 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
237 West Parkway, Pompton Plains NJ 07444 | 973-617-8700 | Toll-Free: 1-800-UPDATES | www.HSH.com For the week ending October 12, 2007 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
HSH contacts over 2,000 lenders each week, and generates reports for consumers, and competitive analysis services and statistics from its databases with over 20 years of current and historical data. Daily statistics and samples of our services and information are available at no cost at http://www.hsh.com/. The HSH Market Trends is free and informative -- subscribe today! | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Economy and Mortgage Rates Firm October 12, 2007 -- It's a simple fact that if the economy refuses to sag outside of troubled housing markets, mortgage interest rates are unlikely to decline. The overall average for thirty-year fixed rate mortgages held steady at 6.78% this week, while prices for five-one Hybrid ARMs moved two basis points (.02) higher, closing the nation's leading survey of mortgage rates at 6.51%
The minutes from September 18 Federal Reserve Open Market Committee meeting were released this week, the result of which was a unanimous decision to slash short-term interest rates by a half percentage point. The size of the move surprised markets to a degree, but the Fed specifically noted that they hoped to "help forestall some of the adverse effects on the broader economy that might otherwise arise from the disruptions in financial markets" seen in August and September. Since then, those financial markets have calmed measurably and even managed to improve somewhat. The spread between conforming mortgages and their jumbo counterparts continues on a slow narrowing path. After hitting an extraordinarily-wide 93 basis points at the end of August, the spread this week has retreated to just 66 basis points, as at least some liquidity returns to certain non-conforming mortgage markets. As has been the case lately, conforming interest rates are in a slightly rising pattern while jumbo rates are falling. While the spread is still three times the gap seen in mid-July, grinding progress is being made as time goes along. This is occurring despite on-going announcements from major banks about their exposure to troubled mortgage loans.
While the "adverse effects" the Fed expressed concern about may ultimately show themselves, the collective economic picture has been fair to even pretty good, overall. Even with recent revisions suggesting that hiring remains soft, there has been no outright decline in hiring, and reasonably full employment levels should help the economy to continue to move forward. New claims for unemployment benefits eased back during the week of October 6, falling by 12,000 to land at 308,000 and those claim numbers continue to travel in a narrow band from about 300,000 to about 330,000. However, Slowly rising "continuing claims" numbers do point to an increase in difficulty in finding a new job for some folks. Retail Sales for September were reported to have risen by 0.6% for the month, a little more than was expected. There was still a nice lift of 0.2% when auto sales and sales at gas stations were excluded. There is still some on-going concern that consumers will pull back from spending money as their homes fail to increase (or even decrease) in value but so far that doesn't seem to be the case on any widespread basis. Prices of goods and services do remain a concern, however. Prices of imported goods rose a stout 1% in September, about double the expected increase and a marked turnaround from the 1.4% decline noted during August. More expensive petroleum products are again skewing the numbers higher -- leaving them out left a 0.2% decline in import costs -- and the weak dollar is certainly playing a role as well. Goods priced for export from the US managed a 0.3% lift during the month.
That surge in petroleum costs is of course influencing prices here, and coupled with spiking food costs, certain measurements of prices are rising strongly. The Producer Price Index powered ahead by 1.1% in September, driven higher by those volatile costs, but leaving them out of the picture left a much quieter 0.1% increase. That 'core' rate of inflation at the manufacturing level has risen by 2% over the past year, while the "headline" figure is running more than double that figure. We'll see next week if those rising input costs are making it to the consumer level; if they are starting to, underlying interest rates may move upward. With the weaker dollar comes a better chance to export goods and services. The nation's imbalance of trade narrowed to 57.6 billion dollars during August, as exports rose by 0.4% while imports declined by a like amount. Given our appetite for foreign-made goods, the decline in imports might be a sign of somewhat slower consumer spending, but it's unclear that this is the case at the moment. Measures of stockpiles at businesses of all stripes increased mildly in August, with aggregate levels of unsold goods rising by just 0.1%. Sales remained strong enough to keep inventories at lean levels though, so manufacturing will likely have been pushing out goods to downstream parties at moderate levels at least into September. Consumer moods are basically holding steady to perhaps a little weaker for the most part. The weekly ABC News/Washington Post survey of Consumer Comfort slipped back a notch to -13 during the week ending October 7, while the preliminary reading for Consumer Sentiment from the University of Michigan shed 1.4 points to land at an 82.0 mark. The Fed's concerns about the effects of the financial market contraction in August may yet be realized, but until then, there's little to do but wait and hope for the best. Among other things, the better tenor for economic news has served to press stock markets to record highs as investors look for performing sectors of the economy in which to place their bets. That good news is perhaps offsetting some of the concerns people might have about the value of their homes, lending at least some confidence about the future.
Borrowers wishing for a huge dip in interest rates will continue to be disappointed until the economy really slows or until inflation appears to be on a fast-declining pattern. To us, neither of those seems likely anytime soon; as well, if the Fed is standing by the ready to trim interest rates again if economic decline is imminent, that decline becomes somewhat less likely, and couple bring an unwelcome rise in inflation pressures along with increasing growth. A more robust block of data is due next week to help sharpen the present picture. Aside from the CPI, there's a reading on Industrial Production, the housing market index from the NAHB index (probably as bleak as usual), Housing Starts (ditto), but we'll also see the Fed's regional survey of economic conditions (a.k.a. the "Beige Book") which should be our first review of whether financial market troubles are making trouble outside of Wall Street. For our part, we reckon that, on balance, the weak housing numbers will help mortgage interest rates to decline a couple basis points overall next week. Our new fall visitor survey, "Fixing The Mortgage Market Mess: What should be done... and by whom?" seeks your input as to how the aftermath of the credit market mess should be addressed. There are a lot of proposals on the table and the potential for a lot of change to come to housing and mortgage markets, and we think you should get a chance to chime in. Take the survey here. For more in-depth commentary, see our latest two-month forecast. And for today's top stories, see our daily news column. | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| For further Information, inquiries, or comment: Keith T. Gumbinger, Vice President Copyright 2007, HSH® Associates, Financial Publishers. All rights reserved. | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
HSH Weekly Market Trends
To be removed from HSH Weekly Market Trends, click here.
To modify your record in HSH Weekly Market Trends, click here.
HSH Associates, Financial Publishers
http://www.hsh.com/
No comments:
Post a Comment