INSIDE THE MARKETS

If you absolutely, positively want to position yourself to be successful in today's market!

QUOTE OF THE WEEK..."Work joyfully and peacefully, knowing that right thoughts and right efforts will inevitably bring about right results."--James Allen (1864-1912), British inspirational writer INFO THAT HITS US WHERE WE LIVE...We did see some right results for housing last week, and hopefully we've been working joyfully and peacefully to bring them about. Realtor.com reported that inventories of homes, condos, townhouses and co-ops shrank in August for the fourth month in a row. They're now down 19% from a year ago, and rest at 2.27 million units. Dropping inventories do keep home prices from falling and, supporting this, the national median list price was unchanged from June and July and up about 0.5% from a year ago, at $189,900. National average mortgage rates continued to drift downward, again hitting new record lows. And borrowers are responding, with demand for purchase loans up 7% from the week before, according to the Mortgage Bankers Association. Refinancing applications are also up. Freddie Mac's chief economist noted the average interest rate on outstanding mortgages is 5.28% and that refinancing into a 30-year fixed mortgage at today's rates could save $1715 a year in interest on a $200,000 loan. BUSINESS TIP OF THE WEEK...The best indicator of long term success is actually "street smarts." To develop yours, dive in, don't dawdle over decisions, learn from your mistakes and experiment continually. >> Review of Last Week TURNAROUND!...Stocks headed back up five days in a row, giving the S&P500 its best performance since June, though it was just the second weekly rise in eight weeks. The week began with great worry over the status of French banks, but things turned positive on news that the BRIC countries--Brazil, Russia, India and China--are in talks to buy eurozone debt. The European Central Bank also lined up other central banks to help out with loans if needed. This got Wall Streeters feeling so good, they ignored the lackluster U.S. economic reports and sent stock prices skyward. The parade of mediocre data was led by producer inflation, flat for August but up 6.5% from a year ago. Core CPI consumer inflation was up 0.2% for August and up 2.0% versus a year ago, putting it at the top of the Fed's target range. That could make this week's Fed meeting interesting. New jobless claims inched up to 428,000. Retail was flat for August, but even in good times there are off months, and anyway Retail Sales are up 7.2% from a year ago. Finally, the industrial sector continues to lead the recovery, with August production and capacity both UP. For the week, the Dow ended UP 4.7%, at 11509; the S&P 500 was UP 5.4%, to 1216; and the Nasdaq was UP 6.3%, to 2622. Worries about European debt made Treasuries and mortgage bonds look like safe bets, sending prices up at first. But inflation concerns and the stock rally ultimately sent bonds the other way. The FNMA 3.5% bond we track closed Friday at $101.05, down .98 for the week. Nevertheless, as mentioned above, national average mortgage rates inched down, setting new record lows.  DID YOU KNOW?...A prepayment (or prior redemption) privilege is a clause allowing the borrower to pay off a mortgage early without penalty. When interest rates fall, this lets the borrower pay off the mortgage and refinance at a lower rate.  >> This Week’s Forecast NEW CONSTRUCTION, EXISTING HOME SALES AND, OH YES, ANOTHER FED MEETING...It will be useful for folks with our interests to check out Tuesday's August Housing Starts, expected to be down. This will at least help clear the inventory of new homes. The annual rate for Building Permits should be down a little as well. Wednesday will give us the Existing Home Sales reading for August, predicted to be inching back toward the 5 million level. Wednesday we'll also see the Fed's policy statement from the latest FOMC meeting.No one expects the rate to rise, but speculation surrounds Chairman Bernanke's decision to extend the confab to two days. What will they say about inflation? Will they launch Operation Twist and start buying long bonds? Will they throw more money into the system? >> The Week’s Economic Indicator Calendar Weaker than expected economic data tends to send bond prices up and interest rates down, while positive data points to lower bond prices and rising loan rates. Economic Calendar for the Week of Sep 19 – Sep 23  Date Time (ET) Release For Consensus Prior Impact Tu Sep 20 08:30 Housing Starts Aug 592K 604K Moderate Tu Sep 20 08:30 Building Permits Aug 588K 597K Moderate W Sep 21 10:00 Existing Home Sales Aug 4.70M 4.67M Moderate W Sep 21 10:30 Crude Inventories 9/17 NA –6.7M Moderate W Sep 21 14:15 FOMC Rate Decision 9/21 0%-0.25% 0%-0.25% HIGH Th Sep 22 08:30 Initial Unemployment Claims 9/17 417K 428K Moderate Th Sep 22 08:30 Continuing Unemployment Claims 9/10 3.730M 3.726M Moderate Th Sep 22 08:30 Leading Economic Indicators (LEI) Index Aug 0.1% 0.5% Moderate >> Federal Reserve Watch    Forecasting Federal Reserve policy changes in coming months...This week's Fed meeting does not have economists expecting a boost in the Funds Rate, even though last week's inflation figures could bring a hike sooner than the two years the Fed wants to keep the rate at its super low level. Note: In the lower chart, a 1% probability of change is a 99% certainty the rate will stay the same. Current Fed Funds Rate: 0%–0.25% After FOMC meeting on: Consensus Sep 21 0%–0.25% Nov 2 0%–0.25% Dec 13 0%–0.25% Probability of change from current policy: After FOMC meeting on: Consensus Sep 21      <1% Nov 2      <1% Dec 13      <1%

