Mortgage Times

[Adam in CO]

Mortgage Market News for the week ending November 9, 2007

Events This Week:

Employment Steady
Productivity Jumped
Import Prices Rose
Sentiment Dropped

Events Next Week:

Tues 11/15
Pending Sales

Wed 11/16
PPI
Retail Sales

Thurs 11/17
CPI
Philly Fed

Fri 11/4
Ind. Production

Important Fed Testimony

With a light schedule of economic events last week, Fed Chief Bernanke's testimony on Thursday dominated the headlines. According to him, the housing sector downturn so far has had little impact on the broader economy, which has been "remarkably resilient". For the future, however, Bernanke stated that the Fed expects slower economic growth in the fourth quarter of 2007 and further declines in housing prices. During the question and answer session, one Congressman noted that the common perception now is that Fed policy has become "more neutral". When asked to elaborate what this means, Bernanke nicely summarized the Fed's current outlook. In short, the Fed believes that the risks are roughly even between higher future inflation and slower economic growth, so the Fed will act based on incoming economic data. For investors, the Fed's current balancing act means that every new piece of information tips the scales in one direction or the other, which has increased the volatility in mortgage markets.

In his remarks, Bernanke also downplayed the concerns about China's diversification away from US dollar based assets. Earlier in the week, a Chinese official suggested that China should replace some US investments with those from other countries. The prospect of lower foreign demand led to selling in both US stock and bond markets. While there has been no confirmation of a change in policy and the short term implications are relatively minor, this is a situation which will need to be watched in the future.

Of particular significance to the mortgage market, Bernanke proposed a new idea to ease tight credit conditions. He suggested allowing Fannie Mae and Freddie Mac to purchase mortgages up to $1 million. Mortgages above the current $417,000 conforming limit would be guaranteed by the government for a fee, while those below the cap would continue to be guaranteed by the companies. The purpose would be to narrow the spread between jumbo loans and conforming loans closer to the levels seen before the credit crunch. Key Congressional officials expressed support for the measure.

• Also Notable:
• The September Trade Deficit fell to the lowest level in two years
• As expected, the central banks of Europe and England made no change in interest rates
• The Mortgage Bankers Assoc. forecasted a recovery in the housing market during the second half of 2008
• Oil prices climbed to record levels near $100 per barrel, up from $70 p/b in the middle of August

Average 30 yr fixed rate:
Last week:-0.02%
This week:+0.06%

Stocks (weekly):
Dow:13,084-462
NASDAQ:2,638-162

Week Ahead

Given the current climate, the crowded Economic Calendar means that every day offers the possibility of big movements next week. The biggest economic news will be Thursday's Consumer Price Index inflation report. Almost without exception, higher inflation leads to higher interest rates, and the Consumer Price Index (CPI) is the most widely watched indicator. CPI looks at the price change for those finished goods which are sold to consumers. Wednesday, the Producer Price Index (PPI) inflation report will come out. The PPI inflation data focuses on the increase in prices of "intermediate" goods used by companies to produce finished products. The same day, the Retail Sales report will provide a read on the health of the economy. Consumers account for about 70% of economic activity, and this report is a major indicator of spending levels by consumers. Industrial Production, another important indicator of economic activity, will come out on Friday. Pending Home Sales, a leading indicator for the housing market, is on the schedule for Tuesday. Finally, the two regional manufacturing indexes will round out next week's Economic Calendar. Mortgage markets will be closed on Monday in observance of Veterans Day.

admin@corefinancegroup.com

[RubHer Yellow Ducky]

ADAM,

Do precious metals play any part in this and if so how do you explain the record gold prices and the rapid rise in silver ???

[Adam in CO]

Originally Posted by RubHer Yellow Ducky

ADAM,

Do precious metals play any part in this and if so how do you explain the record gold prices and the rapid rise in silver ???

That's a supply and demand issue.

Old guys like you need falsies and fillings so the prices go up.

[h2co-pilot]

What about certain kinds of yogurt, it seems people are just wasting it.

[ssgharkness020147]

Because of the dollars low strength right now, people are putting money into precious metals. When the dollar falls people always head to precious metals/treasury to avoid the turmoil in the markets.

Originally Posted by RubHer Yellow Ducky

ADAM,

Do precious metals play any part in this and if so how do you explain the record gold prices and the rapid rise in silver ???

[Adam in CO]

Originally Posted by h2co-pilot

What about certain kinds of yogurt, it seems people are just wasting it.

Believe me. It is NOT a waste.