Mortgage Times

[Adam in CO]

Mortgage Market News for the week ending June 29, 2007

Compliments of
CORE
PHONE:
303-770-2262
adam@corefinancegroup.com
5310 DTC Pkwy
Greenwood Village, CO 80111



Events This Week:

Employment Solid
Inflation Lower
Manufacturing Up
Housing Mixed

Events Next Week:
Mon 7/2
ISM Manufacturing
Tues 7/3
Pending Home Sales
Factory Orders
Thurs 7/5
ISM Services Fri 7/6
Employment

Fed Holds Rates Steady


All eyes were on the Fed last week, but Thursday's FOMC meeting produced few surprises, and mortgage rates exhibited little of the volatility seen in recent weeks. As widely expected, the Fed unanimously voted to hold their target interest rate unchanged at 5.25%, where it has been for about a year. The accompanying statement contained no substantial changes. The Fed acknowledged that the inflation situation has improved "modestly" in recent months, dropping the term "elevated" from its description of core inflation, while stating that risks remain in the outlook for the future. According to the Fed, the economy expanded at a "moderate" pace during the first six months of 2007, and they expect about the same for the second half of the year. Consistent with prior statements, future policy adjustments will depend on incoming economic data. There appears to be little chance that the Fed will adjust its target rate any time soon.

The most highly anticipated economic report last week, Friday's Core PCE inflation index, meshed nicely with the picture which emerged from the Fed meeting. The Fed's preferred inflation indicator rose at a 1.9% annual rate, dropping below the 2.0% level which is generally considered to be the upper boundary of the Fed's "comfort zone". Once again, current inflation readings seem to suggest that the rate hikes imposed by the Fed from 2004 through the middle of 2006 have achieved the desired results, bringing down stubbornly high inflation.

In the housing sector, mixed results provided further evidence that the housing market has stabilized. As expected, May Existing Home Sales were essentially unchanged from April, while May
New Home Sales declined only slightly. Inventories of unsold existing homes climbed, and new home inventories fell a little. Economists at both the National Association of Realtors and the National Association of Home Builders predict that home sales will remain near current levels for the rest of the year, before picking up in 2008.

• Also Notable:
• As widely expected, the Fed unanimously voted to hold their target interest rate unchanged at 5.25%
• The Fed suggested that the "adjustment" period in the housing market is "ongoing"
• May median Existing Home prices were 2% lower than one year ago, according to the NAR
• The Fed released new guidelines on subprime loan regulation aimed at protecting consumers

Average 30 yr fixed rate:
Last week:-0.01%
This week:-0.05%Stocks (weekly):

Dow:13,380-26
NASDAQ:2,601+9

Week Ahead

After a busy week, next week's holiday-shortened schedule will be dominated by Friday's always important monthly Employment report. As usual, this data on the number of new jobs created and the Unemployment Rate 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. Earlier in the week, the ISM national manufacturing index will be released on Monday. The Pending Home Sales index, a leading indicator for the housing market, will come out on Tuesday. The ISM Services index and Factory Orders will round out the economic calendar. Mortgage markets will close early on Tuesday and will be closed on Wednesday in observance of the July Fourth holiday.

"In the housing sector, mixed results provided further evidence that the housing market has stabilized." There's a weak statement.

[Adam in CO]

I don't make the world financial picture. I just report on it.