...

If you absolutely, positively want to postion yourself to be successful in today's market!

Federal tax credits for most energy-efficient home improvements are set to expire at the end of 2011.Experts say they won't be extended. Purchase and installation must be this year, so you need to start projects no later than October or November.

Products and projects that qualify for the federal tax credit may be found at:
http://www.energystar.gov/index.cfm?c=tax_credits.tx_index
Rebates and tax credits are also offered by states and these incentives can be searched at:
http://www.dsireusa.org

The maximum federal tax credit is $500 and the amount varies depending on the product. But tax credits are often better than deductions, which only reduce your taxable income. Tax credits reduce your total tax liability, so it's like getting money back from the IRS.

Plus, energy-efficient upgrades save you money year after year. Insulation can reduce air leakage 20% to 30%, saving about $220 a year. New windows can save up to $500 a year. A new air conditioner is typically 30% more efficient than a 10-year-old one. New ductwork, central air cooling and water heaters are also very cost-effective improvements.

For bigger green projects, federal tax breaks are available until 2016! Examples include solar energy systems, geothermal heat pumps, small wind turbines and fuel cells. These may earn a tax credit worth up to 30% of the cost, with no dollar limit. For more information, check the Energy Star website:http://www.energystar.gov/index.cfm?c=tax_credits.tx_index

Check the websites above for eligible projects. Andalways consult with a tax professional before proceeding with expenditures that have tax implications.

PS  Thinking of upsizing, downsizing or refinancing to take advantage of today's affordable home prices and historic low mortgage rates? Please call or email us now to discuss your situation.

Inside The Markets

If you absolutely, positively want to position yourself to be successful in today's market!

Market Update


QUOTE OF THE WEEK..."The lure of the distant and the difficult is deceptive. The great opportunity is where you are."--John Burroughs, American naturalist and essayist



INFO THAT HITS US WHERE WE LIVE...The great opportunity now is for home buyers to get a mortgage at an historically low rate. Freddie Mac reported national average mortgage rates set new record lows last week. But according to most observers, buyers shouldn't expect further rate dips. Lenders are seeing plenty of loan volume, so they don't have to lower pricing to get more activity.



Opportunity was also one of the themes in Fannie Mae's August National Housing Survey, where 69% of Americans polled say now is a good time to buy a home. And in spite of all the talk about more price declines, people expect home prices to dip only 0.5% in the next year. This is why some observers feel we're at a price bottom now. A strong 46% of Americans expect rents to go up in the next year, so that should motivate purchases as well.



BUSINESS TIP OF THE WEEK...Business school researchers found that the businesses able to survive economic downturns were ones who continually changed in response to the business climate, adapted to the headwinds and constantly tried new ideas.



>> Review of Last Week

CONTINENTAL DRIFT...In four days of stock trading, the Dow drifted down for the sixth week out of the last seven, all because of financial dramas on the European continent. Europe's Central Bank President failed to offer any plan to stimulate growth following the downward revision to his GDP forecast for the region. Friday there was talk that Greece might default on its debt over the weekend. On our shores, news that weekly initial jobless claims are still above 400,000 didn't help matters either.



Even a couple of surprisingly good U.S. economic reports couldn't overcome all these bad vibes. The August ISM Services Index was UP, to a better-than-expected 53.3, showing expansion in the non-manufacturing sector responsible for about 85% of our jobs. Following this, it was reported that the July Trade Deficit shrank, thanks to a $6.2 billion INCREASE in exports, which are UP 15.1% in the last year, ahead of imports, up 13.6%.



