A BUTTERFLY FLAPPING IT’S WINGS IN BRAZIL…COULD THEORETICALLY GENERATE A TORNADO IN TEXAS. Or at least so says a theory known as the “Butterfly Effect”, often used to show how seemingly unrelated items actually can impact one another. And would you have guessed that a policy decision in Sweden could have helped home loan rates improve by about .125% last week? That’s exactly what did happen…so let’s take a closer look and understand.

Last week had a distinct lack of US economic news, but ever-vigilant Bond Traders were on the watch for market moving action all over the world. On Wednesday, Sweden decided to lower its benchmark rate (much like our Fed Funds Rate) to an all time low of 1.5%. So what? Well, this move raised concerns that the European Central Bank might just follow suit…and ever declining rates in Europe are translating into very low yields on European Bonds of all types. Meanwhile, our Bond yields are very strong, presently about 2% higher than what can be found in Europe. So where are Europeans with an appetite for higher yields buying their Bonds? You guessed it – right here in the US. The stepped-up demand causes Bond prices to rise, and home loan rates to decline.

And although this news didn’t cause a huge market reaction, last week also brought more good tidings for the housing front, as existing home sales posted expected gains and new home sales arrived with a nice fat increase. Next time you hear all the hype about “housing bubble trouble”…remember that national housing inventory – or the number of home presently available for sale – is at a 30 year low, per Frank Nothaft, Chief Economist of Freddie Mac. And although some real estate markets are more vibrant than others, the recent data indicates that demand is still exceeding supply, and the national housing market remains very strong overall.

EVER HIRE SOMEONE TO DO A LITTLE WORK AROUND YOUR HOUSE…AND BEEN LESS THAN SATISFIED? THIS WEEK’S MORTGAGE MARKET VIEW OFFERS SUGGESTIONS ON HOW YOU CAN AVOID HIRING SOMEONE WHO IS LOOKING FOR WORK IN ALL THE WRONG PLACES.

The economic calendar gets nice and meaty next week, offering a full slate of news and perhaps most importantly, the Fed meeting on Thursday. It is highly expected that the Fed will once again raise the Fed Funds Rate (FFR) by .25%, as the economic news of late has been solid, and the Fed wants to stay on track with their plan to bring the FFR up to 3.5 - 4%. This move is highly expected, but when Greenspan talks, Traders listen, and they’ll be hanging on his every word for any surprising comments.

But although the economy continues to clip along at a reasonable pace…there is one “fly in the ointment”; a buzzing concern about oil prices. Oil prices have been flirting with $60 a barrel, a very high level that raises some concern as to the impact on consumers and businesses alike. Will Chairman Greenspan get his hands greasy and address the topic? We’ll all have to wait and see.

The chart below shows the nice increase in Bond pricing of late…and in the absence of surprising comments from Greenspan or super hot economic news, Bonds may just keep their momentum and continue their upward trend, which would cause home loan rates to see some further improvement.

“WE JUST HAPPENED TO BE WORKING IN THE NEIGHBORHOOD…”

Don’t fall for this common ploy that shoddy contractors use to make a few easy bucks.

The scam: The doorbell rings on a Saturday afternoon, and a pleasant enough individual introduces himself as a contractor, who just happened to be doing some work in the neighborhood. And what a nice young man, he also happened to notice that you are missing a few shingles/boards on the deck/trim pieces, and sure enough, also happens to have some left over materials that look like an exact match.

The catch: the nice young man needs just a few hundred bucks to get started…but after pocketing the cash, the work is poorly done, or sometimes never completed at all.

Here are a few tips to protect yourself if you’re considering a fix-up project:

• Use common sense. Would a really terrific contractor actually be out trolling the neighborhood for spare odds and end jobs? Probably not.

• Ask your family, friends or coworkers for referrals of contractors who have done great work for them. Real Estate professionals may have terrific recommendations as well. Keep in mind that you should be the one seeking out the contractor, not the other way around.

• Ask other contractors that you’ve worked with in the past for recommendations on your specific project, even if it is not their area of expertise. Quite often, great plumbers may know great painters who know great roofers…and so on.

• Remember that a “licensed” contractor only means they were able to pass a written test, not necessarily that they are able to perform quality work. If the contractor is not referred, be sure to check some references.

The economic calendar heats up considerably this week, and many moderate to high impact releases are in store. The Fed policy statement on Thursday will likely garner strongest attention for week ahead.

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

For the week of June 27 – July 01