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Last Week in Review

NO PAIN...NO GAIN? While that old maxim is often the case, for the past week the Stock market's pain has been the Bond market's gain. Last week, the Dow lost around 500 points - and as money flowed out of Stocks and into Bonds, this helped home loan rates improve by .125 - .25% over the course of the week.

But if you want to revisit some real Stock market pain, just dial back the clock twenty years from last Friday. On October 20th 1987, the Stock market suffered its very largest one day loss ever, with the Dow falling 508 points and losing 22.6% of its value overall. That's like the Dow losing over 3100 points today! And just prior to that wild meltdown, 1986 and 1987 had been banner years for the Stock market - fueled by hostile takeovers, leveraged buyouts and merger mania.

The rest of the economic news for last week was a mixed bag, including lower than expected Housing Starts and Building Permits for new construction homes, and also an overall tame read on consumer inflation via the Consumer Price Index.

BUT IF YOU HAVE SOME OF YOUR OWN BUILDING PROJECTS YOU'D LIKE TO START AROUND THE HOUSE...YOU WILL BE ESPECIALLY INTERESTED IN THIS WEEK'S MORTGAGE MARKET VIEW, WHICH HELPS YOU UNDERSTAND WHAT KIND OF REMODELING PROJECTS CAN BRING THE MOST RETURN.

Forecast for the Week

While it will be interesting to see how Stocks fare next week, and if they will continue to slide lower - the week ahead also brings some potentially market moving economic reports. Existing Home Sales will be the headliner on Wednesday while Durable Goods Orders, weekly Initial Jobless Claims, and New Home Sales will arrive on Thursday. If the news of the week is very negative for the economy, Bond prices could move higher still and bring more improvement to home loan rates.

Remembering that home loan rates improve when Bond prices move higher, the chart below also shows some encouraging "floors of support", just underfoot where Bonds are trading right now, which should help them hold their current ground and perhaps even improve. But if the Stock market rallies and reverses course to move higher, this could quickly cause Bonds and home loan rates to worsen.

The Mortgage Market View...

Home Is Where You Hang Your Hat...Not to Mention a Few Light Fixtures, a Screen Door, and Maybe a New Deck

When the housing market's hot, it seems like just about any remodeling project is a good investment and adds value to your home. But when the market's tight, you want to be more selective about which projects you undertake...and what you expect to gain in return.

If you've been thinking about boosting your home's value or just making your living space more comfortable, the ideas below can help your prioritize your list. So before you start knocking out walls and renovating your roofline, consider these ways to make a difference...cost-effectively!

First Things First. Buyers often decide whether to look at your house before they even get out of the car. Before you spend a lot of time and money remodeling the inside, you may want to look at the outside. Washing windows, repainting trim, planting flowers, and fixing screen doors can make a big difference. For even more impact, you may want to consider replacing your siding or even adding a patio or deck. The added value for these bigger projects won't yield as high of a return on investment, but may help your house stand out. So, weigh your options and ask your Realtor® for advice before starting a big project.

Come On In...Make Yourself at Home. Making a cozy first impression is critical. To make sure your entryway invites people to come in--not turn away--try adding a fresh coat of paint to your foyer or a wicker chair and table outside the door. For even more impact, replace those old light fixtures and update the floor in your entryway.

Sparkle Up That Old Bathroom. Remodeling an old bathroom can make a big impact. For very little money, you can add a new faucet to your sink, a new medicine cabinet on the wall, and even new paint or wallpaper. For a little more, you can update the bathtub, add a double sink, or re-tile the floor.

Even Better: Add a Second Bathroom. Perhaps no improvement makes a bigger impact on your family's comfort and your house's appeal than adding a second bathroom. The number of bathrooms is always a big sticking point for potential buyers, especially families with two or three children. Although adding a bathroom costs more than simply fixing up your old one, it also increases the value of your house more. Plus, having that second bathroom may help you sell your house faster than if it only has one bathroom...an important point to consider in today's market.

