Weekly Mortgage Forecast

Week of: Monday, July 21, 2008

Present Market Conditions
With increased confidence in the financial sector and lower oil prices, the Dow gained over 400 points. As investors returned to stocks, they sold their relatively safer investments, bonds, which pushed mortgage rates higher.

Expectations
Fannie and Freddie dominated most of the headlines last week however, Fed Chief Ben Bernanke presented the latest Fed forecast for the economy during his testimony before Congress. He described the inflation outlook as “unusually uncertain”. >From Bernanke’s comments, investors are concluding that the Fed’s primary goal right now is to promote stability in the financial markets, rather than fighting inflation, and they expect the Fed to hold rates steady in the near-term.

Guidance
Rates are holding near historic lows as housing prices continue to favor a buyer’s market. Now is a great time to contact Georgie and leverage her knowledge and expertise to structure a mortgage solution that meets your financial objectives.

Mortgage Market News for week ending June 27, 2008

No Rate Change From Fed

Wednesday’s highly anticipated Fed meeting produced little reaction in mortgage markets, and mortgage rates barely changed during the week. As expected, the Fed ended its cycle of interest rate cuts and held the Fed Funds rate unchanged at 2.0%. In addition, there were no major surprises in the Fed statement, which was entirely consistent with Fed Chief Bernanke’s recent comments. According to the statement, the Fed expects inflation to moderate later this year and next, but uncertainty over the inflation outlook remains high. Meanwhile, the risk of slower economic growth has diminished. The Fed listed the credit crunch and higher energy prices as obstacles for the economy.

In reaction to the announcement, investors concluded that the Fed will wait longer to begin raising interest rates. The Fed’s challenge is still to promote economic growth while fighting inflation. For mortgage markets, the negative implications for inflation from higher energy prices were offset by the positive effect on inflation of a slower economy, keeping mortgage rates steady. The stock market did not take the news as well, since higher energy prices and a slower economy are both negative for equities, and the Dow fell to the lowest level of the year.

The current economic data on inflation remained relatively mild, but the threat of higher future inflation climbed. The May Core PCE price index, the Fed’s preferred inflation indicator, rose less than expected. On the other hand, Dow Chemical announced additional across the board price hikes of up to 25%, shortly after a similar 20% increase less than one month ago.

Weekly Mortgage Forecast

Week of: Sunday, June 29, 2008

Present Market Conditions
The Dow briefly crossed into bear market territory last Friday as oil prices hit a new record high, and more financial market woes rattled investors. As a result the bond market rallied, driving prices up and yields down. This is good news for mortgage interest rates, which move in the opposite direction of bond prices.

Expectations
“You have a very jittery market that’s vulnerable to whatever the news is on a given day,” said James King, chief investment officer at National Penn Investors Trust. This week (shortened by the Fourth of July holiday) has plenty of economic news on tap, including reports on manufacturing, construction, factory orders and the labor market.

Guidance
With housing prices favoring a buyers market and rates holding at historic lows, now is the best time to contact Georgie. Leverage her knowledge and expertise to structure a mortgage solution that meets your financial goals.

Mortgage Market News for the week ending June 20, 2008

Mortgage Rates Turn Lower

After rising for the past four weeks, mortgage rates showed a nice decline this week. A number of factors combined to shift investor sentiment in favor of the mortgage market. Signs of a slowing economy suggested a reduction in inflationary pressure, which was good news for mortgage markets. In particular, the manufacturing reports showed declining levels of activity, and the housing data was lower. On the inflation front, the Core Producer Price Index (PPI) matched the consensus forecast, and oil prices held steady. In addition, continued credit concerns and global geopolitical unrest produced a flight to the relative safety of bonds instead of stocks, and the stock market suffered significant losses.

Economic weakness changed the outlook for Fed policy as well, setting the stage for next week’s Fed meeting. In contrast to the nearly exclusive focus on fighting inflation expressed over the past four weeks, the Fed is now expected to assume a more balanced approach between promoting economic growth and restraining inflation. Investors don’t anticipate any change in the Fed Funds rate at the next meeting, and they reduced their expectations for Fed rate hikes later in the year.

In the housing sector, May Housing Starts fell 3%. May Building Permits, a leading indicator of future activity, also declined. The President of the National Association of Home Builders (NAHB) suggested that home builders are “doing the right thing.” A decline in the production of new homes will lower the supply of available homes, which is a key step in stabilizing the housing market. The NAHB also pushed for Congress to pass a housing stimulus package to boost demand.

