Finance Market Update - Week of February 4, 2008

By
Real Estate Agent with RE/MAX Elite

Brentwood TN Real Estate

Mortgage bond prices rose last week pushing mortgage interest rates lower. Trading was volatile with most of the positive improvements coming early in the week. The anticipated Fed rate cut and mixed economic data sent bonds up and down the latter portion of the week. Unemployment was stronger than expected @ 4.9%, however payrolls fell 17,000. Stocks continued to bounce back posting additional gains following the Fed 50 basis point rate cut. Unfortunately this caused the demand for mortgage bonds to languish. The good news is that despite the weaker demand the latter portion of the week, for the week, interest rates on government and conventional loans fell by about 3/8 of a discount point. This is good news for Brentwood TN Real Estate buyers.

The productivity data Wednesday will be the most important event this week. Factory orders and the Treasury auctions also have the real potential to cause mortgage interest rate volatility.

Economic Factors

Economic Indicator Release Date Time Consensus Estimate Analysis

Factory Orders Monday, Feb. 4, 2008 Up 2.0%  Important. A measure of manufacturing sector strength. Weakness may lead to lower rates. 

Preliminary Q4 Productivity Wednesday, Feb. 6, 2008 Up 1.0%  Important. A measure of output per hour. Improvement may lead to lower mortgage rates. 

10-year Treasury Note Auction Wednesday, Feb. 6, 2008 None Important. Notes will be auctioned. Strong demand may lead to lower mortgage rates. 

30-year Treasury Bond Auction Thursday, Feb. 7, 2008 None Important. Bonds will be auctioned. Strong demand may lead to lower mortgage rates. 

Consumer Credit Thursday, Feb. 7, 2008 Up $8 billion Low importance. A significantly larger than expected increase may lead to lower mortgage interest rates. 

Market Conditions

Despite continued Fed rate decreases, the future of the US economy remains uncertain. The Fed is desperately trying to jumpstart the economy amid high commodities prices and the fear of inflation. Former Fed chairman Greenspan indicated last week that the Fed's actions probably wouldn't keep the economy out of recession. Usually economic weakness is good for bonds and bad for stocks. Unfortunately the bond market has been hit hard recently by huge losses from bond insurers and many investors fear the worst is yet to come.

Keep in mind that a Fed rate cut does not automatically mean mortgage interest rates will improve, as was evident following the last few Fed rate cuts. The Federal Reserve has direct control over the level of short-term interest rates. The Fed's influence over longer-term interest rates is less certain. Former Fed chairman Greenspan hit upon this fact last week when he noted, "central banks have less and less power to influence long term rates." Remember that the Fed cuts rates to help spur the economy. Usually funds exit bond holdings and enter stocks. This was exactly what happened over the past two weeks. Bonds fell pushing rates higher following the Fed rate cuts, while stocks showed strong gains.

The good news is that interest rates still remain very favorable. There is a very real possibility that longer-term mortgage interest rates could head lower if inflation fears subside and the economic weakness continues. However, lower rates are not a given. High commodities prices and liquidity concerns in the mortgage industry continue to weigh heavily upon the economy. Couple those concerns with reports of continued housing price declines and the short-term economic outlook looks dim.

Mortgage interest rates remain historically favorable and taking advantage of rates at these levels to lock in a low interest rate for years to come would be prudent.
* Information courtesy Tonya Esquibel, WR Starkey, Franklin TN*

Vanessa Stalets

Brentwood TN Real Estate

RE/MAX Elite

615-661-4400

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Ambassador
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Gary Woltal
Keller Williams Realty - Flower Mound, TX
Assoc. Broker Realtor SFR Dallas Ft. Worth
Vanessa, the favorable interest rates should help all in the business! Thanks for the latest stats.
Feb 04, 2008 02:16 AM #1
Rainmaker
924,619
Larry Brewer - Benchmark Realty llc
Benchmark Realty LLc - Nashville, TN

If we have a recession, it will be very short and recovery will happen quickly. I'm sure that some parts of the country have been in a recession for a long time. I'm grateful that I live in Tennessee.