Make it Hot in the Kitchen. Renovating an outdated kitchen is practically a sure thing...as long as you don't splurge on extravagant items like hand-painted Italian tile or built-in espresso machines. Instead, focus on the basics: installing new flooring, adding a backsplash and a new coat of paint, re-facing existing cabinets, installing new countertops, and possibly installing new appliances. These go a long way to making a new buyer feel at home.

Remember, start small, work your way up, and always plan ahead. You don't want to get halfway into a renovation only to find that you have to update your entire electrical system or that you forgot to apply for a permit. So, check your local zoning codes before starting any remodeling project. But with a little planning and prioritizing, you can make your house more comfortable and valuable with very little time...and money.

The Week's Economic Indicator Calendar

Economic Calendar for the Week of October 22 – October 26

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Last Week in Review

"MISSED IT BY THAT MUCH." Remember the old show "Get Smart", when bumbling secret agent Maxwell Smart would describe his latest major goof by holding up his fingers about a half-inch apart, and emphatically stating that famous line? In similar fashion...it appears the Department of Labor missed some recent job creation counts by quite a long shot.

Last Friday, the highly anticipated monthly Jobs Report arrived bright and early, showing 110,000 new jobs created during September, very close to what analysts had expected. But the real surprise was the upward revision to last month's shocking number, which had shown a LOSS of 4000 jobs in August. The revised number was a gain of 89,000 jobs, or a change of 93,000! That's right - the Department of Labor "missed it by that much."

Bond prices and home loan rates worsen on strong or positive economic news, so the surprising upward revisions in job growth caused Bonds and home loan rates to worsen by about .125% on Friday alone.

AND SPEAKING OF JOBS - HAVE YOU EVER CONSIDERED WHAT WOULD HAPPEN IF YOU LOST YOUR JOB OR YOUR INCOME DUE TO A HEALTH CRISIS OR INJURY? NO ONE EVER EXPECTS IT TO HAPPEN TO THEM - BUT WHY NOT BE ON YOUR WAY TO MAKING SOME HEALTHY CHOICES FOR YOUR OWN FINANCIAL FUTURE RIGHT NOW?

Forecast for the Week

This coming week should be another juicy one as far as the economic calendar is concerned, with several reports and releases that will have the power to move the markets.

Of special note, Tuesday brings the release of the "Meeting Minutes" from the last Federal Reserve Board meeting - and unlike the carefully crafted wording of the formal Policy Statement that is released just following the meeting - the Minutes are the "Fed Unplugged", including commentary and conversation during the meeting by all attending Fed Board members. Dallas Fed President Richard "Loose Lips" Fisher is often a loose cannon, sometimes blurting out off the cuff comments on the economy almost uncontrollably...so it will be interesting to see if the meeting contained any wild cards.

Remembering that when Bond prices move lower, home loan rates worsen - we can see in the chart below that Bond prices were slammed lower on Friday, shown by the large red "candle" on the right hand side of the chart. Bonds also were slammed back below floors of a few floors of support, so it appears that the path of least resistance is for Bond prices and home loan rates to get slightly worse before they get better.

The Mortgage Market View...

MAKING HEALTHY FINANCIAL DECISIONS

While we all hope that we never have to deal with a sudden medical crisis caused by the discovery of a life threatening or life altering illness the reality is that at some point, many of us will have to face this situation. As they say, life is a terminal condition. Good health is a gift that is often taken for granted, but when you are healthy is also the very best time to take a few simple steps to insure that you and your family, income and assets would be protected in case the worst would happen.

A stat that "will" surprise you:

Did you know that less than 10% of all adult Americans have a will? Amazing, because it is one of the most important documents you will ever create, especially if you have children. In addition to your will, it is advisable to create Power-of-Attorney's to allow someone you trust to be able to make financial decisions or pay bills on your behalf if you are not able to do so yourself.

Also consider creating a living will, outlining the types of treatments that you would want or not want to have performed. Typically a living will is accompanied by a health care proxy, which is a Power-of-Attorney specifically for making medical decisions.

