Weekly Market Forecast – June 9, 2008

Week of: Monday, June 09, 2008

Present Market Conditions
Stocks gave back their gains from the week before and the short-lived boost in the U.S. dollar following Bernanke’s comments also retreated to previous levels. The unemployment rate jumped to 5.5%, it’s highest since 2004, however this tends to hold or reduce interest rates; a good sign for the mortgage industry. Fannie Mae’s president and CEO, Daniel Mudd commenting on the most sever housing slump since the Great Depression, said that we are “Likely to be about halfway through right now.” Fed Governor Randall Kroszner recently said the U.S. housing sector will gradually recover as an excess of home inventory is reduced. Fed Governors differ as to when the Fed should start tightening to stave off inflationary concerns, but agree it will likely not be until the end of the 2008.

Expectations
Mortgage rates are expected to continue to bounce up and down but fortunately within a tight range. Most all eyes will be on two primary economic reports due for release this week. Retail Sales, released by the Department of Commerce, is due out Thursday and the Consumer Price Index (CPI), released by the Department of Labor, is due out this coming Friday. Both are expected to have approximately a .5% increase. If the actual numbers are lower, rates will likely follow with a slight decrease; the opposite being true as well.

Guidance
Despite the volatility, rates continue to be at record lows. With growing speculation of inflation and potential interest rate increases be sure to leverage the knowledge and experience of Georgie to assist you in structuring a mortgage solution to meet your financial goals.

georgie@traversemortgage.com

 

Tame Inflation Data Turns Rates Lower

Mortgage rates ended the week close to where they began the week, but the end result masked a lot of movement. The week began poorly for
mortgage markets. Stronger than expected Retail Sales data and tough talk on inflation from Fed officials pushed mortgage rates higher on
Monday and Tuesday. In particular, Tuesday's Fed speakers suggested that the economy was beginning to recover - even if there is still a long way
to go - and that inflation concerns have increased. The tide turned on Wednesday, however, when CPI, the most closely watched inflation report
of the month, showed a lower than expected increase in inflation. Mortgage rates fell every day through the remainder of the week.
 
The April Core Consumer Price Index (CPI) rose at a 2.3% annual rate, below the consensus forecast of 2.4%. So far, higher food and energy
prices have not been passed through in a large way to the prices of other goods. The Fed has been emphasizing inflation fears for a couple
of weeks, which has had a negative impact on mortgage markets, so the good news on inflation was a relief to many investors. The Fed is
generally considered to be comfortable with Core CPI readings below 2.5%.
 
In the housing sector, this week's news was mixed. Against a consensus forecast of 940K, April Housing Starts rose 8% to an annual rate of
1,032K units. Building Permits, a leading indicator of housing market activity, rose 5%, the first increase in in five months. The
construction of single family homes remained weak, however. The strength in the Housing Starts report came from new apartment construction, which
is extremely volatile on a monthly basis. Separately, the National Association of Realtors (NAR) reported that median home prices fell 8%
during the first quarter from the same period one year ago. The chief economist of the NAR suggested that the data may be a little misleading,
since a smaller percentage of high end homes were sold during the period due to the difficulty in obtaining jumbo mortgages. In addition, the
results varied in different parts of the country. 100 out of 149 metropolitan areas saw price declines during the first quarter.



Brought to you by:

Corey Phelps

Front Street Mortgage

Phone: 231-360-7283

Weekly Mortgage Forecast

Week of: Monday, May 12, 2008

Present Market Conditions
The entire economy, including buyers, is in a wait and watch stance to survey the effects of the latest FED rate cut. “Despite a weak housing market, mortgage rates remained almost unchanged this week based on better-than-expected economic data releases that indicated the economy still has some staying power,” said Frank Nothaft, Freddie Mac vice president and chief economist. Fannie Mae announced that it will buy the new Jumbo Conforming mortgages for the same prices as those below the old conforming loan limit, which should make some larger mortgages more affordable.

