Mortgage Times

[Adam in CO]

Mortgage Market News for the week ending January 11, 2008

Events This Week:

Employment Mixed
Inflation Steady
Pending Sales Down
Manufacturing Weak

Events Next Week:

Tues 1/15
PPI
Retail Sales

Wed 1/16
CPI
Industrial Prod.
Beige Book

Thurs 1/17
Housing Starts
Philly Fed

Fri 1/18
Sentiment

The Fed is Ready to Act

Mortgage rates continued their recent trend lower on the perception that the economy is slowing even more than expected. Economic weakness generally leads to less inflation, which tends to produce lower mortgage rates. Confirmation of an economic slowdown was provided in a speech by Fed Chief Bernanke on Thursday. Calling the December Employment report "disappointing", he suggested that the Fed is prepared to take "substantive" action and that further easing may well be necessary in light of the risks of a slowing economy. Investors interpreted his remarks to mean that the Fed will be likely to cut rates more aggressively than previously expected, and they now price in a near certainty of a half point rate cut at the next meeting on January 30.

Bank of America announced that it had reached an agreement to acquire Countrywide Financial. The news came as concerns about Countrywide's solvency were causing unease in the market, but the pending acquisition has helped to ease those fears. A bankruptcy of Countrywide would not have been good for the mortgage industry and its ripple effects would have been felt throughout the economy.

In the housing sector, November Pending Home Sales fell slightly from the prior month, leaving them 19% lower than one year ago. Pending Home Sales are a leading indicator of future housing market activity, meaning that the next Existing and New Home Sales reports may show declines. Separately, the National Association of Realtors (NAR) released a revised forecast last week, in which they increased slightly their expectations for housing market activity in 2008.

• Also Notable:
• As expected, neither the European Central Bank nor the Bank of England changed their benchmark interest rates
• Major retailers reported weaker than expected sales in December
• Treasury Secretary Paulson suggested expanding the mortgage assistance program to include prime adjustable-rate loans
• Oil prices retreated to $93 per barrel, down from record levels just below $100 per barrel

Average 30 yr fixed rate:
Last week:-0.24%
This week:-0.12%

Stocks (weekly):
Dow:12,726-158
NASDAQ:2,466-82

Week Ahead

The Economic Calendar will be packed next week. The two major monthly inflation reports will come out on Tuesday and Wednesday, and investors will be watching closely in light of the expected upcoming Fed rate cuts. The first, the Producer Price Index (PPI) inflation report, focuses on the increase in prices of "intermediate" goods used by companies to produce finished products. 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 and will come out on Wednesday. Retail Sales will also be released on Tuesday. 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 Wednesday. On Thursday, Housing Starts and the Philly Fed index will round out a busy week.

admin@corefinancegroup.com

[KenP]

Thanks Adam.

[Adam in CO]

Originally Posted by KenP

Thanks Adam.

My pleasure Old Ken.