Mortgage Times

[Adam in CO]

Mortgage Market News for the week ending July 18, 2008

Events This Week:

Inflation Higher
Retail Sales Rose
Housing Starts Up
Manufacturing Mixed

Events Next Week:

Wed 7/23
Beige Book
Thurs 7/24
Existing Home Sales
Fri 7/25
Durable Orders
New Home Sales
Sentiment

Mortgage Rates Higher as Stocks Climb

Last week, the stock market declined and mortgage rates fell, as investors worried about Fannie Mae and Freddie Mac and oil prices reached record highs. In a pivotal reversal, the opposite took place this week. With increased confidence in the financial sector and lower oil prices, the Dow gained over 400 points. As investors returned to stock assets, they sold relatively safer investments such as bonds, which pushed mortgage rates higher.

While Fannie and Freddie dominated most of the headlines this week, Fed Chief Bernanke presented the latest Fed forecast for the economy during his testimony before Congress. The Fed lowered its projections for economic growth for 2008 and 2009 and expressed concern about the risk of higher inflation. Bernanke described the inflation outlook as "unusually uncertain". From Bernanke's comments, investors concluded that the Fed's primary goal right now is to promote stability in financial markets, rather than fighting inflation, and they expect the Fed to hold rates steady in the near-term.

The news in the housing sector was mixed. June Housing Starts rose 9%, far above the consensus. Similarly, June Building Permits, a leading indicator of future housing market activity, rose 12%, which also far exceeded the forecasts. However, a change in the New York City building codes contributed much of the gains. Separately, the National Association of Home Builders (NAHB) sentiment index fell to a record low in July.

• Also Notable:
• The June Core Consumer Price Index rose at a 2.4% annual rate
• The FOMC minutes revealed the Fed's conflict between fighting inflation and supporting the economy
• Bernanke predicted that we should see stabilization in new home building late this year or in 2009
• Oil prices dropped below $130 per barrel, down from a record high of $147 per barrel last week

Average 30 yr fixed rate:
Last week:-0.18%
This week:+0.27%

Stocks (weekly):
Dow:11,452+408
NASDAQ:2,274+47

Week Ahead

The Economic Calendar will be lighter next week. Friday's report on Durable Orders will be the most significant indicator of economic activity. Existing Home Sales on Thursday and New Home Sales on Friday will reveal activity levels in the housing sector. Consumer Sentiment will also be released on Friday. The Fed's Beige Book and Leading Indicators will round out the schedule. Fed speakers and new developments about Fannie and Freddie will also influence mortgage markets next week.

admin@corefinancegroup.com.