Mortgage Times

[Adam in CO]

Mortgage Market News for the week ending July 25, 2008

Events This Week:

Sentiment Higher
Jobless Claims Rose
Housing Mixed
Durable Orders Up

Events Next Week:

Tues 7/29
Confidence
Thurs 7/31
GDP
Chicago PMI
Fri 8/1
Employment
ISM Manufacturing

Housing Bill Helps Mortgage Market

A comprehensive Housing Bill was agreed upon by the House, the Senate, and the President this week, and it was successful in increasing confidence in the guarantees provided by Fannie Mae and Freddie Mac. As a result, mortgage rates ended the week modestly lower. Formal passage of the Housing Bill is considered a sure thing. One primary feature is that it authorizes the Treasury to provide credit to and buy shares in Fannie and Freddie, if needed. According to industry trade publications, Fannie and Freddie, along with the FHA, accounted for 90% of US home mortgages originated in the second quarter of 2008, up from just 49% one year earlier. Keeping the two firms healthy is vital for the US housing market.

Besides providing support for Fannie and Freddie, the Housing Bill will also help the housing market in other ways. One program will allow the FHA to insure up to $300 billion in new loans targeted at troubled homeowners. Another program adds tax credits for first-time homebuyers, which in essence will be a 15-year interest free loan for up to $7,500. In addition, the bill provides funds for more low income housing and grants to be made for local community redevelopment. A wide range of smaller programs are included as well.

The economic news in the housing sector was mixed. June Existing Home Sales fell slightly, and inventory levels of unsold homes increased. In contrast, New Home Sales were significantly higher than expected in June, and the May figures were revised higher as well. High inventory levels will probably need to come down to achieve a meaningful recovery in the housing market, but the chief economist of the National Association of Realtors (NAR) believes that the Housing Bill will play a major role in helping the housing market to rebound. In particular, he expects the first-time homebuyer tax credit to boost future home sales.

• Also Notable:
• The Fed's Beige Book reported consumer spending as "mixed, weak or slowing" in nearly all districts
• In June, Freddie Mac's total mortgage portfolio grew 9% from one year ago
• Oil prices dropped below $124 per barrel, down from a record high of $147 per barrel earlier this month
• The Fed's Plosser stated that inflation is "already too high" and that rate hikes probably will be needed "sooner rather than later"

Average 30 yr fixed rate:
Last week:+0.27%
This week:-0.11%

Stocks (weekly):
Dow:11,384-68
NASDAQ:2,305+36

Week Ahead

Friday will be the big day next week. The important Employment report will come out that day. 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 70K jobs in July.

The first reading of second quarter 2008 Gross Domestic Product (GDP) will be released on Thursday. GDP is the broadest measure of economic activity. The two national manufacturing indexes, the ISM and the Chicago PMI, will come out on Thursday and Friday. Consumer Confidence and Construction Spending will round out the schedule.

admin@corefinancegroup.com.