Expectations
Housing inventories are expected to drop to 400,000 (seven-month supply) by the end of ‘08 and to a five month supply sometime in ‘09. A five-month supply has historically signaled tightness in the housing market and normally results in a decline in rates. Expected to pass the Senate and be signed by the President, a $300 billion FHA housing loan guarantee program will assist troubled borrowers in refinancing into a mortgage with more affordable terms, resulting in a reduction in the number of foreclosures.

Guidance
Prolonged low interest rates and greater affordability (lowering home prices) will attract buyers into play; indeed it is a good time to buy. Now is the time to contact Georgie so she can structure a mortgage solution to meet your financial goals.

Traverse Mortgage Corporation

   (231) 947-9700        (800) 968-3680 

mailto:georgie@traversemortgage.com

Weekly Market Update

 

Week of: Monday, May 05, 2008

Present Market Conditions
As widely anticipated, the Fed cut the Fed Funds rate by one quarter point. Investors now believe that the Fed is less worried about slowing economic growth. The unemployment rate slipped to 5.0% showing signs of improving which supports expectations the Fed will pause cutting rates. This resulted in less volatility and good news for mortgage markets as rates have dipped slightly.

Expectations
Expectations for a future Fed rate cut have fallen to very low levels. According to Wall Street economists, the Fed is expected to remain in a holding pattern and assess the effects of last week’s rate cut, the economic stimulus package and the decrease in the unemployment rate. Though the economic calendar is very light this week with mostly second-tier data releases, of interest is the ISM service sector survey (Monday), pending home sales index (Wednesday), and productivity (Wednesday).

Guidance
With current mortgage rates still at historically low levels, now is the time to contact Georgie so she can structure a mortgage solution to meet your financial goals.

 

 

 

Traverse Mortgage Corporation

   (231) 947-9700        (800) 968-3680 

mailto:georgie@traversemortgage.com

Weekly Market Forecast

Week of: Monday, April 28, 2008

Present Market Conditions
U.S. stocks posted the first back-to-back weekly gains since February after earnings at Boeing Co. and Philip Morris International Inc. bolstered speculation that overseas growth will offset slower domestic demand. With stocks climbing, U.S. Treasury prices continued to decline and investors are now waging strong bets that the Federal Reserve will indicate this week it plans to end its campaign of interest rate cuts.

Expectations
The central bank is widely expected to cut rates by a quarter percentage point at its policy meeting on Wednesday. A growing number of economists predict the Fed will then keep rates on hold to ward off inflation. “What it means is that the market isn’t so convinced that the economy is falling apart as it was a month ago,” said David Wyss, chief economist at Standard and Poor’s. “It also means that investors are not expecting the Fed to go down as far–25 basis points instead of 50.”

Guidance
Mortgage rates have an inverse relationship with bond prices. As bond prices continue to fall, it is likely to see an increase in mortgage interest rates. With current mortgage rates still at historically low levels, now is the time to contact Georgie so she can structure a mortgage solution to meet your financial goals.

 

Traverse Mortgage Corporation

   (231) 947-9700        (800) 968-3680 

georgie@traversemortgage.com

 

Mortgage Market News for the week ending April 25, 2008

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.

Brought to you by:

Corey Phelps

Front Street Mortgage

Phone: 231-360-7283

Weekly Mortgage Update

Week of: Monday, April 21, 2008

Present Market Conditions
Stocks rallied and Treasury prices fell last week as investors stepped out of the safety of government bonds following upbeat quarterly reports from names like Citigroup Inc. and Google Inc. In addition, surging energy prices may have helped lure some investors from government debt, which has seen low yields in recent months as investors have sought safety amid economic uncertainty and tightness in the credit markets.

Expectations
Federal Reserve policy makers, sensing both renewed inflation dangers and a possible economic boost from government rebate checks, may be nearing a pause in interest-rate cuts after the fastest reductions in two decades. “We are close to the end of rate cuts,” said Dean Maki, chief U.S. economist at Barclays Capital Inc. in New York. “The economy will be improving. Also, the inflation pressures are only intensifying at this point.” Investors are increasingly taking such talk, along with economic data and company earnings, as signs that the Fed will leave interest rates unchanged for the rest of the year after a quarter-point move on April 30th. Chairman Ben S. Bernanke and the rate-setting Federal Open Market Committee next meet April 29th-30th in Washington.

