Inside lending info from Mike and Betsy Moshofskey of CTX Mortgage Co.

Real Estate Agent with Keller Williams Integrity First

I obtained this information from Mike and Betsy Moshofskey from CTX Mortgage. It provides an overview of the current financial markets and provides insight into what we can expect for future lending and market conditions for our clients.

Inside Lending
For the week of January 7, 2008 - Vol. 6, Issue 1

>> Review of Last Week

HAPPY NEW YEAR! ...NOT SO FAST. The week began with truly lackluster market performance on the low-volume, last trading day of 2007. This brought in the year's final numbers: the Dow, up 6.4%; the S&P 500, up 3.5%; and the NASDAQ, up 9.8%. Not bad actually, considering the crazy volatility.

After the New Year's close, stocks slid Wednesday with the ISM Manufacturing index showing slight contraction and oil hitting $100 a barrel. The Dow shaved off 220 points and Santa Claus got sent home with one day left for his namesake rally, which clearly wasn't going to happen.

Side note: With oil at $100 a barrel, everyone's freaking out. Let's get real. First, this is not an all-time high--it's still lower than the inflation-adjusted high of nearly $103 per barrel back in 1980. Next, please observe that price hikes in crude on the commodities market are not necessarily reflected in price hikes at the gas pump. Gas was at $3/gallon when oil was at $65/barrel. Oil went up 60% in 2007, yet gas is up just a tick above that $3. Finally-good news!-it's taking less crude oil to make a gallon of gas. That's because gasoline now has a higher content of renewable, non-petroleum products!

Thursday, new jobless claims fell to 336,000 and factory orders rose for the third straight month, but concerns over the economy still kept stock prices down. Then Friday's weaker than expected jobs report sent stocks plummeting. Suffice it to say, unemployment creeping up to 5% (still not a bad number) was the culprit, in spite of the fact that non-farm payrolls rose 18,000, the November payroll gain was revised upward to 115,000, and the ISM Services index showed solid growth in our non-manufacturing sector. Go figure.

With all the investor fretting, the Dow ended the week at 12,800.18, down 4.2%. The S&P 500 was down 4.5%, to 1411.63. And the NASDAQ crunched down to 2504.65, off 6.3%.

True to form, this rotten stock market performance sent bond prices up, as investors flocked to a safe haven. This sent yields down, with the benchmark 10-year Treasury at 3.865%, ALMOST hitting its lowest level since early '04, but not quite. It appears mortgage rates will continue to stay at attractive levels.

>> This Week's Forecast

TECH IT OUT!  Monday the Consumer Electronics Show (CES) opens in Vegas. It's the world's largest high tech tradeshow and a bellwether for all the trends in this hot investment sector. Tuesday we get the Pending Home Sales figure for November.

In light of Friday's lousy jobs report, the weekly Initial Jobless Claims number will get far more than usual interest on Thursday. But the biggie will be Fed Chairman Ben Bernanke's speech on the economic outlook at 1:00PM ET.

With oil hovering around $100 a barrel, we're now including the weekly Crude Inventories number in our Economic Calendar, as this figure can impact the price of crude in the commodities market and fuel (pardon the pun) gas price inflation woes-even though, as we showed above, they're not tightly connected.

>> The Week's Economic Indicator Calendar

Weaker than expected economic data tends to send bond prices up and interest rates down, while positive data points to lower bond prices and rising loan rates.

Economic Calendar for the Week of Jan 7 - Jan 11
DateTime (ET)ReleaseForConsensusPriorImpact
Jan 8
10:00Pending Home SalesNov 0.6%Moderate
Jan 10
08:30Initial Jobless Claims01/05NA336KModerate
Jan 10
10:30Crude Inventories01/05NA-4056KModerate
Jan 11
08:30Trade BalanceNov-$59.5B-$57.8BModerate

>> Home Base

INFO THAT HITS US WHERE WE LIVE  The S&P/Case-Shiller Home Price Index, which measures only 20 markets, had home prices as of October down 6.5% from their peak, which they say was June 2006. That's a price drop of less than 4.9% on an annual basis. And the fact is, the median price for existing homes went down only 1.9% in '07, as reported here last week. Fannie Mae's CEO said he thinks prices could drop 4-5% this year. Others see the median price for existing homes going up 0.3%.

While these numbers are nothing to throw a party over, they all contradict the media's erroneous home price MELTDOWN. Especially when you consider that the average home in the U.S. increased 100% in value in that last 10 years and in California, it did it in 6 years!

We can all take some solace from the fact that the Conference Board's Consumer Confidence Index rose in December, the first time in five months, from 87.8 to 88.6. And the number of consumers expecting an IMPROVEMENT in business conditions in the next six months rose to 13.8% in December. If the media would only give some of these folks a little airtime! Don't hold your breath.

>> Federal Reserve Watch

Forecasting Federal Reserve policy changes in coming months. An overwhelming majority of the experts expect the Fed to cut rates 25 basis points (.25%) at the January 30 meeting. Many are clamoring for a 50 basis point cut to stimulate the economy, but most feel this cautious Fed will take its time.

Current Fed Fund Rate: 4.25%
After FOMC meeting on:Consensus
Jan 304.00%
March 183.88%
June 253.63%

Odds of change from current policy:
After FOMC meeting on:Consensus
Jan 3075%
March 1885%
June 2595%

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