A Mortgage Update from Jay Skwierawski for the week of July 20
Hello Everybody!
Last week started out with such promise. Over the previous weekend, the government announced that they would stand behind Fannie Mae and Freddie Mac and, basically, do whatever it takes to make sure that they don't fail. This would have been disastrous for a housing market that is trying to pull itself out of the doldrums. Yet, interest rates jumped this week to their highest level this.
Bad news on inflation and some favorable news on the economy were the main culprits this week, along with more news of mortgage related losses by big banks and investments companies, the failure of IndyMac Bank and a huge decrease in the price of oil.
First the news that was released: The Producer Price Index (PPI), the measure of inflation at the wholesale level, was reported at up 1.8%, considerably higher than the high "up 1.3%" that the market was anticipating, and at a level we haven't seen since 1981. In addition, the core PPI (excluding the cost of volatile food and energy) was reported up .2%, which was actually better than the increase of .3% that was expected. Retail Sales were reported up only .1%, compared to the up .4% that was expected. This was bad news, especially considering this should have included the checks that were sent out for the President's fiscal stimulus plan. Excluding auto sales, Retail Sales also came in worse than expected. The Empire State Index, which is a measure of the economy in the New York area came in better than expected, but still at a recessionary level. As has been the case lately, the markets have been selling off, with rates rising, on news that, even though it's bad news is better than expected. Industrial Production unexpectedly rose by .5%. The markets were expecting a flat number. Capacity Utilization, the measure of how much output factories have versus what they are capable of, also came in higher than expected. The measure of inflation at the consumer level - the Consumer Price Index (CPI) came in much higher than expected, as businesses started to pass on the higher cost of fuel, and the core CPI, excluding the cost of food and energy, also came in slightly higher than expected. Good news was reported on the "home" front, as new housing starts were reported to be 100,000 units higher than expected, and permits for new units rose to a level 130,000 more than expected! Crude oil inventories jumped, which helped bring the cost of oil down at a record breaking pace last week. Finally, first time unemployment claims came in lower than expected and the Philadelphia Fed Index came in much lower than anticipated, at a very recessionary number.
In the banking news front, we had J.P. Morgan Chase and Wells Fargo report good earnings, while Freddie Mac was trying to increase capital to reduce the need for any government intervention. Some other large institutions (National City, Wachovia, Lehman Bros, MGIC and M&I) either reported large losses, or warned that they were going to, as the bad news on the mortgage sector continued. We also had Ben Bernanke, the Chairman of the Federal Reserve, testify for two days before Congress. In his testimony, he said that the Fed worries about inflation and a slowing economy, and will continue to do what it can to resolve both. He said that he could see the economy and housing both improving as we approach the end of the year.
The best news out of the week is that the price of oil plunged over Wednesday, Thursday and Friday. Hopefully this bodes well for the future prices we're going to be paying at the pump. The reason for the drop in the price of oil has partly to do with the rise in our crude oil inventories, the announcement by the president that he is pushing for increased drilling here at home, and a strengthening in the dollar due to some of the positive news out this week.
Although the news out on the economy was mixed, we should focus on the positive news on the housing sector. Have we finally rounded the corner, and are we in the homestretch? We may find out next week when some more housing news is released:
Monday - The Index of Leading Economic Indicators is released. This shows the expected direction of the economy over the next 6 to 9 months, and has a LOW impact on mortgage rates.
Wednesday - Crude Oil Inventories are released. Although this report typically has a moderate impact on rates, lately it has had a HIGH impact on rates, as increasing inventories here at home show that we are fed up with high gas prices, and we're starting to cut back.
Wednesday - The Fed's Beige Book is released, showing how the economy is doing at the various areas covered by the different Federal Reserve Banks. This report typically has a MODERATE impact on mortgage rates.
Thursday - Initial Jobless Claims reports how many people joined the unemployed rolls for the first time. This has a MODERATE impact on rates.
