Finance Market Update - Week of February 18, 2008

By
Real Estate Agent with RE/MAX Elite

Brentwood TN Real Estate

Mortgage bond prices fell last week pushing mortgage interest rates significantly higher. Stock strength the beginning of the week hurt mortgage bonds. Stronger than expected retail sales, shocked the market. The weakness was compounded as investor concerns about exposure to mortgage bond risk grew. Fed Chairman Bernanke expressed concerns about economic growth but his remarks did little to help mortgage bonds.

For the week, interest rates on government and conventional loans rose by about 1 and 3/4 of a discount point.

The consumer price index data Wednesday will be the most important event this week. The Fed minutes, housing starts, and leading economic indicators also have the real potential to cause mortgage interest rate volatility. Be cautious Tuesday as trading resumes following the holiday.

Economic Factors

Economic Indicator Release Date Time Consensus Estimate Analysis Presidents Day Monday, Feb. 18, 2008 None  Important. Shortened trading week may lead to mortgage interest rate volatility as trading resumes.

Consumer Price Index Wednesday, Feb. 20, 2008 Up 0.3%, Core up 0.2%  Important. A measure of inflation at the consumer level. Lower than expected increases may lead to lower rates.

Housing Starts Wednesday, Feb. 20, 2008 Down 0.5%  Important. A measure of housing sector strength. Larger than expected decreases may lead to lower rates. 

Fed Minutes Wednesday, Feb. 20, 2008 None  Important. Details of the last Fed meeting will be thoroughly analyzed. 

Leading Economic Indicators Thursday, Feb. 21, 2008 Down 0.1%  Important. An indication of future economic activity. Weakness may lead to lower rates. 

Philadelphia Fed Survey Thursday, Feb. 21, 2008 None  Moderately important. A survey of business conditions in the Northeast. Weakness may lead to lower rates. 

HR 5140

President Bush signed into law last week a $152 billion economic stimulus bill that will temporarily allow Fannie Mae, Freddie Mac, and the Federal Housing Administration to guarantee mortgages as large as $729,750 in some high-cost markets.

HR 5140, the Economic Stimulus Act of 2008, raises the conforming loan limit for mortgages eligible for purchase or guarantee by Fannie and Freddie to 125 percent of the median home price in high-cost areas, not to exceed $729,750. In areas not designated as high-cost markets, the conforming loan limit will remain $417,000.

The stimulus bill also increases the upper limit for FHA loan guarantee programs in high-cost markets -- currently $372,790 -- to 125 percent of the median home price, with an upper limit of $729,750. The upper limit for FHA-backed mortgages in "normal" housing markets will be increased from $200,160 to $271,050.

Federal regulators have said it will take longer for Fannie and Freddie to draft new credit guidelines and update their systems to evaluate what are now considered "jumbo" loans. The task is complicated by the fact that the new loan limits for high-cost areas will vary according to the median home price in a given county or metropolitan statistical area (MSA).

While HR 5140 is an effort to help the struggling housing market, there is no guarantee investors will accept the jumbo loans backed by Fannie and Freddie. If investors don't purchase the larger loans after they are securitized, that would limit the benefits to the secondary mortgage market and do less to ease the credit crunch than backers of the move have hoped. Mortgage interest rates remain volatile amid all the uncertainty.
* Information Courtesy Tonya Esquibel, WR Starkey Mortgage, Franklin TN*

Vanessa Stalets

Brentwood TN Real Estate

RE/MAX Elite
615-957-6333
615-661-4400

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Rainer
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Danny Thornton
R & D Art - Knoxville, TN
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Vanessa, some great information here. Thanks for sharing it with us.

Also, on another note, great t finally put a voice with a picture. 

Feb 18, 2008 06:58 AM #1
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Karen Kruschka
RE/MAX Executives - Woodbridge, VA
- "My Experience Isn't Expensive - It's PRICELESS"
I can hardly wait for this to all shake out so the overall market will settle down and buyers will stop being so squeamish and uncertain,  Karen
Feb 19, 2008 08:37 AM #2
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Vanessa Stalets
RE/MAX Elite - Brentwood, TN
REALTOR, Brentwood TN Homes, Real Estate
Danny- Thanks! It was great talking with you!
Feb 19, 2008 09:54 PM #3
Rainmaker
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Vanessa Stalets
RE/MAX Elite - Brentwood, TN
REALTOR, Brentwood TN Homes, Real Estate
Karen- I am right there with you, may be a while yet...
Feb 19, 2008 09:55 PM #4
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Vanessa Stalets

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