Mortgage Times

[Adam in CO]

Mortgage Market News for the week ending December 21, 2007

Events This Week:

Inflation Higher
Sentiment Up
Housing Mixed
Manufacturing Down

Events Next Week:
Thur 12/27
Durable Orders
Confidence
Jobless Claims
Fri 12/28
New Home Sales

Inflation Poses a Dilemma for Fed

Last week, the most important economic report contained the Fed's preferred inflation indicator. The Core PCE price index rose at the expected 2.2% annual rate, which was above the Fed's perceived comfort zone, below 2.0%. The overall price index rose at a 3.6% annual rate, mostly due to higher energy prices. The mortgage market was unmoved by the on target data. Bigger picture, though, the threat of higher inflation may inhibit the Fed from cutting rates to boost economic growth. Since inflation is negative for mortgage rates, mortgage investors will be watching closely to see how tough a stance the Fed takes on fighting inflation. For the week, mortgage investors seemed to approve of the Fed's attitude, and mortgage rates ended the week modestly lower than the prior week.

On a different front, last week marked the first Fed auctions to provide added liquidity to major financial institutions. This unprecedented plan was announced on December 12 and put into action on Monday. The Fed's goal was to provide a relatively cheap supply of short term funds for institutions, since many of the traditional sources of funds have become more costly due to the credit crunch. Demand was high, but not as strong as expected. In short, the auctions appeared to be a helpful, but not a vital, new tool for the Fed to stimulate economic activity.

In the housing sector, the news again was mixed. November Housing Starts came in slightly higher than expected, and Building Permits, a leading indicator of future housing market activity, declined a little. Separately, the December NAHB Home Builders activity index held steady from last month. While some economists continue to predict further declines, there have been many signs in the recent economic data that the housing market may have stabilized. With mortgage rates near the lowest level of the year and the Fed pumping funds into the banking system, there are reasons to look forward to renewed activity in the housing sector.

• Also Notable:
• The European Central Bank made a record $500 billion in short term loans to ease year end liquidity conditions
• The Fed's Lacker expressed discomfort with the inflation picture, which has "deteriorated"
• The Fed endorsed new mortgage lending rules

Average 30 yr fixed rate:
Last week:+0.07%
This week:-0.08%

Stocks (weekly):
Dow:13,408-28
NASDAQ:2,673+13

Week Ahead

The Economic Calendar will be sparse during Christmas Week. Durable Orders, an important indicator of economic activity, will be released on Thursday. Consumer Confidence will come out the same day. New Home Sales on Friday will be the only other economic report. Trading activity will be light, meaning that there could be a lot of volatility during the week. Mortgage markets will close early on Monday and will be closed on Tuesday.

admin@corefinancegroup.com

[BKLYNH2]

Hmmm. Maybe this would be a good time to refinance. Adam could you hook me . . . . . err arrange something for me.

[Adam in CO]

Originally Posted by BKLYNH2

Hmmm. Maybe this would be a good time to refinance. Adam could you hook me . . . . . err arrange something for me.

Ha ha. I know what you mean and I AM telling your wife.

[BKLYNH2]

Originally Posted by Adam in CO

Ha ha. I know what you mean and I AM telling your wife.

?

[DennisAJC]

I still think that girl looked unclean.