Elections, the Fed, and Jobs... Oh My!

In This Issue           Last Week in Review: Election results, the Fed's announcement, and the Jobs Report - what a full week it was! So what was the impact on home loan rates? Forecast for the Week: It's a quiet week on the economic report front, but don't expect the volatility to die down as the markets continue to digest last week's news. View: Leasing a car may be easy, but getting out of a car lease is another story. Luckily, this week's View article has some ideas that can help.           Last Week in Review           "TOMORROW IS OFTEN THE BUSIEST DAY OF THE WEEK." Spanish Proverb. And it sure seemed that way every day of last week, with one of the busiest economic calendars seen in years. Friday's Jobs Report capped off a week filled with election results and a big announcement from the Fed regarding the next round of Quantitative Easing (QE2). So what impact did all of this news have on Bonds and home loan rates? Let's break it down. On Friday, the Labor Department reported that 151,000 jobs were created in October, all in the private sector. This was much higher than the 60,000 job creations that were expected - and while the economy needs a lot more job creations to put a dent in the unemployment rate, this is a great start to a recovery in the labor market. Adding to the positive tone of the report, there were upward revisions to both August and September's numbers, and the Unemployment Rate held steady at 9.6%. The Average Hourly Wage increased as well - and across the board, the numbers were stronger than anticipated. Should this trend continue in the coming months, it would support the notion that labor has not only stabilized - but is perhaps even expanding, which would be welcome news indeed. And while this is great news for the economy, remember that when good economic news arrives, investors move money into Stocks... and this pulls money out of all types of Bonds, including Mortgage Backed Securities, which home loan rates are based on. When money moves out of Bonds, it causes Bond pricing and home loan rates to worsen - and that's exactly what happened, following the better than expected Jobs Report. Although we all like to hear good news for the economy - any strong, positive economic news is bad news for Bond pricing and home loan rates. Home loan rates were exceptionally volatile all last week - and likely to remain so ahead. While rates are still at very low, affordable levels - they won't last forever, so please get in touch if you have questions about how the current rate climate might benefit your situation. In other big news last week, the Federal Reserve Board made their much anticipated announcement regarding another round of "Quantitative Easing" or QE2, where the Fed will participate in purchasing Treasury Securities in a bid to keep the economic recovery on track. On Wednesday, the Fed announced that they intend to purchase $600 Billion in Treasuries, starting now and continuing through mid-2011, which equates to about $75 Billion in purchases per month. So how will this impact home loan rates ahead? We need to be mindful that the Fed initiated QE2 for three reasons. One, to help lower interest rates in order to spur consumer and business spending... which in turn will create inflation. Two, to help lower the unemployment rate via an economic boost. And three, to help push Stock prices higher. And all three of these factors will cause headwinds for Bonds and home loan rates down the road. As the Fed gets to work on putting their latest plan into effect - we can be sure that inflation readings in various economic reports will likely be more highly scrutinized by the markets. Upcoming reports will reveal whether the Fed will be successful in their quest to fight deflation, and create a level of Goldilocks inflation that is not too hot, not too cool... but juuuust right. Ultimately, if inflation expectations creep higher, interest rates for long-term Bonds - like Mortgage Bonds - will rise as well. One thing is certain, the volatility we saw in the markets last week is sure to continue. If you have any questions about how you can take advantage of today's historic low rates, please contact me, and let's evaluate your current situation. And feel free to forward this email to any friends, family members, or colleagues who may have questions as well - I'm always pleased to talk with anyone you'd refer my way. THINK YOU'RE STUCK IN YOUR VEHICLE LEASE? THINK AGAIN. CHECK OUT THE MORTGAGE MARKET GUIDE VIEW FOR SOME TIPS THAT COULD MAKE GETTING OUT OF IT EASIER THAN YOU THINK.           Forecast for the Week           After all last week's big news, Traders will continue to digest all the happenings... and will have a somewhat quiet economic news week ahead, including the Bond Market being closed on Thursday in honor of Veteran's Day There are no major economic reports until Wednesday, which will bring another look at employment with the Initial and Continuing Jobless Claims Report. Last week's Initial Jobless Claims were 457,000, above the 445,000 that was expected, while Continuing Jobless Claims fell 42,000 to 4.34 Million. Initial Jobless Claims have been stuck to that mid-400's level like a magnet for a very long time - and a real, sustained movement below 400,000 is needed in order for the market to feel confident that labor is recovering. Also this week we'll get a read on Consumer Sentiment on Friday - always an important number, but particularly of note for retailers, especially as we head into the holiday shopping season. 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 had some ups and downs last week in response to the QE2 announcement and the Jobs Report. I'll be keeping a close eye on the volatility as this week progresses. ----------------------- Chart: Fannie Mae 3.5% Mortgage Bond (Friday, November 5, 2010)           The Mortgage Market Guide View...           Getting Out of a Car Lease Car leases can pose many advantages for consumers. Typically speaking, lease payments are less than payments on a car loan, thus allowing a consumer to lease a vehicle that he or she couldn't afford to actually buy. Many people also like the idea of avoiding major repairs by handing back their car after a predetermined amount of years. However, being tied into a lease can be a negative burden at times - especially in today's uncertain economic climate. Let's say that after signing on the dotted line to lease a car, your financial situation changes for the worse and you can no longer afford it. Just turning the car into the dealership and walking away from the lease could impact your credit dramatically, even to the point of a "repossession" showing up on your credit report. But what option do you have? It may surprise you to find out that you actually have a few options. One option is something known as an "early termination" of the lease. The problem with early termination, however, is that it can be costly, very costly. Aside from paying off the amount owed on the lease, there can also be penalty fees and other miscellaneous charges padded into the contract. Another option is to sell your leased car privately. The problems with this option are that it requires a lot of hard work on your part and it only benefits consumers with cars that have an equal or greater value than their current "buy out" price. But there is another option for getting out of your car lease, and it can prove to be the best one for many people. It is something known as a "lease transfer" and the process is just as it sounds. A leaseholder finds someone who is not only credit-worthy, but also willing to assume his or her car lease. Once the terms are negotiated and ratified the remainder of the lease is transferred into the new leaseholder's name. If a lease transfer sounds like a complicated process, it's because it can be. The good news, however, is that thanks to websites like www.leasetrader.com and www.swapalease.com the lease transfer process has been fully explained and streamlined. These companies basically act as middlemen between the buyer and the seller, providing a forum for listings, as well as hands-on help with expediting the process. It is important to know that the aforementioned websites - as well as most car leasing companies - will charge a fee for a car lease transfer. But... those fees can be negotiated between the buyer and the seller, and they are also much less costly than the fees associated with terminating your lease early. -------------------------- Economic Calendar for the Week of November 8-12, 2010 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 November 08 - November 12 td

Posted via email from philipjensen's posterous