Mortgage Times

[Adam in CO]

Mortgage Market News for the week ending October 12, 2007

Events This Week:

Employment Steady
Inflation Mixed
Retail Sales Strong
Trade Deficit Fell

Events Next Week:

Mon 10/15
Empire State

Tues 10/16
Industrial Prod.

Wed 10/17
CPI
Housing Starts

Thur 10/18
Philly Fed

Quiet Week in Mortgage Markets

As expected, it was a relatively quiet week for mortgage markets, and mortgage rates finished just a little higher than the prior week. The first big economic news last week was Tuesday's release of the FOMC Minutes from the September 18 Fed meeting. The minutes explained the Fed's rationale for its large half-point rate cut, but offered few clues about the Fed's future policy actions. In short, the Fed cut rates by a larger than expected 0.50% due to heightened concerns about an economic slowdown as a result of the credit crunch and the housing market slowdown. Without much fresh guidance, the implied chance of a quarter-point rate cut at the next FOMC meeting on October 31 priced in by investors remained near 35%.

Last week's major economic reports came out on Friday. September Retail Sales were stronger than expected across the board, leading to upward revisions to forecasts for growth in Gross Domestic Product (GDP). Stronger economic growth generally leads to higher inflation, and mortgage rates rose after the news. The inflation data for September was mixed, as the Producer Price Index (PPI) unexpectedly jumped 1.1% from August due to rising energy prices. On the other hand, Core PPI, which excludes the volatile food and energy components, fell slightly short of the consensus forecast.

In the housing sector, the National Association of Realtors (NAR) released a revised economic outlook, which lowered slightly their 2007 forecast due to tighter credit for home mortgages and stricter lending standards, while adding that activity levels will vary significantly in different regions. Still, the Chief Economist of the NAR pointed at that lending conditions are moving in the right direction, easing somewhat since August, and that 2007 is expected to have the fifth highest level of existing-home sales on record. Specifically, the NAR expects the number of Existing-home sales to be about 10% lower in 2007, before returning closer to 2006 levels in 2008. They also believe that modest home price appreciation will resume during 2008. Finally, their forecast shows mortgage rates holding near current levels for the rest of the year.

• Also Notable:
• The FOMC Minutes revealed a slightly slower Fed outlook for economic growth in 2007 and 2008
• One out of sixteen US households will buy a home in 2007, according to the NAR
• Oil prices climbed to record levels above $83 per barrel, up from $70 p/b in the middle of August
• As much as $600 billion of adjustable-rate subprime loans are due to adjust to higher rates by the end of 2008, according to the Wall Street Journal

Average 30 yr fixed rate:
Last week:+0.02%
This week:+0.02%

Stocks (weekly):
Dow:14,087+16
NASDAQ:2,803+29

Week Ahead

Next week's biggest economic news will be Wednesday's Consumer Price Index inflation report. Almost without exception, higher inflation leads to higher interest rates, and the Consumer Price Index (CPI) is the most widely watched indicator. CPI looks at the price change for those finished goods which are sold to consumers. Housing Starts also will be released on Wednesday. Industrial Production, another important indicator of economic activity, will come out on Tuesday. The two regional manufacturing indexes will round out next week's schedule.

Compliments of :
The Colorado Real Estate Finance Group, Inc.
PHONE: 303-770-2262
FAX: 303-770-2276
admin@corefinancegroup.com
5310 DTC Pkwy
Greenwood Village, CO 80111