Hummer Forums by Elcova - Mortgage Times

Mortgage Market News for the week ending September 28, 2007

Compliments of :

The Colorado Real Estate Finance Group, Inc.
A Real Estate Speculation and Finance Firm
Real Estate Investment Bankers lending in all 50 States
PHONE:303-770-2262
FAX: 303-770-2276
admin@corefinancegroup.com
5310 DTC Pkwy, Suite I
Greenwood Village, CO 80111

Events This Week:

Inflation Tame
GDP Rose
Housing Down
Manufacturing Mixed

Events Next Week:
Mon 10/1
ISM Manufacturing
Tues 10/2
Pending Home Sales
Wed 10/3
ISM Services
Fri 10/5
Employment

Inflation Data Tame

After last week's rate cut by the Fed, MBS investors were closely watching for signs of higher future inflation, as any such indications would cause investors to require higher yields, pushing up mortgage rates. This week's economic data was tame, however, and mortgage rates fell modestly for the week. The drop in rates was almost entirely due to weakness in the housing data, while the other reports on economic growth were mixed. On the inflation front, the August Core PCE price index, the Fed's preferred inflation indicator, matched the consensus forecast with a 1.8% annual rate of increase. For the third straight month, this data has fallen within the Fed's "comfort zone" below 2.0%, providing a degree of comfort to MBS investors.

A series of Fed speakers during the week did little to clarify what the Fed's next move will be. One Fed official suggested that there would be additional rate cuts as needed to stabilize the economy, while the next day another official told listeners that the Fed would hike rates if inflation turns higher. As usual, the bottom line is that the Fed will react to incoming economic data, and this week's Core PCE inflation report increased the expected likelihood of another rate cut at the next FOMC meeting on October 31. Next week's Employment report should be a major factor in the outlook for future Fed actions.

In the housing sector, this week's data showed a continued drop in activity, as was mostly expected. August Existing Home Sales matched the consensus forecast, falling 4%. Inventories of unsold homes rose to a 10 month supply, above the 16-year high reached in July, while median prices were slightly higher than one year ago. Meanwhile, August New Home Sales dropped 8% from July, and were down 21% from one year ago. August's activity is the first month reflecting the effects of significantly tighter credit conditions.

Also Notable:
Recent studies have shown that lenders now require higher credit scores to obtain optimal rates than before the credit crunch
In October, the G-7 will convene to discuss the US subprime mortgage fallout, according to a Japanese news story
A legislative committee okayed a bill to eliminate the taxes on mortgage debt forgiven by a lender
Regulators will end the cap and permit Fannie Mae to grow its loan portfolio by 2% per year

Average 30 yr fixed rate:
Last week:+0.07%
This week:-0.06%

Stocks (weekly):
Dow:13,899+42
NASDAQ:2,701+26

Week Ahead

Friday's always important monthly Employment report will be the highlight next week. As usual, this data on the number of new jobs created, the Unemployment Rate, and wage inflation will be the most highly anticipated economic data of the month, since the health of the labor market is perhaps the single biggest factor in the performance of the economy. Early estimates are for 100,000 net new jobs added in September, following the surprising loss of -4K jobs seen in August.

Before then, the ISM national manufacturing index will be released on Monday. Tuesday's biggest report will be the Pending Home Sales index, a leading indicator for the housing market. In addition, ISM Services, Factory Orders, and Jobless Claims will come out on Wednesday and Thursday. Mortgage markets will close early on Friday in observance of Columbus Day.