Mortgage Time – Inflation Fears Persists

Global inflation concerns pushed average mortgage rates to the highest levels of the year. In both the US and in Europe, central bank officials have focused recently on the threat of higher inflation. Monday, the Fed’s Fisher pointed to increased global demand as a major source of inflationary pressures. Later in the week, the Fed’s Plosser described inflation as a very serious problem for the economy. Fed Chief Bernanke warned that the Fed will “strongly resist” a rise in long-term inflation. He also remarked that the surprising jump in the Unemployment Rate from 5.0% to 5.5% didn’t have much impact on the Fed’s outlook for economic growth and inflation.

With so much talk about the threat of higher inflation, many mortgage investors positioned their portfolios very conservatively ahead of Friday’s big Consumer Price Index (CPI) inflation report. The report, however, revealed no startling surge in inflation. May CPI came in slightly higher than expected, while May Core CPI, which excludes the food and energy components, matched the consensus forecast. Mortgage investors were pleased that the news wasn’t worse, and mortgage rates declined after the report was released, although they remained far higher than the prior week.

In the housing sector, the April Pending Home Sales index jumped 6% from March, far exceeding the consensus forecast for a small decline. Pending Home Sales are a leading indicator of future housing market activity, so the next Existing and New Home Sales reports may show increases. The National Association of Realtors (NAR) latest forecast predicted that conditions will remain soft in the short term, but that activity will pick up during the second half of the year

 
Compliments of
Corey Phelps
Front Street Mortgage

PHONE:
231-360-7283

FAX:
231-946-6321

corey@frontstreetmtg.com

805 W Front Street

Traverse City, MI 49684

 

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

 

Inflation Fears Hit Mortgage Rates

 

 

Investors’ outlook for inflation worsened during the week, and mortgage

rates moved higher. While the economy remains relatively weak and the

recent inflation data has held steady, many signs point to higher levels

of inflation down the road. The Fed’s Fisher summarized it well, saying

that inflation expectations continue to worsen “even in the face of an

anemic (economy).” Higher energy prices are behind the inflation fears.

Dow Chemical announced this week that it will boost the price of its

products by as much as 20% due to its higher energy costs. Until now,

manufacturers have mostly absorbed higher production costs, rather than

raising the price of their goods. The action by Dow Chemical and several

other major suppliers may be an indication that companies are beginning

to aggressively pass along their rising costs.

 

Adding to the concerns of investors, Fed officials have been

consistently warning about the risks of higher inflation, and the next

move from the Fed is expected to be a rate hike later in the year. The

most recent inflation data showed that the overall April PCE price

index, the Fed’s preferred inflation indicator, rose at a 3.2% annual

rate. The Core PCE price index, which excludes the food and energy

components, increased at a significantly lower 2.1% annual rate,

although this level still would have to decline below 2.0% to fall

within the Fed’s “comfort zone.” Investors fear that the opposite

outcome is more likely, however, and that future readings will be

higher.

 

In the housing sector, April New Home Sales rose modestly from March.

Inventories of unsold new homes fell slightly, and median prices were

higher. Separately, the S&P/Case-Shiller home price index showed that

first quarter prices for existing homes declined 14% from one year

earlier. Bigger picture, though, the data indicated that home prices are

still 60% higher than at the start of the decade.

Corey Phelps

Front Street Mortgage

 

PHONE:

231-360-7283

 

FAX:

231-946-6321

 

corey@frontstreetmtg.com <mailto:corey@frontstreetmtg.com> 

 

805 W Front Street

 

Traverse City, MI 49684

 

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

Wekkly Market Forecast

Week of: Monday, May 19, 2008

Present Market Conditions
Though mortgage rates fluctuated, they ended the week close to where they began. 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 five months. Treasuries rallied at the end of last week with the news of the economic growth related to consumer spending.

Expectations
Federal Reserve Chairman Bernanke indicated in a speech on May 13th that the Fed stands ready to continue to add liquidity to the markets. On the same day, San Francisco Fed bank president Janet Yellen added that she anticipates inflation will slow as commodity prices level off in the second half of the year. Economists will be anticipating the Jobless Claims and Existing Home Sales reports due later this week.

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.

 

Traverse Mortgage Corporation
   (231) 947-9700        (800) 968-3680 

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