Emergency fund:

There are dozens of reasons that it is important to build up a nest egg of cash, but one of the most important is to help protect against the loss of income that can occur during a medical crisis. Rarely considered for couples who both work, but worth mentioning, is that during a medical emergency, not only would the ill individual be out of work, but oftentimes the other would also have lowered income due to spending time and energy with the sick partner.

Throw me a line:

A Home Equity Line of Credit (HELOC) can be another great safety net to consider, as it allows you easy and immediate access to a relatively cheap source of money. It is important to remember that your ability to qualify for a new loan may be diminished if you are critically ill, so obtaining a HELOC when you do not need it is a very good idea. And since HELOC's are typically inexpensive to set up, and only require payments if there is a balance owed, this makes it an ideal safety net.

"Insure" your safe future:

Life insurance is rarely considered a popular discussion topic, but it is a very important way to protect your family. Dealing with the loss of a loved one is very difficult and there is no easy way to ease the pain. And the financial problems, although secondary, can be very serious. Loss of home, income, and savings can all be avoided with the right life insurance plan.

Other types of insurance to investigate are disability insurance - which can help provide income if you are unable to work because of an injury or illness - and also long term care, which can help you preserve your assets from being eaten up by caretakers in the future.

If you need help setting up a Home Equity Line or a referral to a great financial planner or insurance agent - please email or give me a call. I'd be happy to help you make the connections needed to ensure your own healthy financial future.

The Week's Economic Indicator Calendar

Economic Calendar for the Week of October 08 – October 12

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Last Week in Review

"ONE WAY TO AVOID MISINFORMATION IS TO AVOID PROVIDING ANY INFORMATION." St. Louis Federal Reserve President William Poole And while that may be true, the markets are hoping for a bit more guidance from the Fed, including Fed Pres William "Everyone Into The" Poole.

The Bond market and home loan rates were fairly tame for the bulk of the week, but had picked up a little steam on Thursday following the US Treasury's auction of $13 billion in five-year notes that afternoon. The Treasury auction showed strong foreign demand and heavy buying by large institutional investors - and anytime demand is strong, pricing moves higher; so as Bond pricing moved higher, conforming home loan rates improved.

Then along came Friday, when the Bond market and home loan rates gave back the ground they had previously gained. What happened? Things started off well on Friday morning, when the important, inflation-measuring Personal Consumption Expenditure (PCE) Index arrived inline with expectations. The Report indicated that inflation appears to be under control which is good news for inflation hating Bonds and home loan rates.

But on Friday afternoon, a parade of Federal Reserve speeches provided some contradictory comments that spooked the markets - apparently not taking Fed President Poole's advice that sometimes no information is good information. San Francisco Fed President Janet "Always" Yellen raised her voice on inflation, renewing worries for a Bond market that hates inflation. Bond prices and home loan rates worsened in response, losing the ground they had gained the day before...and ending up quite close to where they began the week overall.

BOND TRADERS HAVE CERTAINLY BEEN WORKING FOR A LIVING, WITH ALL THE ACTION OF LATE...AND THE WORKLOAD IS SURE TO PICK UP IN THE COMING WEEK WITH THE ARRIVAL OF THE HIGH IMPACT JOBS REPORT. ALL THIS TALK OF JOBS AND WORKING MAKE YOU YEARN TO CALL YOUR OWN SHOTS AND JOIN THE RANKS OF THE SELF-EMPLOYED? IF SO, DON'T MISS THIS WEEK'S MORTGAGE MARKET VIEW.

Forecast for the Week

The month's most important Report is about to be released...That's right, and notice the whispers about this Friday's monthly Jobs Report. Remember last month's Jobs Report arrived as quite a surprise...economists were expecting around 110,000 new jobs being added for the month, but were shocked and demoralized to see a net LOSS of 4000 jobs! Remember that a weak economic read of this sort hurts the Stock market, but causes the Bond market to improve...and as Bond pricing improves, so do conforming home loan rates. And last month's surprising miss meant that home loan rates improved by .125% on the day of the Report alone.

