“THE ELEVATOR TO SUCCESS IS OUT OF ORDER. YOU HAVE TO USE THE STAIRS...ONE STEP AT A TIME.” Joe Girard Although Bonds finally took a step in the right direction last week...it may not be time to haul out the champagne and celebrate their success quite yet. Bonds and home loan rates saw some modest improvements over the course of the week, largely due to tamer than expected inflation data on both the producer and consumer levels. And while this is a good sign, the overall trend of Bonds and home loan rates has been fairly negative in recent months, so optimism needs to be somewhat held in check.

In housing news, the latest report showed Housing Starts declined 5.6%, just a touch more than expected, and Building Permits – which indicate future new construction activity – fell 6.7%. Economists were expecting some declines, but because the numbers were slightly lower than anticipated, this was also a positive for Bonds. Overall, housing numbers continue to remain strong – but all of the housing related reports are important to watch month over month, so we can determine any change in trend to the hot housing market.

AND SPEAKING OF “HOT” HOUSING...HAS YOUR HOUSE BEEN FEELING A LITTLE TOO COOL AND DRAFTY AS THE WINTER MONTHS APPROACH? IF YOU ARE CONSIDERING MAKING SOME ENERGY-EFFICIENT HOME IMPROVEMENTS, BE SURE TO READ THIS WEEK’S MORTGAGE MARKET VIEW – AND LEARN HOW UNCLE SAM MAY BE ABLE TO HELP.

Although Bonds didn’t gain huge ground last week – they definitely made a step in the right direction. The chart below shows that Bonds were finally able to muscle slightly higher, back into the channel that has acted like a lid on Bond prices in recent weeks. But it is also plain to see that the channel itself has a very clear downward trend, overall causing Bond prices to decline and home loan rates to rise as long as they are caught in the channel. This channel – or “Down Escalator” has been very powerful, so it will take some ultra-Bond-friendly news to incent any significant improvement in home loan rates.

Bottom line: With very little on the economic calendar and the Thanksgiving holiday approaching, it is unlikely that Bonds and home loan rates will make any major moves in the coming week, and will likely remain somewhat stable in the absence of surprises.

Headed out to Home Depot to replace some windows? Hold on! If you can wait until January 1st, Uncle Sam might just be able to help you with tax credits, via the Energy Tax Incentives Act of 2005. The Act was created to provide homeowners with tax credits for certain improvements to a residence that make a property more energy efficient. And with the winter month’s right around the corner and the expected jump in energy prices, many individuals may be considering a few alternatives to help take the chill out of the air while lowering their energy bill.

So here’s the scoop on several of the eligible improvements, and the tax credits associated with each. All new windows that are purchased and installed will provide a homeowner with a maximum tax credit of $200. Doors, skylights, insulation, and metal roofs coated with heat-reducing pigments provide a credit of 10% of the cost up to a maximum of $500. The largest credit allows up to 30% of the cost or a maximum of a $2,000 credit for the equipment and installation of solar water heating, so long as it is not used for swimming pools or hot tubs.

And while the tax credits are welcomed, the return on investment for making these improvements could save hundreds if not thousands of dollars in energy bills, as well as boost the value of a property. To best determine the improvements that will give you the most bang for your buck start by visiting the Home Energy Saver website, simply by clicking here: Home Energy Website Link. Want to know what other homeowners in your area are paying for their energy bills? Simply enter the zip code of your city and a chart will be displayed with the average energy bill for a regular home and a home that is energy efficient (specific to your area). Additionally, take a few minutes, enter all the data that is relevant to your specific home and within a few moments a calculation will be performed that will provide you with a list of specific recommendations for energy efficiency improvements that can be made to lower your energy bill.

As always, it is important to confirm any tax credits with a certified tax accountant. Should you need a referral for a great CPA, please contact me, as I may be able to provide a great recommendation.

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 November 21 – November 25