Weekly Mortgage News from Rodney Anderson of
Dallas Mortgage Company - CTX Mortgage
Week of August 15th, 2006
THE PAUSE THAT REFRESHES; THE PAUSE THAT BRINGS FRIENDS TOGETHER; PAUSE AND REFRESH YOURSELF...Coca-Cola's ad slogans from the 1920's and 30's seem brand new again, as the Federal Reserve Board finally decided to take a pause in its two-plus year long string of rate hikes, leaving the Fed Funds Rate at 5.25%. But interestingly enough, the pause didn't necessarily bring friends together - the Fed vote was not unanimous. Richmond Fed President Jeffrey Lacker had voted for another .25% rate hike. Because the hike wasn't unanimous, the market was a little jittery, not quite sure if the Fed is just taking a temporary break from raising rates or if the Fed will resume the hiking action in the fourth quarter.
But there was no pause in the news headlines - and although the news flew in hot and heavy all week, home loan rates remained surprisingly stable. On the heels of the Fed decision, Retail Sales numbers came in at their hottest rate over the past six months, meaning the consumer is still out there spending away. The sales numbers were a bit higher than expected...so the media is already jumping on concerns that perhaps the Fed should not have paused. However, the numbers were not too far off what was anticipated, and Retail Sales numbers do tend to be volatile. And remember, this is the same media who in recent months loudly wondered if the Fed would ever stop hiking.
And that's not all...oil prices shot higher this week on news that British Petroleum (BP) is shutting down its Prudhoe Bay oil field in Alaska on an indefinite basis due to a pipeline leak. This move takes about 400,000 barrels a day off the world market - about 8 percent of domestic US oil production. Because oil is involved in almost all the products we buy, higher oil prices add inflationary pressures.
But most of the headlines last week revolved around a foiled terrorist plot to blow up commercial aircrafts flying from Great Britain to the US. The terrorist plot involved using liquid explosives smuggled through carry on luggage. Airport security measures are tightening in the US, including that any kind of liquid or gel - water, sunscreen, hairspray, even toothpaste - will no longer be able to be brought in a carry on bag. Interestingly, Stocks, Bonds and home loan rates were relatively calm in the wake of the news. Although a thwarted attack obviously provides a lower level of concern than one that was actually carried out - the calm in the markets shows a great deal of resiliency in the face of somewhat concerning geopolitical news.
DID YOU KNOW…THAT AMERICANS CONSUME TWICE AS MUCH SODA POP AS THEY DID JUST 25 YEARS AGO? IN FACT, WE SPEND $54 BILLION A YEAR ON IT…WHICH IS TWICE AS MUCH AS WE SPEND ON BOOKS! THAT'S A WHOLE LOTTA SODA DRINKING GOING ON - DOES IT FIT IN YOUR BUDGET? READ THIS MONTH'S MORTGAGE MARKET VIEW, FOR A QUICK WAY TO ANALYZE YOUR MONTHLY SPENDING, AND SEE IF YOU NEED TO TRIM BACK, OR IF YOU CAN AFFORD ANOTHER COKE AND A SMILE.
Forecast for the Week
So...will this week perhaps bring a nice refreshing pause from all the headlines? Not likely. In addition to whatever news may come from continuing events around the world, the week brings a beefy news platter, including the Producer Price Index (PPI) and Consumer Price Index (CPI). In the wake of the Fed Funds Rate pause, these inflation indicators will be under extra-heavy analysis.
Bonds have been trading in a very narrow range of late with little movement in home loan rates. It's likely that the inflation flavor of the upcoming reports will determine if Bonds will continue to hold the line above support at the 100-day Moving Average, or be forced back under.
News and reports that reek of inflation are bad for Bond prices and home loan rates - so if the headlines seem loaded with inflation, Bond prices will fall and home loan rates will rise. However, if the important economic reports of the week show that inflation is under control, Bonds and home loan rates may enjoy some slight improvement.
The Mortgage Market View...
