Fed Announces: Bond Buying Program Ends

Provided to you Exclusively by Jim Belote   For the week of Nov 03, 2014 | Vol. 12, Issue 44

Jim Belote Branch Manager, MBA Union Mortgage Group Phone: (757) 395-LOAN Fax: (757) 351-6471 E-Mail: jim@jimbelote.com 582 Lynnhaven Parkway, Suite 300 Virginia Beach, VA 23452

In This Issue...

Last Week in Review: The Fed announced the end of its massive Bond-buying program. Plus, key reports on housing and the economy. Forecast for the Week: The labor sector will be front and center, with the Jobs Report for October coming on Friday. View: Want to make a great first impression? Make sure you avoid these common word mistakes.

Last Week in Review

"So long, farewell, auf wiedersehen, adieu!" Rodgers & Hammerstein, The Sound of Music. Fed Chair Janet Yellen announced that after two years of supporting the economy, the Fed's latest round of its Bond-buying program (called Quantitative Easing or QE) is over. Stock markets initially reacted poorly to the midweek news, but rebounded later in the week due to strong corporate earnings reports. Mortgage Bonds have edged lower but remain near 18-month highs. However, market volatility is likely to continue, as Stocks performed terribly after the first and second rounds of the Fed's Bond-buying program ended. Whether Stocks will do so again is an important story to watch in the coming weeks. If Stocks worsen, Bonds and home loan rates (which are tied to Mortgage Bonds) could benefit. It's important to note that the Fed will still be supporting the markets through another Bond program in the coming months, as economic growth in the U.S. is still modest at best. For example, the advanced or first reading of third quarter Gross Domestic Product came in at 3.5 percent. While this was above expectations, a closer look at the report showed weak manufacturing and consumer demand—far from great news overall. In the housing sector, the August S&P/Case-Shiller 20-city Index showed home prices increased by 5.6 percent on an annual basis. This is down from the 6.7 percent recorded in July, and it was also the slowest pace of price gains in 21 months. Price appreciation continues to reach more normal levels than those seen in 2013. The bottom line is that home loan rates remain near some of their best levels of the year, and now is a great time to consider a home purchase or refinance. Let me know if I can answer any questions at all for you or your clients.

Forecast for the Week

There are just a few economic reports ahead, with the highlight being the October Jobs Report on Friday. Economic news begins on Monday with the ISM Index, a national manufacturing index. The ISM Services Index follows on Wednesday. The first report from the labor sector comes via Wednesday's ADP Employment Report. Weekly Initial Jobless Claims will be released on Thursday, as claims continue to trend below the 300,000 level. Productivity for the third quarter will also be released Thursday. Friday brings the October Jobs Report, which includes Non-farm Payrolls and the Unemployment Rate. 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. 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—and when they 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 were 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 moved a bit lower but home loan rates remain near 18-month lows. Chart: Fannie Mae 3.5% Mortgage Bond (Friday Oct 31, 2014)

The Mortgage Market Guide View...

5 Common Word Mistakes to Avoid For many people, a sign of true quality and professionalism lies in the day-to-day details, like writing. Here are five common word pairings that are frequently misused in business communications. Polish your writing in letters, email and on the web by remembering proper usage. Complimentary or complementary The first means free. "Receive a complimentary copy of our handbook." The second means to complete or enhance. "This new pattern will complement any décor." Farther or further The first refers to specific, measurable distance. "Drive a little farther and save a lot." The second refers to something more than what has already been done. In the sentence that follows, for example, you wouldn't physically stretch your money. You'd do more with it. "Stretch your money further with this option." Principal or principle The first means an initial sum of money, first in order of importance, or a person. "Your principal focus should be family." The second means a fundamental truth or guide. "The principle rule in home ownership is to protect your investment." Stationery or stationary The first refers to letterhead, notecards and envelopes. A good reminder is to think "e" for envelope. "Have we ordered new stationery yet?" The second means immobile. Titled or entitled The first refers to the title of something. "The latest report is titled Top Industry Trends." The second means having right or claim to. "You are entitled to review your credit report for free." Please feel free to pass these tips along to your team, clients and colleagues. Economic Calendar for the Week of November 03 - November 07 Date ET Economic Report For Estimate Actual Prior Impact Mon. November 03 10:00 ISM Index Oct NA 56.6 HIGH Wed. November 05 08:15 ADP National Employment Report Oct NA 213K HIGH Wed. November 05 10:00 ISM Services Index Oct NA 58.6 Moderate Thu. November 06 08:30 Jobless Claims (Initial) 11/01 NA 287K Moderate Thu. November 06 08:30 Productivity Q3 NA 2.3% Moderate Fri. November 07 08:30 Non-farm Payrolls Oct NA 248K HIGH Fri. November 07 08:30 Unemployment Rate Oct NA 5.9% HIGH Fri. November 07 08:30 Average Work Week Oct NA 34.6 HIGH Fri. November 07 08:30 Hourly Earnings Oct NA 0.0% HIGH

The material contained in this newsletter is provided by a third party to real estate, financial services and other professionals only for their use and the use of their clients. The material provided is for informational and educational purposes only and should not be construed as investment and/or mortgage advice. Although the material is deemed to be accurate and reliable, we do not make any representations as to its accuracy or completeness and as a result, there is no guarantee it is without errors. As your mortgage professional, I am sending you the MMG WEEKLY because I am committed to keeping you updated on the economic events that impact interest rates and how they may affect you.