a list of nonprofit organizations that offer these services at little or no cost. Make sure the organization is bonded and insured (ask for proof), and speak with others who have used its services.

For more about helping your parents with their finances, see all my columns on the topic:

• What You Should Know About Your Parents’ Finances

• 7 Signs Your Parents May Need Help With Money Tasks

• How to Talk About Money With Your Parents

• Protect Your Parents From Scams

• The Power of Power of Attorney

Reprinted with permission. All Contents ©2011 The Kiplinger Washington Editors.


Economic Calendar for the Week of February 14-18, 2011

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 February 14 – February 18

Date ET Economic Report For Estimate Actual Prior Impact
Tue. February 15 08:30 Retail Sales Jan 0.5%   0.6% HIGH
Tue. February 15 08:30 Retail Sales ex-auto Jan 0.6%   0.5% HIGH
Tue. February 15 08:30 The Empire Manufacturing Survey – New York State Fed 16.0   11.92 HIGH
Wed. February 16 08:30 Producer Price Index (PPI) Jan 0.7%   1.1% Moderate
Wed. February 16 08:30 Building Permits Jan 580K   635K Moderate
Wed. February 16 08:30 Housing Starts Jan 540K   529K Moderate
Wed. February 16 08:30 Core Producer Price Index (PPI) Jan 0.2%   0.2% Moderate
Wed. February 16 09:15 Capacity Utilization Jan 76.2%   76.0% Moderate
Wed. February 16 09:15 Industrial Production Jan 0.6%   0.8% Moderate
Thu. February 17 08:30 Core Consumer Price Index (CPI) Jan 0.1%   0.1% HIGH
Thu. February 17 10:00 Index of Leading Econ Ind (LEI) Jan 0.2%   1.0% Low
Thu. February 17 10:00 Philadelphia Fed Index Feb 21.9   19.3 HIGH
Thu. February 17 08:30 Consumer Price Index (CPI) Jan 0.3%   0.5% HIGH
Thu. February 17 08:30 Jobless Claims (Initial) 2/12 410K   383K Moderate
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