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By Taff Weinstein at

Pending Home Sales Best Since June

Pending Home Sales Best Since June:

The Pending Home Sales Index, a forward-looking indicator based on contract signings, rose 3.5 percent to 109.3 in October. The index is now at its highest reading since June (110.0).

Lawrence Yun, NAR chief economist, says pending sales in October were primarily driven higher by a big jump in the South, which saw a nice bounce back after hurricane-related disruptions in September. “Last month's solid increase in contract signings were still not enough to keep activity from declining on an annual basis for the sixth time in seven months,” he said. “Home shoppers had better luck finding a home to buy in October, but slim pickings and consistently fast price gains continue to frustrate and prevent too many would-be buyers from reaching the market.”

According to Yun, the supply and affordability headwinds seen most of the year have not abated this fall. Although homebuilders are doing their best to ramp up production of single-family homes amidst ongoing labor and cost challenges, overall activity still drastically lags demand. Further exacerbating the inventory scarcity is the fact that homeowners are staying in their homes longer. NAR's 2017 Profile of Home Buyers and Sellers – released last month – revealed that homeowners typically stayed in their home for 10 years before selling (an all-time survey high). Prior to 2009, sellers consistently lived in their home for a median of six years before selling.

“Existing inventory has decreased every month on an annual basis for 29 consecutive months, and the number of homes for sale at the end of October was the lowest for the month since 19991,” said Yun. “Until new home construction climbs even higher and more investors and homeowners put their home on the market, sales will continue to severely trail underlying demand.”
With two months of data remaining for the year, Yun forecasts for existing-home sales to finish at around 5.52 million, which is an increase of 1.3 percent from 2016 (5.45 million). The national median existing-home price this year is expected to increase around 6 percent. In 2016, existing sales increased 3.8 percent and prices rose 5.1 percent.

Source: National Association of Realtors

What Happened to Rates Last Week?

Mortgage backed securities (FNMA 3.50 MBS) lost-14 basis points (BPS) from last Friday's close which caused fixed mortgage rates to move slightly higher for the week.

Overview:  We had a very big week on just about every front.  Tax Reform was finally passed early Saturday morning but during the week, Mortgage Backed Securities both improved and sold off on speculation of the Bill passing or not passing.  We got a huge dose of economic data with very strong GDP and Manufacturing data which was very positive for our economy and therefore negative for long bonds that do not perform well in a growth environment.  But the biggest market mover was when the news broke that Flynn was going to plead guilty to lying to the FBI.  Initially the bond market thought that this may derail support for our President and cause the Tax Bill to not make it, but in the end that did not happen.

Domestic Flavor:
Manufacturing: The November ISM Manufacturing (1/3 of our economy) was very strong but basically was in line with estimates (58.2 vs 58.4) any reading above 55 is very hot.

The November Chicago PMI hit 63.9 vs est of 63.0. Any reading above 50 is strong and readings above 60.0 are very, very very strong. This marks the 3rd straight month with a reading above 60.0 which has not happened since 2010.

GDP: We got our first revision to the previously released 3rd QTR GDP. It was revised upward from 3.0% to 3.3%. The market was expecting 3.2%. It is the highest growth rate since Q1 2015.

Construction Spending: We saw a nice pickup in October as it gained +1.4% vs est of 0.4%. YOY it is now up 2.9%. Overall a very good report.

Personal Income and Outlays: Wages were higher than expected as October's Personal Income increased by another 0.4% vs est of 0.3%. Personal Spending matched expectations with a monthly gain of 0.3%. The spread between the rising incomes and spending means that we actually saw a 1% increased in the personal savings rate.

The Fed's key measure of inflation, PCE on a YOY basis increased by 1.6% which was a little higher than expectations of 1.5%. Plus September was revised upward from 1.6% to 1.7%. Still below the Fed's target rate of 2.0% but moving closer. Core PCE YOY hit 1.4% which matched expectations.

The Talking Fed: President Donald Trump has nominated Carnegie Mellon University professor Marvin Goodfriend to be a member of the Federal Reserve Board of Governors. He would be filling a vacancy that happened in 2014 and has never been filled.

Fed Chair Janet Yellen will gave an Economic Update to the House. She opened with “The economic expansion is increasingly broad based across sectors as well as across much of the global economy," and “I expect that, with gradual adjustments in the stance of monetary policy, the economy will continue to expand and the job market will strengthen somewhat further, supporting faster growth in wages and incomes." She also said that Congress needs to pass more "pro-growth" policies and was concerned that after she leaves that there will only be 4 members on the Board of Governors.

The Fed's Beige Book was released and showed that the U.S. economy continued to grow at a "modest to moderate pace" through mid-November as the labor market tightened, the survey also noted.

"Most districts reported employers were having difficulties finding qualified workers across skill levels," the report said. Still, "wage growth was modest or moderate in most districts." This is prepared by all 12 districts and is used in the next FOMC policy meeting.

What to Watch Out For This Week:

By Taff Weinstein at

New Home Sales Hit 10 Year High, Average Sales Price above $400K for First Time Ever

New Home Sales Hit 10 Year High, Average Sales Price above $400K for First Time Ever:
The U.S. Census Bureau and the Department of Housing and Urban Development reported that New Home Sales for October hit a 10  year high with 685K units which beat out expectations of 620K.  This was a 6.2% monthly gain over September.

Sales Price
The median sales price of new houses sold in October 2017 was $312,800. The average sales price was $400,200 which is the first time on record that the average sales prices topped $400,000.

Inventory and Months’ Supply
The seasonally-adjusted estimate of new houses for sale at the end of October was 282,000. This represents a supply of 4.9 months at the current sales rate.

The Northeast is the standout sales region for the second month - up 30 percent to 56,000. Year-on-year sales in the Northeast are up 65 percent. The Midwest also was strong, up 18 percent in October for a yearly gain of 16.2 percent.  These are very strong metrics as it shows strong sales were not due a temporary demand spike related to the hurricanes in the South.

The biggest contributor in size to the month's sales is the West, up 6.4 percent to 167,000 for a yearly 14.0 percent gain. The South, which did not show any effect from the heavy hurricane season, rose 1.3 percent in October for a year-on-year increase of 14.0 percent.

Source: U.S. Census Bureau
What Happened to Rates Last Week?

Mortgage backed securities (FNMA 3.50 MBS) gained +9 basis points (BPS) from last Friday's close which caused fixed mortgage rates to move sideways for the week.

Overview:  We had a holiday-shortened week with really only three full days of bond trading. It was a very light week in terms of economic releases that had any ability to impact bond trades.

Chicago Fed National Activity Index: The October reading showed a spike in overall economic activity and inflation and came in 3 times higher than expected (0.65 vs est of 0.2).

Existing Home Sales: The October data was stronger than expected (5.48M vs est of 5.43M units). Supply continues to be very thin with only 3.9 months worth available. Six months worth of inventory is considered to be optimal. The median sales price fell -0.2% to 247K which a 5.5% gain from this time last year.