"THERE WAS A TIME WHEN A FOOL AND HIS MONEY WERE SOON PARTED...BUT NOW IT HAPPENS TO EVERYBODY." Adlai E. Stevenson
Last week's Retail Sales numbers showed the consumer is still out there spending away...but many of our expenditures have gone up right under our noses, without us getting any extra enjoyment out of them. Rising gas prices, increased interest rates for borrowed money, higher minimum monthly credit card payments...our expenses are getting higher every day, and it may be crimping your normal monthly spending style And not knowing where your money is going each month often gives you a general sense of unease when your head hits the pillow at night...and may eventually cause you a major financial hardship.
There are many phenomenal budget programs available for your computer, such as "Quicken" or "Money", but starting with even a little simple planning can put your mind at ease and allow you to spend, knowing that you have control of your monthly income and expenses. And if the word budget is a dirty word in your vocabulary and makes your palms sweat - hey, relax. Just think of a budget as you would a healthy diet. You don't have to starve, but you may just have to cut back on a few tasty expenses to accomplish your goals. And who knows...you may actually be better off than you thought, and can splurge a little. Let's take a look.
A good budget is written down and includes as much information as possible. Start by determining your current monthly income. Use the net income (amount received after taxes and any insurance benefits are deducted) and anything additional such as part time work, interest, rental, or bonus income. Next, determine your monthly expenses.
Obtain and keep a receipt for every item purchased, especially if you frequently use cash for purchases. Receipts should include everything from groceries to Starbucks coffee...even minor purchases can add up quickly. Although you usually need to have some pocket cash on hand, many people choose to use debit or credit cards more often than cash, purely to have a better record of money spent. At the end of the month grab the receipts, your checkbook, and any credit card statements and start categorizing your expenses.
Expenses should be classified into the following categories:
* Household - this would include rent or mortgage, utilities (gas, electric, water, etc.), cable television, internet, phone, and any additional items such as a housecleaning service or pool service. This category could also include the many things you frequently buy for your home such as paper towels, cleaning products, plastic baggies, lawn and garden supplies and the like.
* Food - separate food expenses by groceries and dining. Dining out would include lunch and dinner expenses for every member of the family.
* Transportation - this would include all expenses related to an auto (e.g., auto payment, insurance, fuel, and maintenance). Additionally, include public transportation, tolls, and parking expenses.
* Healthcare - include monthly health care fees such as medical, dental, prescriptions, and insurance co-pays.
* Looking good - all of the items that make you, you. Clothing, shoes, dry cleaning, toiletries, haircuts, manicures, etc.
* Entertainment - include all of the "just for fun" items. Movies, concerts, vacations, subscriptions, sporting event tickets, and hobbies.
* Miscellaneous - include all additional monthly expenses such as banking fees, credit cards, savings, education, gifts, donations...and don't forget pet expenses
Need a simple, free, easy to use monthly budget sheet that can be used by you or your children? Just hit this link: Sample Budget
It is important to note, some expenses will vary on a monthly basis and an average will need to be calculated. For example, utilities can change each and every month. To come up with the average, simply add the actual amount paid for twelve months and divide the total by twelve to create a monthly average - and adjust as needed over time. Additionally, any expenses such as insurance premiums that are paid annually should be divided by twelve to create a monthly average as well.
Once all items have been categorized and listed, simply total the income and subtract all of the expenses. The remaining number will clearly determine if you are coming up short, breaking even, or have money left over. If you have money left over, meet with your financial planner and discuss investment strategies that will maximize those extra dollars. And if you don't have a great financial planner currently, please call me for a referral.
If you come up short or barely break even, it is important to determine areas that you can trim expenses. Look at trimming dining out, entertainment, or looking good expenses. Although it may sting a little in the short run - you'll know that you are on the path to a great financial future.
If cutting expenses still does not provide enough cash flow to help you sleep better at night, contact me for a complimentary loan and financial analysis. We can work together and decide if a referral to a great financial planner who can help you with your budget is a good fit right now, and there are also many great loan options available, which may help provide the cash flow plan that will put your mind at ease and allow you to build your financial future.
