Mortgage in a Minute

"Normalcy is not interesting."  ~ Lindsay Lohan If the troubled performer were earning her living in real estate, she might think differently about normalcy. For a few years now, the housing market has been anything but normal, so any return to stability is interesting indeed. With a major real estate information provider reporting home price gains moderating in June, their chief economist observed, "This reversion to normality that we are finally experiencing is expected to continue across the country and should further alleviate concern over diminishing affordability and the risk of another asset bubble." Recovery continues nonetheless, as June's more modest price gains still represented 28 months of consecutive year-over year increases in home prices nationally. More evidence of the return to a normal housing market came when a national online real estate site reported that their listings blasted ahead 8.65% from May to June. Their chief economist feels "All the data points support favorable sales over the next couple of months." He pointed out that talk anticipating mortgage rates will rise next year make now a relatively appealing time to buy, while an improving economy puts more money in buyers' hands. Be inspired by the famous saying of the Navy SEALs: "The only easy day was yesterday." Push yourself to excel every day and you'll be equipped to achieve any goal you set. It was a week that featured all manner of global concerns, from a Portuguese bank bailout, to Italy's second straight quarter of economic contraction (technically a recession), to ongoing troubles in Eastern Europe and the Middle East. But Friday Russia ended its military exercises on the Ukraine border, saying it wished to de-escalate tensions. This was enough to restore investors' appetite for risk, pushing the Dow to its biggest one-day percentage jump in more than 4 months.That left the blue chip index up for the week, while the improved investor feelings spread over to the broadly based S&P 500 and the tech-heavy Nasdaq, which both also ended ahead for the week. There was, in addition, enough decent economic data to put Wall Street in a better mood. The ISM Services index boomed to its highest reading since December 2005, showing growth in the sector that provides more than 80% of our jobs. Even the trade deficit was less than expected in June, although this was due to a large drop in imports, as exports increased only slightly. However, Productivity grew nicely in Q2 following its big drop in Q1 and Unit Labor Costs edged up only slightly, good news for inflation watchers. Best of all, weekly Initial Unemployment Claims dropped to 289,000, pulling the four week moving average down to 293,500, its lowest read since February 2006! The week ended with the Dow up 0.4%, to 16554; the S&P 500 up 0.3%, at 1932; and the Nasdaq up 0.4%, to 4371. There were still enough worrisome global economic and political issues to spark a safety bid that pushed up bond prices. The 30YR FNMA 4.0% bond we watch finished the week up .08, at $105.23. In Freddie Mac's Primary Mortgage Market Survey for the week ended August 7, national average fixed mortgage rates edged slightly higher but remain near their yearly lows. Remember, mortgage rates can be extremely volatile, so check with your mortgage professional for up to the minute information. DID YOU KNOW? The Census Bureau estimates that the typical American moves a dozen times in his or her lifetime.

RETAIL GAINS, WHOLESALE INFLATION OK, MANUFACTURING GROWS... Wednesday, all eyes will focus on Retail Sales, expected to show the consumer still helping the economy grow in July. The Producer Price Index (PPI) and Core PPI, excluding volatile food and energy, should report inflation still under control with regard to the prices businesses pay for things. Industrial Production and Capacity Utilization are forecast to tick up, showing manufacturing growing overall, as well as in the New York region measured by the Empire Manufacturing Index.

Weaker than expected economic data tends to send bond prices up and interest rates down, while positive data points to lower bond prices and rising loan rates.

Economic Calendar for the Week of Aug 11 – Aug 15

Date	Time (ET)	Release	For	Consensus	Prior	Impact
Tu Aug 12	14:00	Federal Budget	Jul	–$96.0B	–$97.6B	Moderate
W Aug 13	08:30	Retail Sales	Jul	0.3%	0.2%	HIGH
W Aug 13	10:00	Business Inventories	Jun	0.4%	0.5%	Moderate
W Aug 13	10:30	Crude Inventories	8/9	NA	–1.756M	Moderate
Th Aug 14	08:30	Initial Unemployment Claims	8/9	305K	289K	Moderate
Th Aug 14	08:30	Continuing Unemployment Claims	8/2	2.523M	2.518M	Moderate
F Aug 15	08:30	Producer Price Index (PPI)	Jul	0.2%	0.4%	Moderate
F Aug 15	08:30	Core PPI	Jul	0.2%	0.2%	Moderate
F Aug 15	08:30	NY Empire Manufacturing Index	Aug	15.5	25.6	Moderate
F Aug 15	09:15	Industrial Production	Jul	0.3%	0.2%	Moderate
F Aug 15	09:15	Capacity Utilization	Jul	79.2%	79.1%	Moderate
F Aug 15	09:55	U. of Michigan Consumer Sentiment	Aug	81.7	81.8	Moderate

Federal Reserve Watch   

Forecasting Federal Reserve policy changes in coming months... Even with a few more positive signs of economic recovery, most economists believe Fed Chair Janet Yellin will keep the Funds Rate where it is, well into next year. Note: In the lower chart, a 1% probability of change is a 99% certainty the rate will stay the same.

Current Fed Funds Rate: 0%–0.25%

After FOMC meeting on:	Consensus
Sep 17	0%–0.25%
Oct 29	0%–0.25%
Dec 17	0%–0.25%

Probability of change from current policy:

After FOMC meeting on:	Consensus
Sep 17	<1%
Oct 29	<1%
Dec 17	<1%

Information was provided by Danene Strand.