Leading Economic Indicators: The October release came in at double the market expectations (1.2% vs est of 0.6%), plus September was revised upward from -0.2% to +0.1%.

Durable Goods Orders: The Headline Preliminary October reading was weaker than expected (-1.2% vs est of 0.4%) but just one airplane order can skew that number. Overall, the report had some bright spots. Ex-Transportation, Durable Goods Orders increased by 0.4% which was inline with estimates of 0.5%. But offsetting that small miss was the fact that September's reading was revised upward from 0.7% to 1.1% which is significant.

The Talking Fed: Fed Chair Janet Yellen turned in her official resignation. She said she would stay on until the swearing in of the new Fed Chair Jerome Powell. However, the letter made it clear that she is resigning from the Fed completely and is not going to remain on the Board of Governors in another role. This is key because the board is short of voting members and her staying on in a different capacity was a consideration.

What to Watch Out For This Week:

By Taff Weinstein at

New Home Construction Data Shows Strong Market

New Home Construction Data Shows Strong Market
Two separate reports show that the housing industry is adding new supply to an inventory-strapped market and home builders are feeling good about it.

The U.S. Census Bureau reported that October New Housing Starts were stronger than expected 1.29M vs est of 1.19M and September was revised upward. Single Family Housing jumped 5.3% to 877K units. Building Permits also beat out expectations (1.297M vs est of 1.225M) and also saw an upward revision to the prior month.

Meanwhile, the National Home Builders Association reported that their Home Builders' Confidence shot up to an eight month high, rising 2 points to a reading of 70.   Any reading above 50.0 is positive and readings in the upper 60's and even low 70's is considered very robust.

"Demand for housing is increasing at a consistent pace, driven by job and economic growth, rising homeownership rates and limited housing inventory," said NAHB Chief Economist Robert Dietz. "With these economic fundamentals in place, we should see continued upward movement of the single-family housing market as we close out 2017."
Of the index's three components, current sales conditions rose two points to 77. Buyer traffic also increased two points to 50, which is the first time in six months that this component has been in positive territory. Sales expectations over the next six months fell one point to 77.
Sources: U.S. Census Bureau and National Association of Home Builders

What Happened to Rates Last Week?

Mortgage backed securities (FNMA 3.50 MBS) gained +23 basis points (BPS) from last Friday's close which caused fixed mortgage rates to move slightly lower for the week.

Overview:  While the House did pass their version of Tax Reform, the Senate is still a very large uncertainty in the eyes of long-bond traders that are skeptical that they will have the votes to move forward.

Inflation?  The October Headline Consumer Prices Index YOY hit 2.0% vs est of 2.0%.  So, the 2.8% PPI rate did not flow through to consumer prices.  The more closely watched Core CPI YOY came in a tick higher than expected (1.8% vs est of 1.7%) but still remains below the 2.0% threshold.

The October Headline Producer Prices Index YOY hit 2.8% vs est of 2.4%.  It was 2.6% In September.  The Core reading (ex food and energy) YOY came in at 2.4% vs est of 2.3%.  Overall, a solid report but the markets will wait to see if it shows up in CPI

The Atlanta Fed Business Inflation Survey increased from 1.8% in October to 2.0% in November which is the highest reading since June.

Retail Sales: This data was better than expected.  The Headline October reading came in at 0.2% vs est of 0.0%.  But more importantly, the September data was revised higher from 1.6% to 1.9%.  Ex-Autos, Retail Sales gained 0.1% vs est of 0.2% but again, September was revised higher from 1.0% to 1.2%.

What to Watch Out For This Week:

By Taff Weinstein at

Bad Neighbors Can Cost You, Research Before You Buy

Bad Neighbors Can Cost You, Research Before You Buy:
Buying a home is one of the biggest investment any person will make in their lifetime. But how often do potential buyers do as much due diligence on their nextdoor neighbors as they do with, say, the decor in the bathroom or square footage in the yard?

Some 25% of home buyers said they regret not asking about their neighbors, while 30% said they wish they’d looked into the local sex offender database, according to a survey of 2,000 homeowners by mortgage-information site HSH.com.

Only 16% regretted that their home was too small. But roughly 40% of people said they’ve argued with their neighbor over noise, parking, kids, pets, danger to property and other landscaping issues, according to a separate survey of 3,000 people by real-estate site Homes.com released last year.

An annual online poll has ranked noise as No. 1 year after year. That includes barking dogs, loud music, car and house alarms and domestic arguments.
Barry Covert, a lawyer based in Buffalo, N.Y., recommends people research potential neighbors’ Facebook accounts, talk to local police, visit corner stores and local laundry services, and knock on the neighbor’s front door and find out for yourself. These steps make financial sense. And check online sex offender registries too: One study by Longwood College and Longwood University in Virginia said that registered sex offenders living nearby can reduce a home’s value by 9%, and homes near registered sex offenders can take 70% longer to sell.
Make sure the property line in the deeds of your future home matches with the actual property line, said Robert W. Zierman, a lawyer in Seattle. Few homeowners have heard of “adverse possession,” but it is the legal grounds on which a neighbor can claim “continuous, exclusive, open and notorious” use of your land if he or she has done so for a period of time. If there has been unlawful use of land for many years, the neighbor may be able to claim ownership in some states. Ask the seller for a written disclosure of all issues presented by neighbors over the years, Borzotta said
And the problem isn’t always nextdoor. “We who consider ourselves good neighbors need to realize we’re not perfect,” he said, “and that introspection, maturity and dignity are the best ways with which to handle neighbor conflicts as they arise.”

Source: Neighbors From Heck Online

What Happened to Rates Last Week?

Mortgage backed securities (FNMA 3.50 MBS) lost -11 basis points (BPS) from last Friday's close which caused fixed mortgage rates to move slightly higher for the week.

Overview:  We had a very light week for economic data as there was not a single economic release that had the gravitas to move the needle on rates.  We also had a shortened trading session with the bond markets closed on Friday in observance of Veteran's Day.

The bond market focused on two key areas:  The Fed and Tax Reform.  Both gave the bond market more uncertainty.

The Talking Fed: N.Y. Fed President and FOMC Board Member William Dudley announced that he will be retiring a couple of  months early.  The term limits are for 10 years and he was slated to hit that in early 2019.  He said he would retire in "mid-2018" instead and that the exact timing will be determined by making sure that his replacement is all set before he leaves office.

Tax Reform:  The Senate Finance Committee Chair Orrin Hatch released the Senate's updated Tax proposal.  It had several key differences from the House Bill.

