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Mortgage Market Guide: Economic Growth Disappoints

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Mortgage Market Guide: Economic Growth Disappoints

  In This Issue  
     
 

Last Week in Review: New Home Sales fell, economic growth was tepid and there was an uptick in inflation, yet Consumer Confidence remains high.

Forecast for the Week: The Jobs Report for September will be closely watched to see if the labor sector shows signs of strength … or weakness.

View: Step up your workday game with wearable fitness technology.

 
     
  Last Week in Review  
     
 

“It’s the cost of living, and everyone pays.” Don Henley. Whether talking about home prices or the cost of goods and services, money is on everyone’s mind.

economic

New Home Sales fell 7.6 percent in August from July, the Commerce Department reported. The drop followed a stellar July and still landed well above expectations. From August 2015 through August 2016, sales rose a whopping 20.6 percent. There was also news on home prices: The S&P/Case-Shiller Home Price Index showed a 5.0 percent gain in the year ended in July, just below the 5.1 percent expected.

The economy as a whole continues to trudge along. Gross Domestic Product (GDP) is still running lower than what is considered healthy. The final reading on second quarter GDP rose to 1.4 percent from the earlier reading of 1.1 percent. By comparison, a reading of 2.5 to 3 percent is considered optimal. GDP measures the pace of economic activity and represents the total dollar value of all goods and services produced over a specific time period. It has averaged 2 percent since the recession ended in mid-2009 and reached 2.6 percent in the second quarter of 2015.

The inflation gauge, Core Personal Consumption Expenditures (PCE), rose 1.7 percent from August 2015 through August 2016, below the 2 percent target. Core PCE measures the change in prices of goods and services purchased by consumers throughout the economy, excluding volatile food and energy. Upticks in inflation can reduce the value of fixed investments like Mortgage Backed Securities, and hurt the home loan rates that are tied to them. While inflation is still below the Fed‘s target range, it will be important to watch for any future increases.

However, consumers are feeling optimistic, according to the Conference Board. Its Consumer Confidence Index soared to 104.1 in September, the highest level since before the recession began in 2008.

If you or someone you know is in the market for a home or considering a refinance, please don’t hesitate to contact me to answer questions about loan rates and products.

 
     
  Forecast for the Week  
     
 

Investors and the Federal Reserve will be looking to see if job creation lifts or drags the 180,000 new jobs per month average in 2016. We’ll know for sure Friday.

  • National manufacturing data from the ISM Index will be released on Monday followed by the ISM Services Index on Wednesday.
  • Employment data starts with the Wednesday release of the ADP National Employment Report, followed by weekly Initial Jobless Claims Thursday.
  • The September Jobs Report releases Friday and includes Non-farm Payrolls, the Unemployment Rate and Hourly Earnings.

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 remain near their best levels of the year. Home loan rates continue to hover close to historic lows.

Chart: Fannie Mae 3.0% Mortgage Bond (Friday Sep 30, 2016)

Japanese Candlestick Chart
 
     
  The Mortgage Market Guide View…  
     
 
Do Fitness Trackers Really Improve Your Health?
The devices aren’t terribly accurate, but that may be beside the point: getting you out and about.
By Kaitlin Pitsker, Kiplinger.comMillions of Americans now wear fitness bands on their wrists to count their steps daily. Some employers are using fitness trackers to set goals — and rewards — for employees. Health and life insurers are offering premium discounts for wearing one. School systems are even using them to enable self-directed physical education programs.
 
How accurate are they? Fitness bands contain an accelerometer, which tracks movement in every direction to calculate the number of steps you’ve taken. But studies show that over the course of a day, many trackers have error rates of 10% to 20%. Tufts University’s Health & Nutrition Letter suggests you verify that your stride-length setting is correct by going to a track with the exact distance marked and counting your steps as you walk it. If you walk, say, 100 feet in 40 steps, divide 100 by 40. You have a stride length of about 2.5 feet.Most fitness bands are on track when it comes to counting steps when you’re walking, running or climbing stairs — usually coming within 1% to 4% of your actual step count, says Alex Montoye, an assistant professor at Alma College who studies wearables. The devices are also good at not awarding credit for stationary activities with a lot of wrist movement, such as typing or shuffling papers.But the trackers fall short when it comes to measuring your activity as you’re doing household chores, such as sweeping, washing dishes, cleaning or gardening. According to Montoye’s recent study at Ball State University, most fitness bands underestimate the amount of calories burned when doing tasks around the house by 27% to 34%. Also worth noting: The bands often fail to capture your steps when you’re pushing a grocery cart, lawn mower or baby stroller; if you want credit for those exertions, consider slipping the band into a pants or skirt pocket.

Before you choose a fitness tracker, consider the features you’re looking for. A simple step counter, such as the Fitbit Zip or Jawbone UP Move, will run you $50 to $60. At the high end, the Fitbit Surge ($250) will not only count steps but also track your heart rate and sleep patterns — plus it offers GPS tracking and has a 1.25-inch screen to alert you to text messages sent to your smartphone. If you want to measure your heart rate and monitor your sleep but don’t need the other advanced features, consider the Fitbit Charge HR ($150) and the Jawbone UP3 ($130). (The Apple Watch has a built-in workout application to track your activity, and you can load a sleep-monitoring app from the iTunes store.)

Virtual coaching. Despite missteps when it comes to recording your activity, wearable trackers can be useful for improving your daily workout. Because the majority of adults’ exercise comes in the form of walking, says Montoye, your step count should provide a good ballpark of your daily activity.

And for many fitness-band wearers, the precise number of steps logged matters less than the motivation to get up and move around. The bands can fuel competition to outwalk friends and encourage couples to take an evening walk. According to Harvard Women’s Health Watch, numerous studies have focused on activity levels of women older than 50. Those who wore fitness trackers significantly increased the time they spent doing moderate to vigorous activity.

Reprinted with permission. All Contents © 2016 The Kiplinger Washington Editors. Kiplinger.com.
Economic Calendar for the Week of October 03 – October 07
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