Thursday - Existing Home Sales will be reported. Are there buyers out there that are looking to buy and close before school starts? MODERATE
Friday - Durable Goods Orders - Are people buying those items that are expected to last more than three years? MODERATE
Friday - New Home Sales - Another report showing whether buyers are buying new construction. MODERATE
Friday - Consumer Sentiment (University of Michigan) - How are consumers feeling about the way the economy is doing right now? Is the fact that we're paying almost $4.50 per gallon for gas starting to take its toll?
Of course we'll also be watching the price of oil and for signs of any more unrest in the mortgage industry. As your advisor, I will keep you updated on any major developments along the way!
WHAT'S YOUR MOTHER'S MAIDEN NAME?
Passwords are crucial to accessing your personal accounts and information. The problem is: We all have so many accounts that we worry more about remembering our passwords than we do about making sure they actually protect our data from hackers. So we end up using passwords like our mother's maiden name or child's first name. But, even if you add a few numbers to the end, those types of passwords are easy to break. And that means your data isn't safe.
The tips below can help you avoid the most common password pitfalls and even implement a few new ideas that will make your passwords easy to remember...and hard to break!
Strength Training
A well-protected password is not only unique, but also hard to guess. How do you do that? It's pretty simple really. Just follow this advice:
Use a random string of characters. That means no sequential letters or numbers. None.
Make it long. The longer the better--even up to as many as 10 to 14 characters.
Switch things up. Use a combination of upper and lower case letters, along with a few numbers mixed in the middle or end.
Don't use substitutes. Using "@" for "a" or "1" for "I" may look good to you, but most hackers are smart enough to break those substitutes rather quickly.
Avoid easy targets like words straight out of the dictionary or things like family names and birthdays.
Multiplication Facts
Most of us cheat when it comes to passwords. We have trouble remembering our passwords, so we come up with two or three that we can remember and use them everywhere. But you should avoid the temptation. The fact is, once a password is compromised, all of your accounts are vulnerable. There's no way around it, you need to a way to create and remember multiple passwords--a different one for each account!
Sure-Fire Technique for Memorable, Unique Passwords
For all the advice above, good passwords come down to two things: they're easy for you to remember, and they're hard to break. Implementing the tips above can make your passwords hard to break, but what about remembering them--especially if you have a unique password for every account? Here's a sure-fire tip to help!
1. Think up a phrase. Instead of a common word or family member name, think up a unique phrase that only you know. For example, you may think up something off the wall such as "I Like Short Hair Too."
2. Make it an acronym. In our example, "I Like Short Hair Too" would become ILSHT.
3. Add Complexity. Remember those substitutes you're not supposed to use with dictionary words? Well, you CAN use them with your acronym. For example, "I Like Short Hair Too" can become "1 Like $hort Hair 2" which makes: 1L$H2. You can also use upper and lower letters to make it 1L$h2. The point is to be creative, but in a way that you can easily remember it.
4. Make it unique. A password is only really unique if you use it for one account and one account only. So you can't just use 1L$h2 for every account. And, in reality it's still too short. Here's the key to the whole process: Mix in additional letters and numbers that are unique to each account. For example, if you're logging into a "gmail account" you can use the "gm" and "@cct" (for acct) to make: 1L$h2gM@cct. Then, for a Netflix account, you may use: 1L$h2Nf@cct.
Of course, these are just examples. You'll want to be creative and think up your own acronym and ways to add unique characters for each account. And then keep that little secret to yourself so no one will be able to guess your account passwords.
Follow these simple steps and you'll have passwords that are tough to break, unique to every account, and easy to remember!
Have a great week!
Above is a graph showing the price of mortgage bonds for the past quarter, with the most recent days on the right. You will notice some pretty large drops from Tuesday through Friday. This reflects the increase in rates.
Jay Skwierawski
President
First Sterling Mortgage Services, LLC
737 North Michigan Avenue, #1900
Chicago, IL 60611
312.268.7601
WE CLOSE ON TIME - EVERY TIME!
is a registered service mark of The Prudential Insurance Company of America. Equal Housing Opportunity. Midwest Realty Ventures LLC. All Rights Reserved.