Here are the most notable highlights:
20% permanent corporate tax cut delayed by 1 year
Complies with the $1.5 trillion cost (will cost $1.44 trillion)
Preserves 7 tax brackets: top tax bracket is 38.5%, down from 39.6%
Doubles standard deduction from $12,700 to $24,000 (married couples)
Ends state and local tax (SALT) deduction; keeps business deduction
Keeps the mortgage Interest deduction cap at $1 million
Preserve the estate tax, doubling the current $5.49 million exemption for individuals
Raises the child tax credit to $1,650 from $1,000
Sets 10% tax rate for US companies with IP in foreign low-tax jurisdictions
Full expensing of capital investments for five years
Preserves 401(k)s IRAs,
Sets repatriation rate at 12% for liquid assets, 5% for illiquid assets
Carried interest loophole unchanged
Electric Vehicle tax credit is spared

What to Watch Out For This Week:

By Taff Weinstein at

Land, They Aren't Making More Of It, Or Are They?

Land, They Aren't Making More Of It, Or Are They?
Hong Kong is evaluating creating floating offshore communities to help with their housing crisis.  Sound far fetched?  Not really, considering many of our largest U.S. Cities like Chicago and Boston created land to expand their city's footprint.

But instead of using timbers, cement and land fill to expand the shorelines like in Chicago, Hong  Kong is considering a “floating community” formed of cruise liners, with its own community square, gardens, open-air theater and shopping malls, and taking a ferry to get to work in a downtown area.  It may sound futuristic, but a Hong Kong think tank has suggested this could be an efficient solution to the city’s housing shortage and sky-high property prices.

Each community would comprise 66 cruise ships connected to floating piers and a central deck, with each ship providing some 4,000 flats ranging from 183 sq ft to 549 sq ft.
Based on the construction cost of existing hotels converted from cruise liners and an assumed average living space of 192 so ft. per person, the cost per capita would be about HK$1.2 million.
Technologies have already been developed to support floating facilities, and many existing hotel projects such as the RMS Queen Mary in Long Beach in California proved that the project was feasible.
Source:  South China Morning Post
What Happened to Rates Last Week?

Mortgage backed securities (FNMA 3.50 MBS) gained +37 basis points (BPS) from last Friday's close which caused fixed mortgage rates to move lower for the week.

Overview:  A very interesting and telling week.  If there was any question on what is the most important thing for long bond traders right now...we answered that question last week.  The answer?  Tax Reform.  We had a Fed Meeting - bonds did nothing, we had a new Fed Chair - bonds did nothing.  We had some of the strongest economic data that we have ever seen - bonds did nothing.  All three of those these would normally be very negative for bond trades (pushing mortgage rates higher).  But instead bonds traded higher (pushing mortgage rates lower).  Why?

Tax Reform: While both sides are debating the merits and impact of the tax cuts on individuals, the bond markets are focusing on Corporate Taxes.  The current proposal of a flat 20% corporate tax rate and a 12% rate on money brought back from overseas is very stimulative to our macro economic picture and would be something that bonds would not like.  However, even Republicans are balking at the changes to SALT deductions, the market sentiment currently is that this tax bill will not pass.  And that means no new stimulative reform to our economy and that is very bond friendly.

Manufacturing: The October ISM National Manufacturing Index was very strong, coming in at 58.7 vs est of 59.5. Any reading in the upper 50's is huge.  Prices Paid hit 68.5 vs est of 68.0
The October Chicago PMI was a block-buster!  It hit 66.2 vs est of 61.0.  Any reading above 50 is expansionary and a reading above 60 is rare and very robust.  New Orders were very strong and backlogs hit a 43 year high.
ISM Services:Was a blockbuster, breaking above 60.0 for only the 4th time in 27 years.  The October reading hit 60.1 vs est of 58.6.  This represents more than 2/3 of our economy.

Jobs, Jobs, Jobs:Big Jobs Friday!
We got a mixed bag with the jobs data with real strength in hiring but real wage pressure is once again evasive.

Tale of the Tape:
Non-Farm Payrolls (1st release) for October 261K vs est of 310K
September NFP (2nd release, one more revision to come) revised higher from -33K to +18K (51K swing)
August NFP (3rd and final release) revised higher from 169K to 208K (39K swing)
The more closely watched 3 month moving average is now 162K.
Average Hourly Wages MOM was flat at 0.0% vs est of 0.3%
Average Hourly Wages YOY increased by 2.4% which was at a slower pace than in September (2.8%).
The Unemployment Rate fell to 4.1% vs est of 4.2%.
The Participation Rate fell from 63.1% in September down to 62.7% in October.

The "Yawning" Fed:  They left their key interest rate and asset purchase program alone.
The Fed seemed slightly more positive (and perhaps hawkish) by upgrading the economy from growth "moderately" to "at a solid rate" even as it cautioned that "Gasoline prices rose in the aftermath of the hurricanes, boosting overall inflation in September; however, inflation for items other than food and energy remained soft."
Here are a few highlights from their statement:
Fed says economic activity rising at solid rate despite storms
Fed: inflation for items other than food, energy remained soft
Fed: storms unlikely to alter economy’s medium-term course
Fed: labor market continued to strengthen, unemployment declined
Fed: spending rising at moderate rate, investment picked up
Fed repeats market-based inflation compensation gauges still low
Fed repeats sees inflation stabilizing around 2% medium term

What to Watch Out For This Week:


By Taff Weinstein at

Single Female First Time Home Buyers Increase to 2011 Levels

Single Female First Time Home Buyers Increase to 2011 Levels:

The National Association of Realtors® 2017 Profile of Home Buyers and Sellers, which also identified numerous current consumer and housing trends, including: mounting student debt balances and smaller down payments; increases in single female and trade-up buyers; the growing occurrence of buyers paying the list price or higher; and the fact that nearly all respondents use a real estate agent to buy or sell a home, which kept for-sale-by-owner transactions at an all-time low of 8 percent for the third straight year.  Here are some key highlights from the report:

Single females make up larger share of sales:
Solid job prospects, higher incomes and improving credit conditions translated to continued momentum in the growing share of single female buyers. At 18 percent (matches highest since 2011), single women were the second most common household buyer type behind married couples (65 percent). Furthermore, single women purchased slightly more expensive homes than single men despite earning less. The overall share of single male buyers (7 percent) remained below unmarried couples (8 percent) for the second straight year.
Age of first-timers stays flat; climbs to new survey high for repeat buyers:
For the second straight year, the median age of first-time buyers was 32 years old. First-time buyers had a higher household income ($75,000) than a year ago ($72,000) and purchased a slightly smaller home (1,640-square-feet; 1,650-square-feet in 2016) that was more expensive ($190,000; $182,500 in 2016). Fewer first-time buyers purchased a home in an urban area (17 percent; 20 percent in 2016).
The age of repeat buyers increased to an all-time survey high this year (54 years old; 52 years old in 2016) as older households, perhaps with plans to stay in the workforce longer but with an eye towards retirement, felt more comfortable about buying. Overall, repeat buyers had roughly the same household income than last year ($97,500; $98,000 in 2016) and purchased a 2,000-square-foot home (unchanged from last year) costing $266,500 ($250,000 in 2016).
Nearly all buyers choose a single-family home in a suburban location:
A majority of buyers continue to choose a home in a suburb, small town or rural area (85 percent) as opposed to an urban one (13 percent; 14 percent in 2016). Eighty-three percent of buyers purchased a detached single-family home, which for the third straight year remains the highest share since 2004 (87 percent). Purchases of multi-family homes, including townhouses and condos, were at 11 percent.
Supply scarcity leads to increase in buyers paying list price or higher:
Underscoring the supply and demand imbalances prevalent in many parts of the country, 42 percent of buyers paid the list price or higher for their home, which is up from a year ago (40 percent) and a new survey high since tracking began in 2007. Buyers in the West were the most likely (51 percent) to pay at or above list price.

