The Economic Report 

Flagstar Bank

March 10, 2008

Highlights from the past week:

Last week was another volatile one.  The week started with the February ISM Manufacturing Index coming in at a five year low with a reading of 48.3.  The Commerce Department's report on factory orders was as expected, a 2.5 percent decrease in February.  All the data so far points to a further weakening economy which bodes well for Treasuries, but the deep concern about the housing and mortgage industries caused a large sell-off in mortgage backed securities. The week ended with a much weaker than expected unemployment report.  In February employers cut 63,000 jobs which was the largest monthly decline in five years.  The Labor Department reported that the national unemployment rate declined slightly to 4.8 percent, but that was only because the number of people in the workforce dropped by 450,000.

MBA Mortgage Applications Survey Highlights - For the week ending February 29, 2008. 

The Market Composite Index, a measure of mortgage loan application volume, was 684.9, an increase of 3.0 percent on a seasonally adjusted basis from 665.1 one week earlier.  On an unadjusted basis, the Index increased 15.3 percent compared with the previous President's Day holiday shortened week and was up 1.1 percent compared with the same week one year earlier.

The Refinance Index increased 4.5 percent to 2569.0 from 2458.9 the previous week and the seasonally adjusted Purchase Index increased 1.4 percent to 363.1 from 358.2 one week earlier.  The Conventional Purchase Index increased 0.9 percent while the Government Purchase Index (largely FHA) increased 3.5 percent. On an unadjusted basis, the Purchase Index increased 14.5 percent to 401.6 from 350.7 the previous week.  The seasonally adjusted Conventional Index increased 2.4 percent to 929.0 from 907.1 the previous week, and the seasonally adjusted Government Index increased 6.2 percent to 277.8 from 261.5 the previous week.
 
The four week moving average for the seasonally adjusted Market Index is down 11.0 percent to 809.1 from 909.5.  The four week moving average is down 2.8 percent to 370.7 from 381.3 for the Purchase Index, while this average is down 15.6 percent to 3365.8 from 3987.0 for the Refinance Index.

The refinance share of mortgage activity increased to 52.4 percent of total applications from 52.0 percent the previous week. The adjustable-rate mortgage (ARM) share of activity increased to 17.3 from 15.0 percent of total applications from the previous week.

The average contract interest rate for 30-year fixed-rate mortgages decreased to 5.98 percent from 6.27 percent, with points unchanged at 1.15 (including the origination fee) for 80 percent loan-to-value (LTV) ratio loans.

The average contract interest rate for 15-year fixed-rate mortgages decreased to 5.26 percent from 5.77 percent, with points increasing to 1.08 from 1.01 (including the origination fee) for 80 percent LTV loans.

The average contract interest rate for one-year ARMs decreased to 5.83 percent from 5.84 percent, with points decreasing to 0.85 from 0.86 (including the origination fee) for 80 percent LTV loans.

Economic Releases to Watch in the Week Ahead 

Monday -

Wholesale Inventories - The figure for wholesale inventories is expected to increase 0.5 percent for January.

Tuesday -

Trade Balance - A trade deficit of $59.5 billion is expected for January.

Wednesday -

No significant economic indicators released today.

Thursday -

Initial Jobless Claims - Claims from the previous week are expected to be announced at 355,000.

Retail Sales - February sales figures are expected to show a 0.1 percent increase, excluding autos a 0.2 percent increase is expected.

Business Inventories - Inventories are expected to increase 0.3 percent for January.

Friday -

Consumer Price Index (CPI) - Consumer prices are predicted to increase 0.3 percent for February, excluding Food and Energy (Core PPI) a 0.2 percent increase is expected.

University of Michigan Consumer Confidence (Preliminary) - Specialists expect a reading for the March consumer confidence index at 70.5.

Communications from Flagstar Capital Markets are intended solely for informational purposes. Statements made by various authors and other contributors do not necessarily reflect the opinions of Flagstar Capital Markets, and should not be construed as an endorsement by Flagstar Capital Markets, either expressed or implied. Flagstar Capital Markets is not responsible for typographic errors or other inaccuracies in the content. We believe the information contained herein to be accurate and reliable. However, errors may occasionally occur. Therefore, all information and materials are provided "as is" without any warranty of any kind. The information provided in this circular is for the dissemination to and for the use of real estate business entities and mortgage lenders only. It is not an advertisement for the extension of credit nor is it intended for distribution to consumers.