Mortgage Times

[Adam in CO]

Mortgage Market News for the week ending June 1, 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
GDP Down
Manufacturing Up

Events Next Week:

Mon 6/4
Factory Orders

Tues 6/5
ISM Services

Wed 6/6
Productivity

Fri 6/8
Trade Balance

Another Rough Week for Mortgage Rates


A wide range of economic data came out last week, and the majority of it should have been favorable for mortgage markets, yet mortgage rates climbed for the third straight week, reaching the highest levels of the year. The month's most highly anticipated economic indicator, the May Employment report, was released on Friday. The report reflected new job creation in line with the consensus estimates, which was up modestly from the April levels. It also revealed that wage inflation was declining at the expected pace from its peak levels in December 2006, and the Unemployment Rate remained flat. Despite a lack of surprises in the data, mortgage rates continued their upward trend.

The other major growth and inflation indicators released last week were generally at or below the consensus levels. The Core PCE price index, the Fed's preferred inflation indicator, came in lower than the prior month and the forecasts. First Quarter Gross Domestic Product (GDP), the broadest measure of economic activity, was revised even lower than expected. According to the May 9 FOMC minutes, the Fed believes that economic growth will be below average for the rest of the year, partly due to sustained weakness in the housing sector. Even though the economic outlook did not change much during May, investors felt that higher mortgage rates were appropriate for current economic conditions.

In the housing sector, the incoming data again was mixed. The April Pending Home Sales index fell a little more than expected, but the March reading was revised higher. Pending Home Sales are a leading indicator of future housing market activity, so the next Existing and New Home Sales reports will be likely to show declines. Based on the data, the chief economist of the National Association of Realtors (NAR) suggested that the housing market appears to be "in the process of leveling out". Separately, OFHEO, a government housing agency, reported that US housing prices were slightly higher in the first quarter of 2007 than in the fourth quarter of 2006.

• Also Notable:
• As expected, the Unemployment Rate remained unchanged at 4.5% in May
• The May Employment report showed that the number of jobs in the construction sector remained flat from April
• The April Pending Home Sales index was 10% lower than one year earlier
• OFHEO reported that US housing prices were 4% higher in the first quarter of 2007 than in the first quarter of 2006

Average 30 yr fixed rate:
Last week:+0.10%
This week:+0.05%

Stocks (weekly):
Dow:13,659+182
NASDAQ:2,616+65

Week Ahead

After a packed economic calendar last week, market moving economic news may be scarce next week. ISM Services will come out Tuesday. Wednesday's Productivity report may be the biggest announcement of the week, as Productivity gains are the key to higher standards of living in the long term and help to contain inflationary pressures. The economic data concludes on Friday with the Trade Balance, which has not been a market mover in recent months.