What Happened to Rates Last Week?

Mortgage backed securities (FNMA 3.50 MBS) lost -1 basis points (BPS) from last Friday's close which caused fixed mortgage rates to move sideways for the week, but rates were pressured higher for most of the week.

Overview:  Everything domestically pressured MBS to move lower (mortgage rates moved higher) with very strong economic data (Durable Goods and GDP) as well as the House passage of the Senate's budget which clears the way for Tax Reform to begin.  This all caused mortgage rates to move higher all week until Friday.  That's when Catalonia voted for independence from Spain and global money poured into long bonds seeking safety ahead of any instability to the Eurozone and caused MBS to rebound off their worst levels of the month.

Durable Goods:  The September reading was much stronger than expected.  The headline MOM reading hit 2.2% vs est of 1.0%.  Plus, August was revised upward from 1.7% to 2.0%.  YOY, the reading moved from 5.5% in August to 8.3% in September.  When you strip our the volatile transportation sector, the data is still really strong.  MOM  it hit 0.7% vs est of 0.5% and August was revised higher from 0.2% to 0.7%. YOY, it moved from a 6.8% pace in August to a 7.5% pace in September.  This is a strong report.

Gross Domestic Product:  We got the first look at the 3rd QTR GDP and it was much hotter than expected, hitting 3.0% vs est of 2.5%.  Just 2 months ago, projections were for this reading to hit only 1.0%.  This marks the second straight quarter of 3.0% or above growth.  And that is even with the Hurricanes! The Price Index was also higher than expected (2.1% vs est of 1.8%) which is inflationary.

Consumer Sentiment:  The final reading for the University of Michigan's Consumer Sentiment Index was revised from the early release of 101.1 to 100.7.  This is a huge increase over September's 95.3 reading and is very positive for the economy.

Geo-Political:  The House voted 216 to 212 to adopt the Senate's FY 2018 Budget.  That now lays the ground work for Tax Reform as a simple majority is all that is needed to pass.  The President and Treasury Secretary have said that they will submit their Tax Reform Bill on November 1....and then the fireworks start.

Geo-Political:  The Catalan "government" took center stage as Spain has enacted their "Article 155" scenario to squash the Rebels.  Catalonia defied Madrid and voted to pass the motion to establish a new republic independent of Spain with 70 votes (68 were needed for majority).

What to Watch Out For This Week:


By Taff Weinstein at

How Many Hours do Americans Need to Work to Pay their Mortgage?


How Many Hours do Americans Need to Work to Pay their Mortgage?

The visualization uses data from the U.S. Census for household income and Zillow for median home listing price, while calculating mortgage payments based on a standard 30-year term.
With about 170 hours in a normal work month, the worst is in New York City and Los Angeles, where at least 65% of income is going towards housing.
But in a city like Memphis, TN it takes only 18.4 hours of work a month to pay down the average mortgage. That’s equal to only about 10% of monthly household income.
The red bars represent places where you have to work the most hours to keep the roof over your head. In cities like New York, Los Angeles, Miami, and San Francisco, you put in more than 100 hours to make enough money just to pay for housing. That’s longer than two-and-a-half weeks, meaning well over 50% of your take-home pay! Not surprisingly, unaffordable places are all located on the either coastline. In fact, 8 of the 10 most expensive places are all located in California.

How does your state stack up?
Source: HowMuch.net

What Happened to Rates Last Week?

Mortgage backed securities (FNMA 3.50 MBS) lost -54 basis points (BPS) from last Friday's close which caused fixed mortgage rates to move slightly higher from the prior week to their highest levels since July.

Overview:  MBS sold off (mortgage rates moved higher) as a result of a shift in sentiment among long bond traders regarding Tax Reform and the next Fed Chair.  Odds of Tax Reform happening shot up in the market place after the Senate passed the FY 2018 budget.  You can't have Tax Reform without a budget, so this makes some sort of reform more likely.  Tax Reform can be very stimulative to the economy and bonds simply do not perform well in a strong economy.  Also, several polls and reports hit last week that have the short list for the next Fed Chair done to five members with Janet Yellen at the lower end of expectations.

Location, Location, Location: 
Weekly Mortgage Applications rose by 3.6% lead by a pop in Refinance Applications of 4.0% and Purchase Applications of 3.0%.
New Housing Starts for September were lighter than expected (1.127M units vs est of 1.180M).
Building Permits were also lighter than expected (1.215M vs est of 1.238M).  For both of these, the weakness is mainly in the multi-family sector and not the SFR sector.  This reporting period is during the hurricanes for Florida and Texas which are two of the most populated states.
September Existing Home Sales were a tad better than expected (5.39M vs est of 5.30M units) despite the hurricanes.  As expected, inventory shortages and rising prices are a problem for faster growth.

The Talking Fed:  The Beige Book was more upbeat than expected.  You can read the official release from the Fed here
Despite major disruptions from Hurricanes Harvey and Irma, all 12 Federal Reserve Districts indicated that economic activity increased in September through early October. Several Districts noted increased manufacturing input costs, citing storm impacts (with 58 mentions of the word Hurricane) and labor constraints (employers were having difficulty finding qualified workers) - this was certainly reflected in the last JOLTS report.

Game of Thrones:
The Politico published a report that Treasury Secretary is said to be pushing for Fed Governor Jay (Jerome) Powell and the WSJ openly endorsed former Fed Governor Kevin Warsh.  Both scenarios make Yellen's re-appoint seem more remote.  Also on Fox News, President Trump said that it is "in his thinking" that he could bring in both Powell and Taylor (similar to Yellen and  Fischer as Chair and Vice Chair).  This was yet another reason for bonds to hedge against a shift at the Fed that could lead to faster rate hikes and growth.

Geo-Political:  The Senate passed the 2018FY Budget with a 51-49 vote.  My Kentucky Senator Rand Paul was the only Republican "no" vote.  This means that this now moves into reconciliation mode with the budget that the House has already passed, paving the way for Tax reform.

What to Watch Out For This Week:


By Taff Weinstein at

Real Estate Taxes by State

Real Estate Taxes by State:

The monthly mortgage payment (principal and interest) is the largest component of home ownership.  But the taxes on the property are the second highest cost of homeownership and is greatly impacting migration in the U.S.

How does your state stack up?

