Consumer Confidence Lower than Expectations

Consumer Confidence came in today well below expectations. This shows the continued disconnect with the average consumer who is feeling pretty down about job prospects and the overall economy vesus the press who wants to announce things are doing better.

Though there are signs the worst may be behind us that doesnt make the 5 million workers who are now unemployed feel much better about their own circumstances. If consumers don't feel good about their own economic future they may be less willing to part with the money they do have for discretionary spending. Ultimately if consumers aren't consuming businesses will suffer and that will keep employers from hiring new employees as well as limit the tax revenue the government recieves.

Low tax receipts will make our deficit problems continue for a longer period of time. Deficits also need to be covered (paid for) by the issuance of Treasury Bonds and the more debt we accumulate the more real inflation becomes for us in the future.

On a positive note...today interest rates are better because of the low Consumer Confidence number and the implication that low Consumer Confidence will keep inflation low. Other news that has been a help to mortgage bonds is the turmoil in Greece. With the struggles in Greece hitting front page news it is clear now that there are other countries that are weighed down with a lot of debt that are having trouble covering their bills through this recesion.

It is worth looking around the world and noticing the policies of Greece, Spain and others who have expanded the services their government offers that they can no longer afford. Accross the ocean in Japan we see very similar issues. The US is not immune to this issue. With the HUGE budget deficits the past two years we need to be taking a hard look at the road ahead and changes may be necessary...even though change would be painful for many in our society.

We should all take these stories and apply to them to our own lives. If you are going to buy a home always make sure you are purchasing a home that you can afford and make sure you have funds available for that 'rainy day' as things aren't always going to be rosey. I would love to help you work through your budget to find the right price point for your family if you are looking to purchase a new home while the buyer credits are still offered through April 30th.

Producer Price Index Hotter Than Expected

The PPI numbers were released today with signs that inflation is a little more 'real' than we have been seeing for the past few years. When producers (manufacturers) have higher costs for their raw materials or the energy it costs to manufacture their products they will often try to pass those higher costs on to the consumer in higher prices for their products. We will find out tomorrow if the Consumer Price Index (CPI) comes out showing the higher PPI costs being passed on to the consumer. Given the current economy many manufacturers are having trouble passing their higher costs on to the consumer who has been a little tight fisted with their money.

However, today the very important support of the 200-day moving average for the FNMA 30-year bond was violated and thus rates have moved up a fair amount over the past three days and could move a bit higher before finding a new floor of support. Given the Federal Reserves exit from the MBP program in March and talk that they may begin to sell some of the mortgage bonds they have already purchased we may have seen the end of rates below 5% sooner than later.

I have been encouraging all my clients who are considering a refinance to get their rate locked as soon as possible and if the are shopping for a new house to find one quickly and lock down a rate. Based on the research I have done I do expect rates to be over 6% by summer...which could put a damper on new home sales this summer. Hopefully I am wrong and rates will remain low through the end of the year, but its not something I would bank on.

Job Report Friday 2/5 - how to plan

http://www.lender411.com/id/Rob+McAllister/Job report tomorrow. Please go to my lender411 page to view my full blog, but I am recommending you lock your rates today. Job report will certainly move the market. Rates are great. Don't gamble on what will happen tomorrow...most likely rates will go up from where they are regardless of what the number is tomorrow.