Mortgage Times

[Adam in CO]

Mortgage Market News for the week ending April 25, 2008

Events This Week:

Durable Orders Up
Jobless Claims Fell
Existing Sales Down
Manufacturing Mixed

Events Next Week:

Wed 4/30
FOMC Meeting
GDP
Chicago PMI

Thurs 5/1
Core PCE
ISM Manufacturing

Fri 5/2
Employment

Looking Ahead to the Fed

With little scheduled economic news and a couple of major events on the horizon, there was little change in mortgage markets during the week. The daily volatility remained high, however. Mortgage rates ended a little higher than the prior week, and the stock market was almost flat. Investors were mostly preparing for next week's Fed meeting and Employment data.

Investor sentiment for future Fed actions has shifted significantly over the last couple of weeks. Just weeks ago, investors were expecting an additional three quarters of a point of Fed rate cuts over the next two meetings. Now many believe that the Fed will cut rates by only one quarter point at Wednesday's meeting and then will hold rates steady. The thinking is that the Fed will pause to consider the effects on the economy of prior rate cuts, other expansionary monetary policies, and fiscal stimulus packages (such as the tax rebates). With energy prices at record levels and the dollar at historic lows, the Fed wants to balance the risk of slower economic growth with the need to prevent higher future inflation. This path could be good for mortgage markets, as higher inflation would generally lead to higher mortgage rates.

In the housing sector, the market for existing home sales showed additional signs of stabilizing, while new home sales displayed weakness. Matching expectations, March Existing Home Sales fell a little from February. Median home prices fell 8% from one year ago, while inventories of unsold homes rose slightly. March New Home Sales fell 9% from February. The chief economist of the National Association of Realtors (NAR) suggested that housing market conditions varied greatly in different regions of the country. The NAR predicted that housing market activity will be flat for a few more months and then will pick up during the second half of the year.

• Also Notable:
• In March, New Home Sales fell to the lowest level since October 1991
• The Int. Monetary Fund reduced its forecast for 2008 world economic growth to 3.7% from 4.1%
• Freddie Mac's portfolio increased to $712 billion in March, up from $709 billion in February
• Oil prices climbed to record levels near $120 per barrel, up from $70 p/b in August

Average 30 yr fixed rate:
Last week:+0.37%
This week:+0.06%

Stocks (weekly):
Dow:12,801-25
NASDAQ:2,402+3

Week Ahead

Next week will be a big one. As mentioned above, the next Fed meeting will be on Wednesday, and investors expect a quarter point rate cut. The April Employment report will be released on Friday. 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 a loss of 75K jobs in April.

In addition, the first look at first quarter Gross Domestic Product (GDP) will be released on Wednesday. GDP is the broadest measure of economic activity. The two national manufacturing indexes will come out on Wednesday and Thursday. Finally, the Fed's preferred inflation indicator, the Core PCE price index, is also scheduled for Thursday. The second half of the week will be absolutely packed with major economic news.

admin@corefinancegroup.com