Real-Estate Property Taxes by State


Effective Real-Estate Tax Rate

State Median Home Value

Annual Taxes on

Home Priced at State Median Value

Alabama 0.43% $125,500 $543
Alaska 1.18% $250,000 $2,956
Arizona 0.81% $167,500 $1,356
Arkansas 0.62% $111,400 $693
California 0.81% $385,500 $3,104
Colorado 0.60% $247,800 $1,489
Connecticut 1.97% $270,500 $5,327
Delaware 0.54% $231,500 $1,243
District of Columbia 0.56% $475,800 $2,665
Florida 1.06% $159,000 $1,686
Georgia 0.94% $148,100 $1,397
Hawaii 0.27% $515,300 $1,406
Idaho 0.76% $162,900 $1,246
Illinois 2.30% $173,800 $3,995
Indiana 0.87% $124,200 $1,085
Iowa 1.48% $129,200 $1,916
Kansas 1.40% $132,000 $1,849
Kentucky 0.85% $123,200 $1,042
Louisiana 0.49% $144,100 $707
Maine 1.30% $173,800 $2,259
Maryland 1.10% $286,900 $3,142
Massachusetts 1.20% $333,100 $3,989
Michigan 1.78% $122,400 $2,174
Minnesota 1.18% $186,200 $2,200
Mississippi 0.79% $103,100 $813
Missouri 1.00% $138,400 $1,387
Montana 0.85% $193,500 $1,652
Nebraska 1.85% $133,200 $2,467
Nevada 0.85% $173,700 $1,481
New Hampshire 2.15% $237,300 $5,100
New Jersey 2.35% $315,900 $7,410
New Mexico 0.74% $160,300 $1,188
New York 1.62% $283,400 $4,600
North Carolina 0.85% $154,900 $1,322
North Dakota 1.12% $153,800 $1,722
Ohio 1.56% $129,900 $2,032
Oklahoma 0.88% $117,900 $1,036
Oregon 1.08% $237,300 $2,563
Pennsylvania 1.53% $166,000 $2,533
Rhode Island 1.63% $238,000 $3,884
South Carolina 0.57% $139,900 $798
South Dakota 1.34% $140,500 $1,879
Tennessee 0.75% $142,100 $1,062
Texas 1.90% $136,000 $2,578
Utah 0.68% $215,900 $1,472
Vermont 1.74% $217,500 $3,795
Virginia 0.80% $245,000 $1,948
Washington 1.08% $259,500 $2,805
West Virginia 0.58% $103,800 $607
Wisconsin 1.96% $165,800 $3,248
Wyoming 0.61% $194,800 $1,196

State Tax Rates as of 2015 (most recent data for all states) source: Wallet Hub

What Happened to Rates Last Week?

Mortgage backed securities (FNMA 3.50 MBS) gained +24 basis points (BPS) from last Friday's close which caused fixed mortgage rates to move slightly lower from the prior week.

Overview:  We had a holiday shortened week.  Overall, the limited economic data that hit the markets showed was fairly strong but Friday' Consumer Price Index showed that core prices (ex the volatile food and energy categories) rose at only 1.7% which is well below the Fed's target inflation rate of 2.0%.  This pushed MBS to their highest levels of the week which means that we saw the lowest mortgage rates of the week right after that report.

Inflation?  The Core (ex-food and energy) CPI for September matched the same pace as August which was 1.7%.  The market was expecting a slight increase to 1.8%.  The headline CPI hit 2.2% which was a good increase from August's pace of 1.9%.  But the bottom line is that the core number is still well below 2% which is favorable to bonds.

Retail Sales:  Showed some very solid gains with the ex-Autos number jumping by 1.0% vs est of only 0.3%.  However, much of the spike is contributed to buying supplies, etc due to rebuilding from the hurricanes.  Headline Retail Sales which includes Autos increased by 1.6% vs est of 1.7%, a slight miss but a big pick up from August's pace of -0.1%. Consumer Sentiment:  Wow!  The September data never really showed any type of dip due to the hurricanes and now the preliminary October data is off the charts with a triple digit reading of 101.1 which is the highest readings in 10 years.

Jobs, Jobs, Jobs:   The August Job Openings and Labor Turnover Survey (JOLTS) showed a very large amount of unfilled jobs just waiting for skilled workers and hit 6.082M which is a very slight pullback from July's level of 6.140M but still just below historic highs.  This basically means that the labor market will continue to tighten with an Unemployment Rate of only 4.2%, we have a tremendous amount of open jobs and the only way to fill them will be to pilfer employees from a competitor...and in the process pay up to get them to make the switch.

What to Watch Out For This Week:


By Taff Weinstein at

Home Purchaser's Sentiment Matches All-Time High

Home Purchaser's Sentiment Matches All-Time High:
The Fannie Mae Home Purchase Sentiment Index® (HPSI) increased 0.3 points in September to 88.3, matching the all-time high set in June.

The rise can be attributed to increases in three of the six HPSI components. The good time to buy component rose the most month-over-month, with the net share increasing 10 percentage points compared to August. Renter respondents, in particular, buoyed the net good time to buy component, showing a substantial upward change in optimism in September. The net share who reported that now is a good time to sell a home rose 2 percentage points in September and is now up 23 percentage points compared to the same period last year.

Meanwhile, the net share who said home prices will go up in the next 12 months fell 8 percentage points. Even so, respondents continue to cite high home prices as the most important reason behind the bad time to buy and good time to sell indicators. The net share of those who believe mortgage rates will go down decreased 2 percentage points. Americans also expressed a slightly increased sense of job security, with the net share who say they are not concerned about losing their job increasing 1 percentage point. Finally, the net share of consumers who reported that their income is significantly higher than it was 12 months ago fell by 1 percentage point.

“The biggest driver for the increase in the HPSI is the rebound in the good time to buy sentiment, which outweighed the largest drag—a sizable reduction in the net share of consumers expecting home prices to rise over the next year,” said Doug Duncan, senior vice president and chief economist at Fannie Mae.

Duncan also said that the “details in the survey showed a meaningful pickup in the good time to buy component, especially from the renter respondents. Additionally, perceptions of easing inventory helped boost the net share saying that now is a good time to buy, which is consistent with less bullish home price appreciation sentiment during the month. Overall, we believe that the devastating impacts of the hurricanes will likely weigh on home sales in coming months, posing downside risks for our forecast, which already calls for only a modest gain in home sales this year.”

What Happened to Rates Last Week?

Mortgage backed securities (FNMA 3.50 MBS) lost -8 basis points (BPS) from last Friday's close which caused fixed mortgage rates to move slightly higher from the prior week.  While a net change under -10BPS is very tame, we certainly saw some "choppiness" last week with a -56BPS swing from our best levels of the week to the worst levels of the week.

Overview:  We had a very volatile week as we had very encouraging economic news with very strong manufacturing, services and wages.  All of which are very positive for the economy but negative for rates.  On the flip side, we had heightened global concern over North Korea and a potential testing of a missile that could hit CA and the tearing apart of Spain as their richest province voted, passed and declared independence from Spain.  This global instability caused many to purchase long bonds and is good for rates.

