Mortgage Times

[Adam in CO]

Mortgage Market News for the week ending July 20, 2007
Compliments of
CORE
PHONE:303-770-2262
adam@corefinancegroup.com
5310 DTC Pkwy
Greenwood Village, CO 80111



Events This Week:

Employment Better
Inflation Steady
Manufacturing Flat
Housing Mixed

Events Next Week:
Wed 7/25
Existing Home Sales
Thurs 7/26
Durable Orders
New Home Sales
5-yr Auction Fri 7/27
Advance GDP
Sentiment

Bernanke Takes Center Stage


Last week mortgage investors were primarily watching two main events, Fed Chief Bernanke's appearance before Congress and the monthly inflation reports. Both indicated tame inflation, and mortgage rates fell modestly. On Wednesday, Bernanke acknowledged some improvement in current levels of inflation, while maintaining the Fed's focus on the possibility of higher future inflation. He suggested that the Fed expects energy prices to stabilize. In addition, he reported slightly lower Fed forecasts for economic growth this year, due to weakness in the housing sector. Overall, mortgage investors were pleased by the lack of bad news on the inflation front, and the outlook for lower economic growth was slightly positive.

Shortly before Bernanke's speech, the most widely watched inflation indicator, the June Consumer Price Index (CPI), showed that core inflation rose at 2.2% on an annual basis, matching the consensus forecast. Core inflation at the consumer level has been trending lower since February, to the point where Fed officials are reasonably comfortable with the current levels. Core inflation excludes the volatile food and energy components. The overall inflation rate has been rising at a faster pace in recent months, due to higher energy prices.

In the housing sector, June Housing Starts came in a little higher than expected, while Building Permits fell by 8%. The encouraging news was that Housing Starts have been stable since February, but the decline in Building Permits may have been an indicator that trouble lies ahead. The National Association of Realtors forecasted that Housing Starts will reach a bottom during the fourth quarter of this year. Separately, the National Association of Home Builders Housing Market Index fell to the lowest level since 1991. The NAHB attributed the decline to a surplus of unsold homes, problems in the subprime market, and tighter lending standards.

• Also Notable:
• The Dow Jones stock index hit new record highs above the 14,000 level
• In June, Building Permits fell to the lowest level seen this decade
• Fed Chief Bernanke suggested that the problems in the housing sector may last longer than expected
• The Fed told lawmakers that regulators are taking steps to protect consumers obtaining mortgages

Average 30 yr fixed rate: Last week:0.00%This week:-0.05%

Stocks (weekly): Dow:13,841-60NASDAQ:2,683-18

Week Ahead

Next week's biggest news will be the first look at Gross Domestic Product (GDP) for the second quarter of 2007 on Friday. GDP is the broadest measure of economic activity, and the consensus estimate is for growth at a 3.2% annual rate. Another important indicator of economic activity will be Thursday's report on Durable Orders. In addition, major housing sector data will come out on Wednesday and Thursday with Existing Home Sales and New Home Sales. Treasury auctions and Fed speakers will fill out next week's schedule.

Locally this week we were watching Google stock carefully....