Feb 04, 2008 04:19 AM #2
Rainer
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Danny Thornton
R & D Art - Knoxville, TN
WordPress Guru
Vanessa, this is some great information. Thanks for sharing it with all of us..
Feb 04, 2008 05:32 AM #3
Rainmaker
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The Brewer Team - Benchmark Realty
Benchmark Realty - Franklin, TN

THe interest rates should drive buyers into the real estate market that have been sitting on the sidelines.

Feb 04, 2008 08:31 AM #4
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Karen Kruschka
RE/MAX Executives - Woodbridge, VA
- "My Experience Isn't Expensive - It's PRICELESS"
Vanessa,  I am confident 2008 will be a good year in spite of all the media negativity, but I do appreciate the insight.  Karen
Feb 04, 2008 08:33 AM #5
Ambassador
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TeamCHI - Complete Home Inspections, Inc.
Complete Home Inspections, Inc. - Brentwood, TN
Home Inspectons - Nashville, TN area - 615.661.029
Vanessa, Maybe this may be what is driving this spur in activity. All of a sudden we have gotten real busy. Thanks for the post.  8-}
Feb 04, 2008 09:18 PM #6
Rainmaker
307,391
Vanessa Stalets
RE/MAX Elite - Brentwood, TN
REALTOR, Brentwood TN Homes, Real Estate
Gary - You are most welcome! I am all in favor of helping all of us!
Feb 05, 2008 06:13 AM #7
Rainmaker
307,391
Vanessa Stalets
RE/MAX Elite - Brentwood, TN
REALTOR, Brentwood TN Homes, Real Estate
Larry- As am I! As you know the Brentwood, Franklin and Williamson market are generally and historically stable. Nashville just had their 4th best year! Everyone come to TN!
Feb 05, 2008 06:15 AM #8
Rainmaker
307,391
Vanessa Stalets
RE/MAX Elite - Brentwood, TN
REALTOR, Brentwood TN Homes, Real Estate
Danny- My pleasure, thank you so much for reading and commenting! :.)
Feb 05, 2008 06:15 AM #9
Rainmaker
307,391
Vanessa Stalets
RE/MAX Elite - Brentwood, TN
REALTOR, Brentwood TN Homes, Real Estate
Elizabeth- Drive 'em on in I say! We are ready!
Feb 05, 2008 06:16 AM #10
Rainmaker
307,391
Vanessa Stalets
RE/MAX Elite - Brentwood, TN
REALTOR, Brentwood TN Homes, Real Estate
Karen- I always love your confidence! I too am looking for an upswing...Thanks for reading!
Feb 05, 2008 06:17 AM #11
Rainmaker
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Vanessa Stalets
RE/MAX Elite - Brentwood, TN
REALTOR, Brentwood TN Homes, Real Estate
Michael- Good to hear! You are a great inspector and I suspect you will get busier still..
Feb 05, 2008 06:18 AM #12
Ambassador
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Deb Brooks
Brooks Prime Properties Wichita Falls Texas - Wichita Falls, TX

Vanessa, very impressive and thorough report. Do have your crystal ball handy? What's your guess for the future...say about 18 to 24 months from now? Okay, guess. I'm counting on you.

Deb

Feb 05, 2008 02:09 PM #13
Rainmaker
215,251
The Brewer Team - Benchmark Realty
Benchmark Realty - Franklin, TN
Vanessa - You may have noticed that I've decided to be a Franklin realtor instead of Spring Hill. Nothing wrong with Spring Hill, I just want to compete with the big dogs.
Feb 05, 2008 02:27 PM #14
Rainmaker
307,391
Vanessa Stalets
RE/MAX Elite - Brentwood, TN
REALTOR, Brentwood TN Homes, Real Estate
Deb- Guestimates will get ya killed around here...lol  well of course evrything that goes down comes back up again..we are doing ok still and forsee it getting better. There you go, out on a limb..
Feb 06, 2008 12:27 PM #15
Rainmaker
307,391
Vanessa Stalets
RE/MAX Elite - Brentwood, TN
REALTOR, Brentwood TN Homes, Real Estate
Elizabeth- Great move! Go get'em!
Feb 06, 2008 12:27 PM #16
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