Jobs, Jobs, Jobs:  Big Jobs Friday hit last week, what did we learn?  We learned that pricing pressure in wages is very real.
Tale of the Tape:
September Non-Farm Payrolls -33K vs est of 0K
August was revised from 156K up to 169K.
The "whisper" numbers on Wall Street were actually at -50k, so this is actually not a shock to the system, the last time that we had a major hurricane, NFP also went negative so the markets are giving this piece of data a "pass".
Unemployment Rate dropped down to 4.2% vs est of 4.4% and might have some teeth.  Recently, this number has dropped along with the participation rate. But in this case the participation rate actually increased from 62.9% to 63.1%
Wages:  The MOM Average Hourly Earnings moved up by 0.5% vs est 0.3%, but the bond market focuses on the YOY reading which came in at 2.9% vs est of 2.5%.  This is the highest reading since June of 2009!

Manufacturing:  Just like the regional Chicago PMI report, the September ISM National Manufacturing report was much better than expected and hit its highest levels in 13 years with a 60.8 reading. New Orders rose to a 4 month high and Employment broke 60.0 for the first time in 6 1/2 years.

ISM Services:  This represents over 2/3 of our economic engine.  Any reading above 50.0 is very good and expansionary.  The market was expecting a very high reading of 55.5 but instead we got a very robust reading of 59.8 which is one of the highest readings on record.

The Talking Fed:
The Senate voted to confirm Randal Quarles as a new Federal Reserve Board Governor, he is replacing Daniel Tarullo who was the unofficial head of the banking industry resigned in April.  Quarles will now be the official Fed head of banking regulations and favors fewer of them.  This is the very first run at getting a Fed member through the Senate by the Trump administration and it actually went very smoothly with a 65-32 vote.  There are still two vacant Fed Board positions that were never filled during the Obama administration and Fischer (retires in October) will need to be replaced.  That is three permanent voting members that will be appointed by President Trump in addition to the next Fed Chair.
What to Watch Out For This Week:

By Taff Weinstein at

The Housing Market Update

Inventory Shortage Hampers Pending Home Sales:

The National Association of Realtors released their Pending Home Sales report and there is a glaringly obvious issue: Lack of inventory available for purchase.

The Pending Home Sales Index a forward-looking indicator based on contract signings, retreated 2.6 percent to 106.3 in August from 109.1 in July. The index is now at its lowest reading since January 2016 (106.1), is 2.6 percent below a year ago, and has fallen on an annual basis in four of the past five months.

Lawrence Yun, NAR chief economist, says this summer’s terribly low supply levels have officially drained all of the housing market’s momentum over the past year. “August was another month of declining contract activity because of the one-two punch of limited listings and home prices rising far above incomes,” he said. “Demand continues to overwhelm supply in most of the country, and as a result, many would-be buyers from earlier in the year are still in the market for a home, while others have perhaps decided to temporarily postpone their search.”

With little relief expected from the housing shortages that continue to plague several areas, Yun believes the housing market has essentially stalled. Further complicating any sales improvement in the months ahead is the fact that Hurricane Harvey’s damage to the Houston region contributed to the South’s decline in contract signings in August, and will likely continue to do so in the months ahead. Furthermore, the temporary pause in activity in Florida this month in the wake of Hurricane Irma will slow overall sales even more in the South.

Yun now forecasts existing-home sales to close out the year at around 5.44 million, which comes in slightly below (0.2 percent) the pace set in 2016 (5.45 million). The national median existing-home price this year is expected to increase around 6 percent. In 2016, existing sales increased 3.8 percent and prices rose 5.1 percent.

“The supply and affordability headwinds would have likely held sales growth just a tad above last year, but coupled with the temporary effects from Hurricanes Harvey and Irma, sales in 2017 now appear will fall slightly below last year,” said Yun. “The good news is that nearly all of the missed closings for the remainder of the year will likely show up in 2018, with existing sales forecast to rise 6.9 percent.”

The PHSI in the Northeast fell 4.4 percent to 93.4 in August, and is now 4.1 percent below a year ago. In the Midwest the index decreased 1.5 percent to 101.8 in August, and is now 3.2 percent lower than August 2016.

Pending home sales in the South retreated 3.5 percent to an index of 118.8 in August and are now 1.7 percent below last August. The index in the West declined 1.0 percent in August to 101.3, and is 2.4 percent below a year ago.

What Happened to Rates Last Week?



Mortgage backed securities (FNMA 3.50 MBS) lost -21 basis points (BPS) from last Friday's close which caused fixed mortgage rates to move slightly higher from the prior week.  We saw some "choppiness" on Wednesday.  The markets saw their lowest rates on Monday and their highest rates on Thursday.

Overview:  Last week was packed full of market moving news and most of it was positive for our economy which is always negative for longer term rates.  We also had the grand unveiling of the Tax Reform and saw market sentiment move away from expecting Janet Yellen to remain as the Fed Chair in 2018.

GDP:  We got the final reading for the 2nd QTR GDP and it was revised upward to 3.1% vs est of 3.0%.  Consumer Spending remained a very strong component at a 3.3% clip.  This confirms that our economy had a good amount of momentum rolling into the 3rd QTR and that the 3rd QTR would likely be very strong except that the Hurricanes will drag on the data.

Durable Goods:  This data was much better than expected.  The headline August reading came in at 1.7% vs est of only 0.7%.  When you strip out the volatile transportation sector, it increased by 0.2% which matched market expectations.  The prior month (July) was revised upward from 0.5% to 0.8%.  The Core Durable Goods Orders (non defense and non aircraft) came in three times higher that expectations (0.9% vs est of 0.3%).

Manufacturing:  The bell-weather Chicago PMI was very robust, coming in at at three year high of 65.2 vs est of 58.5.   Any reading above 50.0 is expansionary and readings above 60.0 are very rare.

Tax Reform:  We will finally got the official release of Trump's proposed Tax Reform.  Here are some of the key highlights:
 - elimination of the AMT
 - elimination of the "Death Tax"
 - Four "tax" brackets - 0%, 12% 25% and 35%
 - Married couples up to 24K pay no taxes (0% tax bracket)

 - Most itemized deductions eliminated
 - Corporate tax rate 20%
 - Company tax rate reported as personal income 25%
 - Tax free repatriation on foreign profits

The Talking Fed:
Fed Chair Janet Yellen said that  “Without further modest increases in the federal funds rate over time, there is a risk that the labor market could eventually become overheated, potentially creating an inflationary problem down the road that might be difficult to overcome without triggering a recession.”

Game of Thrones: The waiting game to who the next Fed chair will be got a little excitement after news broke that both President Trump and the Treasury Secretary met with former Fed Board Governor Kevin Warsh yesterday.  No news from that meeting has emerged other than it happened.  As a result, Wall Street has changed their odds of Warsh getting the nod from 10% to 45%.  Meanwhile Yellen's odds dropped from 32% down to 24%.  Still a tight race as there are few more names on the "short list".

