Last Week in Review

THE ECB…A SCARY TEST YOU MIGHT BE GIVEN AFTER HAVING CHEST PAINS? Not so. It’s the European equivalent of the Fed, the European Central Bank (ECB). But speaking of pains, Bond pricing and home loan rates worsened by about .125% over the past week after the ECB hiked their version of the Fed Funds Rate higher...and there is talk that the Japanese may follow suit. Whoa…hold on there sport, what on earth does a rate decision in Europe possibly have to do with home loan rates here in the US? Let’s take a closer look.

Let’s say you are a savvy investor in Europe…you can see that yields in the US have been significantly higher than what you can gain as a return on a similar investment in Europe, Asia, or most other parts of the world. So our smart European investor sees that it makes sense to put their money in the US, in the form of buying Bonds, guaranteed by the full faith and credit of the US Government. In recent times, as much as 65% of our Bonds have been purchased by similar smart foreign investors seeking higher rates of return than they can gain in their own country or elsewhere. This foreign buying has helped our Bond prices stay high, which in turn, has kept home loan rates very attractive.

Back to our wise European investor…who hears on Thursday that the European Central Bank is hiking rates higher, much like our own Fed has done with fourteen hikes over the past year plus. Just like our Fed moves rates in cycles, it’s never one and done, so goes the European Central Bank as well. Savvy European investor notes that with rates on the increase at home…but the US Fed likely winding down the “hike cycle”…it might make sense to start keeping some money invested a bit closer to home instead of in the US. So before you know it – badda-bing-badda-boom – foreign investors stop buying as many of our US Bonds, sending Bond prices lower and home loan rates higher. And just the initial fear of this happening sent Bonds plunging lower this week, causing home loan rates to bump up a notch. Imagine that.

WELCOME TO THE NEIGHBORHOOD! IMAGINE BUYING A NICE NEW HOME, ONLY TO DISCOVER THAT A SEX OFFENDER LIVES JUST THREE DOORS DOWN. TODAY MORE THAN EVER – IT’S IMPORTANT TO “KNOW THY NEIGHBOR”. PROTECT YOUR FAMILY…AS WELL AS THE VALUE AND SALEABILITY OF YOUR HOME…BY READING THIS WEEK’S MORTGAGE MARKET VIEW.

Forecast for the Week

o what’s the scoop for the week ahead? The main item of economic news that could impact home loan rates will be the monthly Jobs Report, due on Friday morning. Last week, unemployment claims were up slightly, but the widely monitored four-week average of claims remains under 300,000. Claims haven’t been above that mark since January 7th, which indicates the continued strength of the job market. So what does that have to do with home loan rates, you ask? Well, a strong job market can lead to inflation, as employers have to pay more dollars in wages to attract and keep their employees. And inflation erodes the value of a fixed return Bond. Therefore a strong labor market tends to be bad news for inflation-hating Bonds, which home loan rates are based on. Bottom line: watch for next Friday’s important jobs number – a big number could likely pressure Bond pricing lower and cause home loan rates to tick higher.

On a technical note, the chart below shows how Bonds and home loan rates were “rejected” from gaining improvement last week, and were forced back lower, causing home loan rates to rise. Bonds will now undoubtedly test their closest technical support level, and the nature of the Jobs Report will likely be the event that determines which way home loan rates trend in the near term.

The Mortgage Market View...

"KNOW THYSELF"...this famous phrase is attributed to any number of ancient Greek philosophers, including the great Socrates. But in today’s world, it is almost more important to “KNOW THY NEIGHBOR”.

Why? Because sex offenders don’t advertise their home or business location, but wouldn’t you want to know? Finding out if one of your neighbors is a sex offender or being notified if a sex offender moves into your neighborhood can be done with just a few clicks of the mouse by visiting: www.familywatchdog.us.

The site provides up to date information about registered sex offenders in your surrounding neighborhood, and has several educational tools available for your family as well. Simply enter your address or zip code and an area map will pop up. The locations of registered sex offenders are identified on the map by color-coded boxes. Colors identify if the location is the offender’s home address or business address, and the type of crime the offender has been charged with. Further, double click on the colored box and you can obtain the offender’s name, complete address, photo, and more information about the conviction. If a registered sex offender lives in your area, it is important that your children learn safety lessons.

Need a little help finding material to educate your children about proper safety precautions?

Simply hit this link: Watchdog Education, and download a free "Family Discussion" questionnaire and safety poster. The questionnaire is a great guideline for covering safety precautions with your children, and the poster provides children with pertinent information should they encounter a dangerous situation. "The Safe Side - Stranger Safety" video is also available for purchase to educate your children. Coming this fall, a new video will be available on the site that will address Internet safety – another hot topic for parents.

Even if your neighborhood checks out and at present there are no sex offenders living in your area, let the “watchdog” continue to look out for your family. Enter one address free of charge and receive notification if a sex offender moves within one mile of that address. Or, enter up to three addresses (home, school, daycare, etc.) for a nominal fee and receive an email notification if a sex offender moves within five miles of any of the three locations in the future.

Most importantly, pass this article on to family, friends, coworkers, neighbors and teachers. Your family is your most valuable asset; invest the time to keep them safe and secure.