Weekly Mortgage News from Dallas, TX

Last Week in Review

"INVEST IN INFLATION...IT'S THE ONLY THING GOING UP." But this sage advice from Will Rogers may need to ride off into the sunset, as last week's economic news showed inflation does appear to be roped and under-control. The two headline reports of the week were the Producer Price Index (PPI), which measures inflation at the wholesale or producer level, and more importantly, the Consumer Price Index (CPI), which measures inflation on the consumer level.

The simplest definition of inflation is purely the "stuff" we spend money on costing us more of our hard earned dollars than they used to - so this news is of importance to everyone. Both reports showed lower readings than expected, for producers of goods and services, and for us - the consumers of those goods and services. Because fixed return Bonds hate the threat of inflation, they enjoyed the news and popped higher, bringing about .125% of improvement to home loan rates.

While the long string of Fed Funds Rate hikes finally came to an end at the Fed's last meeting - it appears that the hikes are starting to have their desired impact. And the Fed is likely breathing a big sigh of relief, as this decision to pause now has some confirmation.

WITH JOHNNY DEPP AND HOLLYWOOD BRINGING THE PIRATE LIFE BACK IN STYLE...ALL HANDS ON DECK TO READ THIS WEEK'S MORTGAGE MARKET VIEW. YOU'LL CATCH A BIT OF PIRATE LINGO THAT WILL HELP YOU AND YOUR FAMILY STAY HEALTHIER IN THE YEARS TO COME.

Forecast for the Week

Remember as a teenager, just when the party got revved up and really fun, it never failed...your parents pulled into the driveway, quickly ending all the crazy party action. And just like that, Bonds have been on a fun ride higher, bringing some improvement to home loan rates...but now, along comes the 200-day Moving Average to quickly sober Bonds up and put a lid on the ride.

Take a look at the chart below. You can easily see that Bond price improvements - which mean home loan rate improvements - froze dead at this technical ceiling. And since Bond prices have been unable to break above this tough ceiling in the last 18 months, it will likely take some real sour economic news to help them power through it. But the news calendar is now light for awhile - with nothing on the slate until next Wednesday's Existing Home Sales and Crude Oil Inventories. While these reports are interesting, they are generally not known as big market movers, making it tough for Bond prices to see significant improvement.

Bottom line: In the absence of other volatile financial or geopolitical news, it's unlikely that Bonds or home loan rates will see much further improvement in the near term, and it may be a battle to even hold their current ground.

Chart: Fannie Mae 6.0% Mortgage Bond (Friday Aug 18, 2006)The Mortgage Market View...

DEAD MEN TELL NO TALES

Your doctor always says it..."Be sure to take your entire course of antibiotics - don't stop taking them just because you are feeling better!" But let's be honest, isn't it harder to remember to take them when you're out and feeling good, with all those nasty symptoms just a fading memory? Why does that doctor care anyways? After all, they'll never know...and you're tired of popping those pills.

But in fact - it is absolutely crucial to your own health, not to mention the health of countless others, to take your entire course of antibiotics - and here's why.

When you take antibiotics, you are fighting bacteria that are making you sick. Once the antibiotic comes in contact with the bacteria, the antibiotic will start to kill it...but in the meantime, the bacteria is trying to fight back, by adapting itself to the antibiotic, trying to actually change its own formation in order to survive under the new conditions.

So as you take your antibiotics - you do start to feel better in a few days, as more and more of the bacteria are killed off. But when you stop early - those bacteria organisms that survived and learned how to survive in spite of the antibiotic remain...the insurgents. The insurgent bacteria may now begin to mutate and change their own structure, as they've learned from their battle against the antibiotic. And if you start to get sick again from the remaining bacteria - the same antibiotic may now be far less effective, since the bacteria have learned how to defeat it, and you will stay sick.

Worse yet - what if you pass your mutated infection on to another person? Now you've passed on mutant bacteria that their doctor may have difficulty treating, since the antibiotic they might be likely to prescribe no longer works...but they won't know that, until the person remains sick long enough to realize that it's not working. Ever stayed sick long through the course of an antibiotic, and had to go back for something else? Very likely, you got sick from mutated bacteria, passed to you from someone who didn't take their full course of antibiotics.

Bottom line - dead men tell no tales, and dead bacteria can't live to learn how to fight another day, and keep you and others continually sick. Take your entire course of antibiotics, exactly as prescribed. If your family complains when you remind them...just pull out your pirate eye patch, tell them the story, and help them keep steady on the course. And while you're at it - protect your friends and family by passing this article along to them as well.

The Week's Economic Indicator Calendar

Remember, as a general rule, weaker than expected economic data is good for rates, while positive data causes rates to rise.

Economic Calendar for the Week of August 21 - August 25

DateETEconomic Report ForEstimateActualPriorImpactWed. August 2310:00Existing Home SalesJul6.58M6.62MModerateWed. August 2310:30Crude Inventories8/18NA-1607KModerateThu. August 2408:30Durable Goods OrdersJul0.0%2.9%ModerateThu. August 2408:30Jobless Claims (Initial)8/19310K312KModerateThu. August 2410:00New Home SalesJul1150K1131KModerate_uacct = "UA-345382-1";urchinTracker();

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