Mortgage Times
#1
11-16-2007, 03:40 PM
Mortgage Times
Mortgage Market News for the week ending November 16, 2007
Events This Week:
Inflation Lower
Employment Steady
Industrial Prod. Fell
Manufacturing Mixed
Events Next Week:
Tues 11/20
Housing Starts
FOMC Minutes
Wed 11/21
Leading Indicators
Sentiment
Tame Inflation Lifts Mortgage Market
Last week's tame inflation data comforted mortgage investors, leading to modestly lower mortgage rates from the prior week. The October Core Consumer Price Index (CPI) rose at a 2.2% annual rate, close to the consensus forecast, and the October Core Producer Price Index (PPI) rose at a lower than expected rate. The core rates exclude the food and energy components, which often fluctuate greatly from month to month, especially with the volatility in energy prices in recent months. The Fed's comfort zone for core inflation is generally considered to be in the 1.0% to 2.0% range. Core CPI was still a little higher than this, but it has come down from higher levels earlier in the year. The other major inflation indicator looked at by the Fed, the Core PCE price index, has stayed below 2.0% for a couple of months.
While it had no impact on short term trading action, Fed Chief Bernanke gave an important speech on Wednesday, indicating that the Fed will provide more information to investors. The Fed will increase its time horizon for its forecasts from 2 years to 3 years, and it will update its outlook 4 times per year instead of twice per year. Another change will include forecasting headline as well as core inflation, since Fed officials believe that the more inclusive headline number better reflects long term trends in inflation. Analysts uniformly praised the moves.
In the housing sector, the economic news was relatively good. The September Pending Home Sales index showed a slight increase from August, surpassing expectations. After dropping 16% over the prior two months, a flat reading was a welcome surprise. Pending Home Sales are a leading indicator of future housing market activity, so the next Existing and New Home Sales reports may level off as well. In addition, the National Association of Realtors (NAR) revised upward its forecast for housing activity in 2008 and suggested that the worst may be behind us.
Also Notable:
[ul][*]The Fed's Kroszner expects the economy to hit a "rough patch" in coming months[*]Fannie Mae, Freddie Mac, and the FHA have seen large increases in market share since the credit crunch[*]Losses in subprime mortgage investments will exceed $400 billion, according to the latest Wall Street estimates[*]After reaching record levels near $100 per barrel, oil prices retreated to $95 per barrel last week[/ul]Average 30 yr fixed rate:
Last week:+0.06%
This week:-0.07%
Stocks (weekly):
Dow:13,104+20
NASDAQ:2,613-24
Week Ahead
With the Thanksgiving holiday next week, mortgage markets will be closed on Thursday, and will close early on Wednesday and Friday. On Tuesday, Housing Starts will be released, and the minutes from the October 31 FOMC meeting will be revealed. The detailed record of the discussion between Fed officials often provides additional insight into the reasoning behind the Fed statement. Consumer Sentiment and Leading Indicators will come out on Wednesday. Trading volume is expected to be light, which means that higher than usual volatility is possible.
[IMG]local://upfiles/25882/E63196A0E02B415CB28C464CFD9C7FEB.jpg[/IMG]
Events This Week:
Inflation Lower
Employment Steady
Industrial Prod. Fell
Manufacturing Mixed
Events Next Week:
Tues 11/20
Housing Starts
FOMC Minutes
Wed 11/21
Leading Indicators
Sentiment
Tame Inflation Lifts Mortgage Market
Last week's tame inflation data comforted mortgage investors, leading to modestly lower mortgage rates from the prior week. The October Core Consumer Price Index (CPI) rose at a 2.2% annual rate, close to the consensus forecast, and the October Core Producer Price Index (PPI) rose at a lower than expected rate. The core rates exclude the food and energy components, which often fluctuate greatly from month to month, especially with the volatility in energy prices in recent months. The Fed's comfort zone for core inflation is generally considered to be in the 1.0% to 2.0% range. Core CPI was still a little higher than this, but it has come down from higher levels earlier in the year. The other major inflation indicator looked at by the Fed, the Core PCE price index, has stayed below 2.0% for a couple of months.
While it had no impact on short term trading action, Fed Chief Bernanke gave an important speech on Wednesday, indicating that the Fed will provide more information to investors. The Fed will increase its time horizon for its forecasts from 2 years to 3 years, and it will update its outlook 4 times per year instead of twice per year. Another change will include forecasting headline as well as core inflation, since Fed officials believe that the more inclusive headline number better reflects long term trends in inflation. Analysts uniformly praised the moves.
In the housing sector, the economic news was relatively good. The September Pending Home Sales index showed a slight increase from August, surpassing expectations. After dropping 16% over the prior two months, a flat reading was a welcome surprise. Pending Home Sales are a leading indicator of future housing market activity, so the next Existing and New Home Sales reports may level off as well. In addition, the National Association of Realtors (NAR) revised upward its forecast for housing activity in 2008 and suggested that the worst may be behind us.
Also Notable:
[ul][*]The Fed's Kroszner expects the economy to hit a "rough patch" in coming months[*]Fannie Mae, Freddie Mac, and the FHA have seen large increases in market share since the credit crunch[*]Losses in subprime mortgage investments will exceed $400 billion, according to the latest Wall Street estimates[*]After reaching record levels near $100 per barrel, oil prices retreated to $95 per barrel last week[/ul]Average 30 yr fixed rate:
Last week:+0.06%
This week:-0.07%
Stocks (weekly):
Dow:13,104+20
NASDAQ:2,613-24
Week Ahead
With the Thanksgiving holiday next week, mortgage markets will be closed on Thursday, and will close early on Wednesday and Friday. On Tuesday, Housing Starts will be released, and the minutes from the October 31 FOMC meeting will be revealed. The detailed record of the discussion between Fed officials often provides additional insight into the reasoning behind the Fed statement. Consumer Sentiment and Leading Indicators will come out on Wednesday. Trading volume is expected to be light, which means that higher than usual volatility is possible.
[IMG]local://upfiles/25882/E63196A0E02B415CB28C464CFD9C7FEB.jpg[/IMG]
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