AudiForums.com - Mortgage Times

Mortgage Market News for the week ending July 27, 2007

Compliments of:
CORE
PHONE:
303-770-2262
adam@corefinancegroup.com
5310 DTC Pkwy
Greenwood Village, CO 80111

Events This Week:
GDP Higher
Inflation Lower
Manufacturing Weaker
Housing Mixed

Events Next Week:
Tues 7/31
Chicago PMI
Core PCE
Wed 8/1
ISM Manufacturing
Pending Home Sales
Thurs 8/2
Factory Orders
Fri 8/3
Employment
ISM Services

Mortgage Rates Little Changed by Stock Market Losses

The biggest economic story last week was the large stock market decline, totaling about 500 points on the Dow Jones index. In recent months, it has been common during stock market downturns to see investors shift funds out of stocks and into bonds of all types. Last week was a little different, however, as Treasury bonds were recipients of a significant portion of the funds leaving stock markets, but mortgage bonds benefited far less. As a result, 10-yr Treasury yields fell from 4.95% to 4.75% during the week, while mortgage rates declined only slightly. Concerns about the spread of the subprime credit risk to higher grade mortgage bonds caused some investors to choose alternative investments.

After Thursday's stock market decline, mortgage rates fell modestly, but Friday morning's economic data eliminated the gains very early in the day. Last week's most highly anticipated economic report was Friday's release of second quarter 2007 Gross Domestic Product (GDP), which showed growth at a 3.4% annual rate, a little higher than expectations. The inflation component of the report matched the consensus forecast. Mortgage investors were hoping to see a slower growth rate.

In the housing sector, a mixed picture emerged. Although the bar was set low, June Existing Home Sales data showed a larger than expected decline. On the positive side, median prices posted a small increase, while inventories of unsold homes fell. Meanwhile, June New Home Sales posted the fifth drop in the last six months, to the lowest level in about seven years. Economists in the real estate industry predicted that the housing market will stabilize for the rest of this year and reminded consumers that local market conditions vary widely.

Also Notable:
The Fed's Beige Book noted that the commercial real estate market was offsetting some of the weakness from the residential real estate market
June Existing Home Sales data showed a decline to the lowest level in about five years, while median prices rose
The Homeownership rate fell to 68.2% during the second quarter of 2007 from 68.7% one year earlier, according to the Census Bureau
The Dow Jones equity index fell significantly from its record level above 14,000 reached last week

Average 30 yr fixed rate: Last week:-0.05%This week:-0.03%

Stocks (weekly): Dow:13,394-462NASDAQ:2,585-98

Week Ahead

Next week will be packed with economic news, highlighted by Friday's always important monthly Employment report. As usual, this data on the number of new jobs created, the Unemployment Rate, and wage inflation will be the most highly anticipated economic data of the month, since the health of the labor market is perhaps the single biggest factor in the performance of the economy. Early estimates are for 135,000 net new jobs added in July.

In addition, the Fed's preferred inflation indicator, the Core PCE inflation index, will come out on Tuesday. The two national manufacturing indexes, the ISM and the Chicago PMI, will be released during the first half of the week. The Pending Home Sales index, a leading indicator for the housing market, will come out on Wednesday. Finally, the ISM Services index and Factory Orders will round out the busy economic calendar.