What to Watch Out For This Week:


By Taff Weinstein at

Student Loan Debt Delays Home Buying by Seven Years


Student Loan Debt Delays Home Buying by Seven Years:

A new study by the National Association of Realtors and the American Student Assistance shows that the weight of student debt can cause new home buyers to delay entering the housing market by seven years.

McNee Solutions

The U.S. currently has a student debt load of $1.4 trillion, which accounts for 10 percent of all outstanding debt and 35 percent of non-housing debt. The magnitude of the debt continues to grow in size and share of the overall debt in the economy. While this amount of debt has risen, the homeownership rate has fallen, and fallen more steeply among younger generations.

Student loan debt impacts other life decisions including employment, the state the debt holder lives in, life choices such as continuing education, starting a family, and retirement.

Twenty-two percent were delayed by at least two years in moving out of a family member’s home after college due to their student loans.

Among non-homeowners, 83 percent cite student loan debt as the factor delaying them from buying a home. This is most frequently the case due to the fact that the borrowers cannot save for a downpayment because of their student debt. Among homeowners, 28 percent say student debt is impacting the ability to sell their existing home and move to a different home. The delay in buying a home among non-homeowners is seven years and three years for homeowners.

What Happened to Rates Last Week?

Mortgage backed securities (FNMA 3.50 MBS) lost -7 basis points (BPS) from last Friday's close which caused fixed mortgage rates to move slightly higher from the prior week.  We saw some "choppiness" on Wednesday which produced both the lowest and highest rates of the week with an intra-day swing of -37BPS.

Overview:  MBS were pushed into a very well-defined trading channel that was supported by our 100 day moving average (the purple line in the chart above) and was capped by our support level at our 50 day  moving average (the blue line in the chart above).  The biggest event/story of the week by far was the Fed meeting and their announcement that they would begin purchasing fewer Treasury Notes and  Agency Mortgage Backed Securities beginning in October.

The Talking Fed:
As widely expected, the Federal Reserve kept their key Fed Funding Rate at 1.00 to1.25% range.  And as widely expected, they gave us some information about their "Taper".  What was not widely expected was that it would start in October instead of December/January and the vast majority of Federal Reserve members are telling the markets that they expect one more rate hike in December.

Guidance on rates:
As you can see from the famous Dot Plot Chart below,

The vast majority of the Fed is saying that they internally expect to see one more rate hike in 2017 and at least three rate hikes in 2018.  Both of which were not priced into the market before Wednesday and in fact are still not fully priced in yet, although the market is showing at least some higher odds of a rate hike in December.

Time to Taper:
They will begin to purchase fewer U.S. Treasury notes and longer term Agency MBS bonds beginning in October.
They will purchase $10B fewer notes and bonds for Oct, Nov and December 2017.
 - of that $10B reduction.  $6B will be in U.S. Treasuries and $4B will be in MBS.
They will purchase $20B fewer notes and bonds (taking another $10B from their prior reduction) beginning in January 2018 and will continue through March 2018.  It will be $12B few Treasury Notes and $8B fewer MBS than at today's levels. 
This pattern will continue to reduce their asset purchase/reinvestments by additional $10B a month every quarter until it gets to a point where they have reduced it by $50B per month and then will continue at that level.

What to Watch Out For This Week:


By Taff Weinstein at

Homeownership Remains a Top Priority among Consumers


The Housing Market Update

Homeownership Remains a Top Priority among Consumers:
The dream of owning a home is still viewed as the number one as a long-term financial goal for Americans, with 54% saying it was their primary long-term financial objective – an 11% increase from last year.  That is according to a recent survey conducted by Report Linker. In fact, 81% say home ownership is the best long-term investment a person can make.

The investment advantage is one of the forces driving Millennials’ interest in buy In the first quarter of this year, the number of new-owner households was double that of new-renter households, an indication the younger generation is moving into the buyers’ market.

A major challenge for would-be homeowners is the lack of housing inventory. The US is in the midst of a housing shortage, largely because members of the Millennial generation want to live closer to urban areas – and the numerous restaurants, attractions and short commute times they offer. In response, builders have focused on urban housing rather than the less expensive suburbs, leading to a decline in overall housing starts and a focus on higher-priced city homes. But as Millennials marry and look to leave their rentals behind, starter homes are beginning to make a comeback and builders are now shifting their focus from luxury homes to lower price points that first-time buyers can afford. They’re also expanding beyond urban areas into the exurbs where land is cheaper.

Among homeowners, 31% have a mortgage, while 15% own their home outright. Those most likely to be mortgage free are those 55 and over (36%), while half of those aged 35 to 44 are more likely to still be chipping away at their payments. More than a quarter of respondents to ReportLinker’s survey say they rent from a private landlord. Renting is especially common among older Millennials aged 25 to 34 (44%), while four in 10 young Millennials (age 18-23) say they stay with friends or family for free.

What Happened to Rates Last Week?

Mortgage backed securities (FNMA 3.50 MBS) lost -57 basis points (BPS) from last Friday's close which caused fixed mortgage rates to move higher from the prior week.  The market saw the lowest rates of the week on Monday and the highest rates of the week on Thursday.

Overview:  A very interesting and very telling week for MBS trends.  Everything about last week should have caused MBS to at least move slightly higher (meaning lower rates). Retail Sales were Dismal, Consumer Sentiment Dropped, a missile was shot over Japan, a London terror attack, and the Atlanta Fed lowered its GDP forecasts. 

So, why didn't MBS rally (or at least move a little higher for lower rates?). This is where it gets interesting as long bond traders have two things weighing on their desire to add to their positions.  First are lower taxes.  Yes Tax Reform has shot way up in probability over the past couple of sessions with Paul Ryan's press conference earlier in the week as well as Treasury Secretary Mnuchin's comments and then followed up with a dinner between President Trump and two Democratic leaders making it appear that there could be some actual bi-partisan work in D.C.  Lower corporate taxes and or lower personal taxes would cause our economy to grow at a pace that would be too hot for long bond holders that profit from slow growth and inflation rates so any increase in probability of tax reform actually getting done this year will cause long bond traders to lose interest in holding MBS.

Next is effectively a "white paper" by the Bank of Canada (which unexpectedly hiked their interest rates this month).  This paper and accompanying comments by Senior Deputy Governor Carolyn A. Wilkins, who said that Canada was open to changes in the BoC mandate, has bond traders concerned that we could be up for a MAJOR shift in global central bank policy in 2018.   

Keep in mind that the number 2 person in our Fed is gone (Fischer - October) and Yellen is very much in doubt to be renominated in 2018.  Even if she did stay, there would be at least 4 Fed Governors that would be appointed by President Trump and a rotation in of 4 district Presidents that are generally more conservative than the current rotation of district voters.