For the week, the Dow ended down 2.2%, at 10992; the S&P 500 was down 1.7%, to 1154; and the Nasdaq was down 0.5%, at 2468.



Friday the bond market saw a huge flight to safety by investors motivated by those rumors of a weekend Greek default. A government spokesman in Athens said that wouldn't be so, but Wall Streeters opted for sleeping undisturbed until Monday. The FNMA 3.5% bond we track closed Friday at $102.03, up .81 for the week. Mortgage bond prices were up and, as mentioned above, national average mortgage rates set new record lows.



DID YOU KNOW?...The CPI inflation indicator measures the change in the cost of a fixed basket of products and services like housing, food and transportation. The Core CPI favored by the Fed excludes food and energy prices because of their monthly volatility.



>> This Week’s Forecast

This week began with the observance of the 10th anniversary of the September 11 terrorist attacks. Our thoughts are with all those who lost their lives and with their families, whose lives were forever changed.



INFLATION, RETAIL, MANUFACTURING...Wholesale inflation is expected to be well under control in Wednesday's Producer Price Index (PPI) and Core PPI readings for August. Thursday, the critical Consumer Price Index (CPI) and Core CPI inflation measures are also forecast well within the Fed's target range. August Retail Sales should still show consumers doing their part, although sales growth is predicted to be less than July's.



Manufacturing is expected to be down a tad in the August Industrial Production and Capacity Utilization readings. And the Empire Manufacturing Index for New York and the Philadelphia Fed Index should still show contraction in those regions, although less than in the prior month.



>> The Week’s Economic Indicator Calendar



Weaker than expected economic data tends to send bond prices up and interest rates down, while positive data points to lower bond prices and rising loan rates.



Economic Calendar for the Week of Sep 12 – Sep 16



DateTime (ET)ReleaseForConsensusPriorImpact

W

Sep 1408:30Producer Price Index (PPI)Aug0.0%0.2%Moderate

W

Sep 1408:30Core PPIAug0.2%0.4%Moderate

W

Sep 1408:30Retail SalesAug0.2%0.5%HIGH

W

Sep 1408:30Retail Sales ex-autoAug0.3%0.5%HIGH

W

Sep 1410:00Business InventoriesJul0.5%0.3%Moderate

W

Sep 1410:30Crude Inventories9/10NA–3.963MModerate

Th

Sep 1508:30Initial Unemployment Claims9/10410K414KModerate

Th

Sep 1508:30Continuing Unemployment Claims9/33.700M3.717MModerate

Th

Sep 15

08:30Consumer Price Index (CPI)Aug0.2%0.5%HIGH

Th

Sep 1508:30Core CPIAug0.2%0.2%HIGH

Th

Sep 1508:30Empire Manufacturing IndexSep–4.0–7.7Moderate

Th

Sep 1508:30Industrial ProductionAug0.0%0.9%Moderate

Th

Sep 1508:30Capacity UtilizationAug77.4%77.5%Moderate

Th

Sep 1510:00Philadelphia Fed Manufacturing IndexSep–10.0–30.7HIGH

F

Sep 1609:55Univ. of Michigan Consumer SentimentSep56.355.7Moderate





>> Federal Reserve Watch

Forecasting Federal Reserve policy changes in coming months...Economists see a hike in the Funds Rate as the farthest thing from the Fed's collective mind, clear through the first half of 2013. Note: In the lower chart, a 1% probability of change is a 99% certainty the rate will stay the same.

Current Fed Funds Rate: 0%–0.25%

After FOMC meeting on:Consensus

Sep 200%–0.25%

Nov 20%–0.25%

Dec 130%–0.25%



Probability of change from current policy:



After FOMC meeting on:Consensus

Sep 20 <1%

Nov 2 <1%

Dec 13 <1%







This e-mail is an advertisement for Kim Schieldknecht. The material provided is for informational and educational purposes only and should not be construed as investment and/or mortgage advice, or a commitment to lend. Although the material is deemed to be accurate and reliable, there is no guarantee of its accuracy. The material contained in the newsletter is the property of PrimeLending, A PlainsCapital Company.. It is designed for real estate and other financial professionals only.  The material does not represent the opinion of PrimeLending, A PlainsCapital or RE/MAX Elite.