Guidance
With current mortgage rates still holding at historically low levels, now is the best time to contact Georgie so she can structure a mortgage solution to meet your financial goals.

Mortgage Market News for the week ending April 11, 2008

Fed Minutes Reveal Growth Concerns While there were no quiet days in the mortgage market during the week, the enormous swings in rates seen recently were absent. The sparse economic news did little to change the outlook for future economic growth and inflation, and the net result of a series of medium sized daily rate movements was a slight drop in mortgage rates for the week. The most notable economic news during the week was the release of the minutes from the March 18 Fed meeting. According to the minutes, the three quarters point rate cut was made to help avoid a worse than expected downturn in economic growth. The Fed forecasted that rate cuts and government stimulus packages will lead to faster economic growth during the second half of the year. Falling home prices and turmoil in financial markets were cited as the two most significant reasons for the slowdown. Two of the ten voting Fed officials wanted a smaller rate cut due to inflation concerns. Investors are now evenly split between an additional quarter point or half point rate cut at the next meeting on April 30. In the housing sector, the February Pending Home Sales index fell a little more than the expected from January, and the index was down -21% from one year ago. Pending Home Sales are a leading indicator of future housing market activity, so the next Existing and New Home Sales reports may show small declines. The National Association of Realtors (NAR) latest forecast predicted that conditions will remain flat for the next few months, but that activity will pick up during the second half of the year. The Chief Economist of the NAR expects that higher mortgage loan limits will lead to increased sales later in the year.

 

Brought to you by:

Corey Phelps

Front Street Mortgage

Phone: 231-360-7283

Mortage News for week ending April 4, 2008

Economic Weakness Lowers Mortgage Rates Comments from Fed Chief Bernanke and weaker than expected data from the job market painted a grim picture of current economic conditions. Slower economic growth generally leads to lower inflation, which is good news for mortgage markets, and mortgage rates dropped moderately during the week. Wednesday, Bernanke testified before Congress. The focus was on the Bear Stearns rescue plan rather than current economic conditions, but he did outline the Fed’s latest economic outlook. While acknowledging that the economy is in the midst of a downturn, he suggested that the economy will strengthen in the second half of the year, and he expects that growth will be positive in 2009. He believes that Fed rate cuts and government stimulus packages will help lift the economy. He also predicted that inflation will moderate in future months. Friday’s Employment report fell short of even Wall Street’s reduced expectations. Against a consensus forecast for a loss of -50K jobs, the economy lost -80K jobs in March, and the figures from prior months were revised lower by an additional -67K. This marked the worst monthly results since March 2003. Once again, the construction and manufacturing sectors performed poorly. Average Hourly Earnings, a proxy for wages, rose at the expected rate. Overall, even though the job market performed very poorly during the first quarter of 2008, the current Unemployment Rate of 5.1% is still reasonably low by historical standards, and the Fed thinks that a recovery is not too far away.

 

Brought to you by:

Corey Phelps

Front Street Mortgage

Phone: 231-360-7283

Weekly Mortgage Update

Week of: Monday, April 07, 2008

Present Market Conditions
Rates eased slightly last week with the release of March’s Jobs Report. However, in his testimony before the Joint Economic Committee of Congress last week, Chairman Bernanke stated that the Federal Reserve remains cautiously optimistic on future economic growth. Bernanke predicts that growth is expected to proceed at or a little above its sustainable pace in 2009, bolstered by a stabilization of housing activity, albeit at low levels, and gradually improving financial conditions.

Expectations
With the Economic Calendar being a little lighter this week, look for investors to hold pending the Jobless Claims report due Thursday and the Consumer Sentiment Report due Friday.

Guidance
With current mortgage rates still remaining at historically low levels, now is the best time to contact Georgie so she can structure a mortgage solution to meet your financial goals.