Forecast for the Week: Housing, manufacturing and retail sales reports will be released

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Reports on housing, manufacturing and retail spending could impact the markets. Also, Fed Chair Powell will give his semi-annual testimony on the state of the U.S. economy to Congress on Tuesday and Wednesday, which could sway trading.

• The closely-watched Retail Sales report will be released Monday.
• Look for manufacturing news via the Empire State Index on Monday and the Philadelphia Fed Index on Thursday.
• Housing data will be released Tuesday with the NAHB Housing Market Index and Wednesday with Housing Starts and Building Permits.
• As usual, Weekly Initial Jobless Claims will be delivered on Thursday.

Remember: Weak economic news normally causes money to flow out of Stocks and into Bonds, helping Bonds and home loan rates improve. In contrast, strong economic news normally has the opposite result. The chart below shows Mortgage Backed Securities (MBS), which are the type of Bond on which home loan rates are based.

When you see these Bond prices moving higher, it means home loan rates are improving. When Bond prices are moving lower, home loan rates are getting worse.

To go one step further, a red “candle” means that MBS worsened during the day, while a green “candle” means MBS improved during the day. Depending on how dramatic the changes are on any given day, this can cause rate changes throughout the day, as well as on the rate sheets we start with each morning.

As you can see in the chart below, Mortgage Bonds traded in a sideways pattern in recent days. Home loan rates remain attractive.

Chart: Fannie Mae 4.0% Mortgage Bond (Friday Jul 13, 2018)

Last Week in Review: Annual inflation ticked up while small business optimism neared record highs

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The Consumer Price Index (CPI) rose 2.9 percent in the 12 months ending in June, up slightly from the 2.8 percent annual reading in May. This was the largest annual increase since the year ending in February 2012, and it was led higher by energy costs. On a monthly basis, CPI increased 0.1 percent in June. Core CPI, which strips out volatile food and energy prices, rose 0.2 percent in June and was up 2.3 percent year over year.

The Producer Price Index (PPI), which measures wholesale inflation, rose 3.4 percent year over year in June, the largest increase in more than six years. The rise was also due in part to increasing energy prices. From May to June, PPI was up 0.3 percent.

Rising inflation is always a concern for fixed investments, like Mortgage Bonds, since inflation reduces their value. Home loan rates are tied to Mortgage Bonds, so they are negatively impacted when Mortgage Bonds worsen. However, many factors influence the markets. For example, if trade issues heat up, Bonds could benefit at the expense of Stocks if investors seek a safer haven for their money.

In the latest week, Stocks benefited from positive earnings and the news that the NFIB Small Business Optimism Index remained near record highs in June. Mortgage Bonds and home loan rates remain attractive and near their best levels historically.

If you or someone you know has questions about home loan rates or products, please contact us. We’re always happy to help.

Smart Steps to Beat the Heat in Favorite Outdoor Spaces

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Are summer’s sizzling temperatures causing you to retreat from your favorite outdoor spaces? Garages, patios, sheds, gardens and other outdoor areas should be enjoyed throughout the year. Unfortunately, heat and humidity can quickly make being outside intolerable during the dog days of summer.

The good news is keeping outdoor spaces comfortable doesn’t have to be a challenge. With the right tools and some thoughtful planning, you can stay cool and continue your favorite hobbies, no matter how high the temperatures rise. Whether it’s wrenching on a car, in the garage tackling a DIY project, tending to your patio container garden or simply kicking back on the deck, the following steps can help you stay cool and safe.

Step 1: Shade

Direct sun on decks and patios can make it nearly impossible to enjoy hot days. Strategically install shade features like umbrellas and awnings to add instant protection and ambiance. An alternative is vine-covered trellises that block sunlight and align well with the natural elements outdoors. For covered areas like garages and sheds, direct sunlight isn’t a concern, but those rays can raise the temperatures in those spaces fast. That’s why it’s important to take additional steps to cool the air within.

Step 2: Portable cooling

Fans alone simply circulate stagnant, hot air throughout outdoor living spaces. Instead consider an evaporative cooler. Available in a variety of sizes, Portacool portable evaporative coolers drop temperatures through the naturally occurring process of evaporation using water and the surrounding air, without creating mist. Open backyard spaces, patios and garages can be more comfortably cool on the hottest days by rolling this cooler wherever it’s needed.

Step 3: Insulation

For covered spaces like garages and sheds, adding insulation can help regulate temperatures. Batt insulation is inexpensive and an easy weekend DIY project to install if drywall isn’t present. Add to walls and ceiling spaces where applicable and then cover with drywall. If you already have drywall, you can look into blown-in insulation options. By insulating these spaces, you’ll help keep sweltering heat out and cool air in for more enjoyable summer days.

Step 4: Color

Keep color in mind when evaluating outdoor spaces. Light colors reflect the sun and dark colors absorb it, causing temperatures to rise. For decks and patios, opt for rugs and furniture in light colors to stay cool and comfortable. For garages and sheds, consider the color of the exterior. If you find the afternoon sun beats mercilessly down upon it, consider painting the exterior a lighter shade of paint, and when it’s time to replace the roof, choose a new color in a lighter hue.

Summer heat doesn’t have to force you indoors. Enjoy favorite outdoor spaces with these simple steps to stay cool and comfortable. For more information about evaporative coolers, visit www.portacool.com.

Forecast for the Week: Inflation reports and additional global trade headlines could impact the markets

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Inflation reports highlight the second half of the week.

• News on wholesale inflation via the Producer Price Index will be released on Wednesday, followed by the Consumer Price Index on Thursday.
• Weekly Initial Jobless Claims will also be delivered Thursday.
• Look for the Consumer Sentiment Index on Friday.

Remember: Weak economic news normally causes money to flow out of Stocks and into Bonds, helping Bonds and home loan rates improve. In contrast, strong economic news normally has the opposite result. The chart below shows Mortgage Backed Securities (MBS), which are the type of Bond on which home loan rates are based.

When you see these Bond prices moving higher, it means home loan rates are improving. When Bond prices are moving lower, home loan rates are getting worse.

To go one step further, a red “candle” means that MBS worsened during the day, while a green “candle” means MBS improved during the day. Depending on how dramatic the changes are on any given day, this can cause rate changes throughout the day, as well as on the rate sheets we start with each morning.

As you can see in the chart below, Mortgage Bonds have bounced around due to continued volatility. Home loan rates nudged lower and remain attractive.

Chart: Fannie Mae 4.0% Mortgage Bond (Friday Jul 06, 2018)

Last Week in Review: The Jobs Report for June was better than expected

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Non-Farm Payrolls rose by 213,000 new jobs in June, above the 195,000 expected, the Bureau of Labor Statistics reported. The figures for April and May were also revised higher by a total of 37,000 new jobs. Professional and business services, manufacturing, and health care saw an increase in jobs, while retail trade lost jobs.

The Unemployment Rate rose to 4.0 percent, while the Labor Force Participation Rate edged higher to 62.9 from 62.7 as more Americans entered the labor force.

There was a downside, however, as the lack of meaningful wage growth continues. Average hourly earnings increased just 0.2 percent in June, after the 0.3 percent rise in May. Over the last year, average hourly earnings were up 2.7 percent.

Home loan rates moved lower in the latest week as Mortgage Bonds improved due to the volatility in the markets.

If you or someone you know has questions about home loans, please give us a call. We’d be happy to help.