Enter the Bank of Canada where Wilkins says it is appropriate for the BofC to reconsider its mandate and lower the target inflation target (for example from 2.0% to 1.5%) or even remove the inflation target altogether.  This has reminded bond traders that even the N.Y. Fed President (number 3 at our Fed) hinted last month that the Federal Reserve could adjust its own inflation target.

This is all digesting in the long bond traders' tummies as everyone is awaiting this Wednesday's FOMC meeting where the market expects that rates and interest rate policy and forward guidance will be unchanged but we will learn about the "great wind-down" as they reduce their monthly MBS purchases.  As one of the largest volume purchasers of all Agency MBS, they will consistently lower their purchases each month....which means consistently more supply available each month and with even a smidge less artificial demand for MBS, it has many bond traders worried.

This is certainly not a "sky is falling" scenario, it simply explains that the sentiment of bond traders (not stock traders) is one of caution making it very difficult to justify bidding up prices.

What to Watch Out For This Week:




By Taff Weinstein at

Sellers Still Expect Prices to Rise

The Fannie Mae Home Purchase Sentiment Index® (HPSI) increased 1.2 points in August to 88.0, just below the all-time high set in June.

The net share who reported that now is a good time to sell a home rose 8 percentage points in August and is now up 21 percentage points compared to the same period last year.

“In the early stages of the economic expansion, home selling sentiment trailed home buying sentiment by a significant margin. The reverse is true today,” said Doug Duncan, senior vice president and chief economist at Fannie Mae. “The net good time to sell share is now double the net good time to buy share, with record high percentages of consumers citing home prices as the primary reason for both perceptions. Such a sizable gap between selling and buying sentiment, if it persists, could weigh on the housing market through the rest of the year.”

Meanwhile, the net share who said it’s a good time to buy fell 5 percentage points in July and is down 16 percentage points year-over-year. Respondents continue to cite high home prices as the most important reason behind the bad time to buy and good time to sell indicators. The net share of those who believe mortgage rates will go down increased 4 percentage points, while the net share of Americans who believe home prices will go up increased 1 percentage point. Americans also expressed a reduced sense of job security, with the net share who say they are not concerned about losing their job falling 1 percentage point. Finally, the share of consumers who reported that their income is significantly higher than it was 12 months ago remains unchanged.

What Happened to Rates Last Week?


Mortgage backed securities (FNMA 3.50 MBS) gained +43 basis points (BPS) from last Friday's close which caused fixed mortgage rates to move lower from the prior week and set a new record low for rates for 2017.

A perfect storm:  That is what it took to drive MBS pricing higher (which means lower rates) last week.  Uncertainty and fear drove demand for our longer term bonds in the face of Harvey and the impending Irma, North Korea and our Debt Ceiling.  We also had the number 2 person at the Fed (Stanley Fischer) retire early (his term ends in June 2018 but he will step down October 2017.)  On the Central Bank front, the Bank of Canada surprised the markets with a 1/4 point rate hike but the European Central Bank disappointed with no real guidance on the timing of winding down their massive bond purchasing program.

Here are the major economic release last week:
The Talking Fed:
The Beige Book was released, little has changed in the 12 Federal Reserve Districts from the last report as all districts reported "moderate" to "modest" growth.  In fact, the word "modest" was used 140 times and the word "moderate" was used 80 times in the report.  It looks like several districts were concerned about a slow down in the auto sector (you can dismiss this folks.....auto sales will spike as all of those water-logged cars from Harvey, Irma and Jose will need to be replaced...a huge boon to the auto market in the next 60 days).
Participants cited tight labor markets and non-wage (benefits) compensation as having less of an impact on attracting workers which could indicated that actual wages paid may soon be rising in order to hire away good workers.

Geo-Political: The House voted to "kick the can" down the road until December 8th, as they voted to "suspend" (so not raise but suspend) the debt ceiling.  They also approved $115B for Harvey relief efforts.

European Central Bank (in)Action: The European Central Bank left their Interest Rate, Deposit Rate and Asset Purchase programs alone with no changes.  ECB President Mario Draghi said "ECB discussion on QE was very preliminary. Various scenarios were discussed as well as various pros and cons. The ECB discussed the QE covered length, size of plan."  He also said that they have not discussed increasing the types of assets that they can buy which is interesting as they have already gobbled up most of the inventory.

What to Watch Out For This Week:

By at

Cool idea! A hamsterwheel desk!

If you are not reaching your current productivity potential - rise up, sedentary sentients, and unleash that untapped potential within by marching endlessly towards a brilliant future of focused work. Step forward into a world of infinite potential, bounded only by the smooth arcs of a wheel. Step forward into the Hamster Wheel Standing Desk that will usher in a new era of unprecedented productivity.

?I love this idea...I wonder if there is a holder for my krispy kremes?

By at

Top 5 Reasons to use a MSP for IT

5 Reasons to Use a Managed Services Provider

One of the questions that I get over and over again is, “Why should we use your, or any, managed services provider?” Typically they ask this because they perceive that it would be better and more cost effective for them just to contact us as their technology issues arise (Break/Fix).

Unfortunately there is a common misconception that having their technology under a managed services agreement is like buying insurance… that they would be paying for something they may or may not use. Not so.

Here are 5 compelling reasons to use a Managed Services Provider.

1  A Managed Services Provider (MSP) will take a proactive approach to managing your tech infrastructure. No more break/fix putting out fires. While you can’t fix everything proactively a MSP worth their weight in salt will proactively identify most , if not all, issues and correct them prior to being a problem. Much easier on the nerves with employees being more productive. Ultimately, this will save your company time and money. A good thing.

2  One of the most important pieces of managed services is the Service Level Agreement (SLA). The SLA explains and promises how and when the MSP will respond to the customized needs of your company. On the other hand, with break/fix services there is not an SLA and typically no guarantee of when the service will be provided. You can easily see that not having a managed service agreement with a SLA could cost your company time and money in lost productivity.

3  This is where the rub is with most companies as a typical managed services agreement is based upon a consistent monthly fee. With that said, in reality, this helps your company keep costs in line and makes budgeting much easier. With an MSP, dealing with unexpected expenses goes away. They now can be handled and dealt with in a timely budgeted manner. Let’s face it the unexpected always happens at the worst time. An MSP can help you get that under control.

4  Partnering with a reputable Managed Services Provider can be far less expensive than hiring, training, and retaining your own IT staff. For the companies that do not have IT staff, do you really want your bookkeeper as the IT “go-to-person”? Really? Using managed services allows that staff member to focus on your company’s business, instead of IT, which is always better for the bottom line.

5  Even if your business has an existing IT staff it can still benefit from managed services. An MSP can complement the internal IT staff by off-loading some of the day to day operations and management of the network and software. What a benefit to your company by allowing your IT staff to focus on other needs. Another big bonus is it can eliminate the necessity of making a large investment in infrastructure management tools since the Managed Services Provider already has these in place typically.

To learn more about the benefits of managed services to your company, email me at bryan@mcneesolutions.com

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