So what's in store for this Friday? Last month's surprise means that the release of this upcoming Jobs Report will draw even more attention than normal. How many jobs were created last month...or not? And will last month's ugly number be revised higher...or lower still? Rest assured that Friday morning at 8:30am ET, traders, economists and investors will be glued to the financial news - and Bonds and home loan rates will likely react in turn. Another weak number will result in Bond pricing moving higher and conforming home loan rates moving lower, especially if no major revisions are made to last month's weak number. But if the tables turn and show surprisingly strong job growth, Bonds and home loan rates will likely worsen on the headline.

Bonds continue to fight a battle at the tough 200-day Moving Average. If the news of the week helps Bonds remain above this line, that will be good news for home loan rates, as the 200-day Moving Average will act as a "floor of support". But if the news causes Bonds to fall beneath this line in the sand, it will be bad news for home loan rates, as the 200-day Moving Average will then act as a "ceiling of resistance".

The Mortgage Market View...

The American Dream

Have you ever dreamed of owning your very own business? Many Americans dream of being self employed, and they do so for many different reasons. Some simply wish to be their own boss, while others want the freedom and flexibility that self-employment may provide, and still others simply want to do what they love. In fact, according to a recent Money Magazine article, almost two-thirds of Americans dream of starting their own business. So would you be surprised to learn less than 2% ever take the plunge and actually do it?

There are some sobering facts - according to the Small Business Administration, around 33% of businesses will not make it past a year and only 44% make it past the fourth year. In addition, most new businesses will not earn profits until at least the third year.

But here's the potential reward - according to the Federal Reserve's most recent Survey of Consumer Finances, the average income of a self employed individual was twice as high as the average wage earner, and the average net worth of self employed individuals was over five times greater than the average wage earner.

If you are in the majority of Americans who would like this dream of self-employment to become a reality - let's take a closer look at some smart steps towards making this dream come true.

Important Considerations

Starting your own business is an exciting and sometimes stressful proposition. There are a few important strategies and assessments that should be considered as you determine if you should start your new venture.

Write a Business Plan. While it may not be easy or fun to do, writing a business plan should be one of the first items to be completed as you move towards opening your new business. By writing a thorough and comprehensive business plan, you are not only forcing yourself to think through and analyze the wide array of potential costs and challenges, but you are also preparing yourself to seek outside investors or bank financing, which will require a well written business plan before they consider financing in your new venture. The Small Business Administration has a wonderful site, full of information on business plan writing, including many sample plans covering a wide range of business types.

Think About Insurance. A very important item to take into account before starting your own business is medical insurance. If possible, switch your insurance coverage to your spouse or significant other. Another short-term solution would be to consider taking advantage of COBRA Insurance. COBRA generally allows you to keep your current coverage for 18+ months after your termination date. After COBRA expires, you would then need to seek out your own medical insurance, which can be very costly for self-employed persons. One helpful idea is to look to join a group of other self-employed persons in order to obtain a better, group coverage. One organization that is working to fill this need is the National Association for the Self Employed, or NASE.

Do Careful Financial Planning. Any new business will require a potentially substantial amount of money for startup costs. Additionally, unless you can start your new business while maintaining your current job, you will need to have sufficient reserves to support yourself/family during the early startup months/years when cash will be extremely tight.

Be careful in particular if you are heavily financing your new business with credit cards. While it is an easy source of capital, it can immediately put you in a tough cash flow position, and more importantly it can hurt your credit or otherwise make it harder to access new credit.

Many businesses fail due to a lack of cash flow. Remember, that a great concept and potential business cannot overcome a lack of funding. You may want to check with your mortgage professional to discuss potential strategies to use your home's equity to help fund your new business or potentially improve your cash flow.

Consider Physical Health and Mental Support. It may not seem like a terribly important item to think about when starting a new business, but your health and ability to work long hours is an important consideration, as most startups require many long hours to get off the ground. Additionally, having the emotional support of your family and friends is critical in order to stay motivated and positive. Finally, your ability to deal with stress will be an important factor in the success of your business.

If you've always dreamed of owning your own business, hopefully these tips and ideas whet your appetite for taking the plunge, working for yourself, and living the American Dream.

The Week's Economic Indicator Calendar

Economic Calendar for the Week of October 01 – October 05