In This Issue
- Last Week in Review: Important jobs data for March was released. How did home loan rates respond?
- Forecast for the Week: Several key reports will be released during the second half of the week. Plus on Wednesday, look for the minutes from the Federal Open Market Committee meeting in March.
- View: “KISS” complexity in your business goodbye with these great tips.
Last Week in Review
“Don’t believe the hype.” Unfortunately, the lyrics from Public Enemy’s hit song came true last week when the official Jobs Report for March was released. Read on for details, and what they mean for home loan rates.On Friday, the Labor Department reported that 88,000 jobs were created in March–less than half the 192,000 expected. This was the lowest monthly job creations number since June 2012, and could be the beginning of a slowdown in the labor market this spring. There was one small positive note, however, as the number of job creations for January and February were revised higher by 61,000.
The Unemployment Rate fell to 7.6 percent, which is the lowest level since December 2008. While this sounds like good news, the decrease can be partly attributed to the fact that 500,000 people left the workforce. As a result, the Labor Force Participation Rate (LFPR) fell to 63.3 percent: its lowest level since 1979. Remember: the LFPR calculation is quite simple. If you are 16 years old and not in the military, then you either have a job or you don’t. The ratio of people “participating” or working is then compared to the total population.
The Jobs Report wasn’t the only poor economic report released last week. The ISM Manufacturing Index was below expectations, ADP private jobs data was less than expected, planned job cuts were up 30 percent from last year, and the employment component within the ISM Services Index fell.
What does this mean for home loan rates? Remember that weak economic news often causes investors to move their money out of Stocks and into safer investments like Bonds. This includes Mortgage Bonds, to which home loan rates are tied. And last week’s string of poor economic reports, coupled with the tensions in North Korea and the debt woes in Europe, helped Bonds and home loan rates reach some of their best levels this year.
The bottom line is that home loan rates remain near historic lows, making now 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
The second half of the week heats up with several important reports.
- Weekly Initial Jobless Claims will be released on Thursday. Last week’s report showed that initial claims surged by 28,000 to 385,000, the highest number since November and well above expectations.
- On Friday, we’ll get a sense of consumer spending with the Retail Sales Report for March and a sense of how consumers are feeling with the Consumer Sentiment Index.
- Also on Friday, the Producer Price Index will show us March’s inflation reading at the wholesale level.
In addition, the minutes from the March meeting of the Federal Open Market Committee will be released on Wednesday. Traders will be looking at this closely, especially regarding any mention of the Fed’s Bond purchase program known as Quantitative Easing.
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 that home loan rates are based on.
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, Bonds and home loan rates improved last week after weak economic data was released and tensions increased with North Korea. I’ll continue to monitor their movement closely.
Chart: Fannie Mae 3.0% Mortgage Bond (Friday Apr 05, 2013)
The Mortgage Market Guide View…
KISS the Chef
How Doing Too Much Can Kill Your Business
Kitchen Nightmares, featuring Scottish chef Gordon Ramsay, was a long running hit show in Britain well before FOX brought it to Americans in 2007. The show presents a critical lesson for business owners and professionals everywhere: don’t let things get too complicated.From the elaborate menus to strange customer service habits, the “broken” restaurants featured on the show persist, day after day, to slowly choke out the ability to do what they are supposed to–fulfill the need of customers efficiently and consistently. It’s a lesson well worth listening to, especially from Gordon Ramsay. He is recipient of 15 Michelin Stars and no stranger to success, but he’s also admitted losing a few of his own restaurants to mismanagement and over-extension.
Kitchen Nightmares makes the viewer keenly feel the validity of the “KISS principle”. KISS is an acronym for “Keep it simple stupid” and it was coined by U.S. Navy engineers in 1960 to stress the importance of building aircraft that could be repaired on the battlefield by a regular mechanic using only basic tools. Essentially, the KISS principle states that most systems work better when they are simple rather than complex.
Here are a few ideas on how to keep things simple in your business:
Identify the need you fulfill. Whether you sell homes or financial services you are fulfilling a need for your clients that has nothing to do with real estate or stocks and bonds–try to think of the psychological need you fulfill.
Build your plan to serve that need. You may have the ability to offer other services that don’t serve the core need of your market, but avoid the temptation to use them if possible. The likelihood of confusing your prospects and customers is too high to justify the value you think you’re creating.
Don’t get too elaborate with systems. Especially the ones that impact customer service. While every business should have processes for everything, the more common sense they are the better. If yours are intuitive and easy to perform for both staff and clients, they are going to be win-win.
Stay focused. If you’re in business to sell houses or do financial planning, don’t extend your brand to include staging or insurance–or anything else you can think of that might dilute your ability to perform the core need.
Feel free to pass this along to clients and colleagues who might benefit from these tips!
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.
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