Saint Croix Falls, WI

The end of summer is coming, unfortunately, the leaves will be turning and high school football games will be being played. Believe it or not, change is coming. As far as we are all are concerned, we are all used to change, especially in our industry. If fact with all of the changes that have happened in the real estate and finance arenas, we should be experts! In fact we should almost be chameleon-like!

Great financing options are still out there; however, it is more important that ever, to structure your customer's deals correctly from the beginning to make sure that they get through the ever tightening underwriting process. We are still having good success in succeeding in this area, because we have always done it that way!!! Is anyone sick of deals falling through because some finance person failed! Take control of your customer's finance!

The temperatures are hot and so are the real estate prices! We are buzzing with activity, but have patience; the lenders are all slow to the draw.

Market Comment

Mortgage bond prices rose slightly applying downward pressure on mortgage interest rates. Trading remained extremely volatile. Energy prices remained the focus. Inflation fears were fanned once again as oil prices hit record highs. Bonds found some support when the Dow Jones index continued to struggle. A relatively benign employment report did very little to move the financial markets.

For the week, interest rates on government and conventional loans fell by about 1/8th of a discount point.

The trade data Friday will be the most important event this week. The weekly jobless report will garner more attention this week than usual with the lack of other substantial data releases. Oil and stocks will also likely continue to factor into mortgage bond movements.

Credit Demand

Inflation is typically the most important focus for the mortgage interest rate market. Unfortunately, mortgage interest rates continue to be pushed around by the fear of inflation. Most of the recent increases in interest rates have come following stronger than expected data despite uncertainly regarding the strength of the economy.

The level of interest rates reflects the balance between the supply of money from investors and the demand for money by borrowers. Rising inflationary expectations cause investors to require higher rates of return on investments to compensate for the erosion of the principal that eventually is returned to them. Regardless of inflation levels, though, rising economic activity can increase the demand for investors' funds, and thereby lead to higher interest rates. Investors pulling money out of stocks and into bonds have recently helped mortgage rates.

The demand for money diminishes as the economy struggles. The Fed lowers interest rates as an incentive to businesses and consumers to increase their borrowings. The Fed hopes manufacturers will increase their investments in plants, equipment and inventories and that consumers will push housing construction higher along with consumer spending and with that, consumer debt. The inverse is also true.

Analysts will monitor this week's consumer credit levels for any indications that consumers may be tapped out.

There is much debate in the financial community about the future. Economists, market analysts, and traders all seem to have a different opinion about the future state of the economy and especially the effects of rising energy prices. One thing most market participants agree on is both the bond and stock markets are going to see additional volatility. Now is a great time to take advantage of rates at the still historically favorable levels.

I just met a couple who wanted to build a house in Prescott Wisconsin. She wanted it now and he wanted to build it himself. So I suggested a happy medium of providing a shell that included the electrical , plumbing, drywall and windows. They thought that was a great idea.

Just shows that we need to get creative in this market.

Winchester Mystery House: 38 Years & Still Not Finished

by Mary Jo Manzanares on November 4th, 2007

The house is a Victorian mansion that was once owned by Sarah Winchester, of the Winchester Rifle fortune. After being told by a fortune teller that she would live as long as she continued to build onto her home - she did just that! Continued to build. And build. And build. For 38 years!

www.midweshomecenter.com

To all,

"KNOWLEDGE IS POWER." It's a phrase used by many, and last week was an important one to be in the know, as Bonds and home loan rates were affected by many big newsmakers and market shakers. Bonds and home loan rates found some improvement in the early part of the week, leading into the Fed's big announcement on Wednesday of another .25% cut to the Fed Funds Rate. Typically, Bonds and home loan rates react poorly to Fed cuts, due to the increase in economic activity that lower Fed rates can cause, which turns into higher inflation. However, the Fed's Policy Statement hinted that the present rate-cutting cycle may be nearing an end. As a result, Bonds and home loan rates reacted favorably to the Fed's action.

However, speaking of inflation, the Fed's most favored measure of it - the Core Personal Consumption Expenditure Index - arrived on Thursday, showing core inflation at 2.1%, just a whisker above the Fed's desired range for inflation of 1 to 2%. This read wasn't great news for inflation-sensitive Bonds...but the resulting market action was nothing, compared to what happened when the Jobs Report arrived on Friday morning.

Talk about a real mover and shaker...the Jobs Report brought word of 20,000 jobs lost in April, which was better than market expectations of 75,000 jobs lost. Initially, Stocks rallied higher and Bonds worsened dramatically, as the headlines were so much better than had been anticipated. But when the details of the report were unpacked, showing prior months worsening revisions - as well as a sobering realization that 20,000 jobs lost is still lousy news - the markets quickly reversed direction, helping Bonds and home loan rates improve once again. Another ultra volatile week - and when the dust settled, home loan rates improved by about .125% overall.