Mortgage Times

[Adam in CO]

Mortgage Market News for the week ending May 25, 2007

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



Events This Week:

Housing Mixed
Manufacturing Up
Employment Solid

Events Next Week:
Tues 5/29
Confidence
Wed 5/30
FOMC Minutes
Chicago PMI
Thurs 5/31
GDP
Fri 6/1
Employment
PCE Prices
ISM Index




Mortgage Rates Reach High for 2007


Despite a lack of major economic news, mortgage rates climbed for the second straight week, reaching the highest levels of the year. This continued the trend in place since the Fed meeting on May 9, in which investors have shifted funds out of mortgage securities for a variety of reasons. Some have lowered their expectations for a rate cut from the Fed in the near future, while others simply prefer to invest in the stock market, which has been performing well recently. Foreign investors have been reallocating their portfolios with a lower percentage of US mortgage securities as well. A primary example of this is the recently announced $4 billion investment by the Chinese government in the US private equity firm, the Blackstone Group. With a highly packed schedule of economic reports next week, investors' focus should return to the data for guidance in their mortgage pricing decisions.

The biggest economic data last week came from the housing sector, and the results were mixed. Thursday's report on April New Home Sales shocked investors with its 16% increase from March, far surpassing the consensus estimates. Inventories of unsold homes declined sharply as well. Friday, though, the news from the Existing Home Sales report was less optimistic. April Existing Home Sales fell a little short of expectations, and inventories of unsold homes increased. Looking at the longer term trends, the housing market appears to have stabilized at a pace below last year's record levels.

• Also Notable:
• Median Existing Home prices decreased 1% from one year ago, while New Home prices fell 11%
• Fed Chief Bernanke suggested that any new mortgage lending limits should not restrict legitimate credit
• Former Fed Chief Greenspan shocked investors with his prediction that the Chinese stock market will decline
• The Mortgage Bankers Assoc. predicted that the number of housing-related jobs would remain flat next year

Average 30 yr fixed rate: Last week:+0.10%This week:+0.12%
Stocks (weekly): Dow:13,471-78NASDAQ:2,551-7


Week Ahead


Next week will be very busy, with a full slate of economic news on the calendar. The always important monthly Employment report will be released on Friday of next week. 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. Early estimates are for about 140,000 new jobs in May, after a gain of 88,000 in April, and investors will be closely watching the wage inflation component of the report as well. The Fed's preferred inflation indicator, the Core PCE price index, will also be released on Friday. The first revision to First Quarter Gross Domestic Product (GDP) will come out on Thursday. GDP is the broadest measure of economic activity. In addition, the two major national manufacturing indexes, the Chicago PMI and the ISM, will be released on Thursday and Friday, respectively. The Pending Home Sales index, a leading indicator for the housing market, also appears on Friday's schedule. Finally, the minutes from the May 9 FOMC meeting will be revealed on Wednesday. Mortgage markets will be closed on Monday for Memorial Day.