Mortgage Market Update - Provided by Virna Brown of GreenPark Mortgage

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Virna Brown GreenPark Mortgage
Senior Mortgage Consultant
34 Harold K. Waterson Lane
North Attleboro, MA 02760
Phone: (508) 369-6988
Mobile: (508) 369-6988
Fax: (508) 256-5550

For the week of November 8, 2010 – Vol. 8, Issue 45

>> Market Update

INFO THAT HITS US WHERE WE LIVE Last Friday the National Association of Realtors (NAR) reported that their gauge of Pending Home Sales dropped 1.8% in September from an upwardly revised August reading. The pending sales index reflects signed contracts. Since it typically takes a few months to get from contract to closing, this reading forecasts actual existing home sales toward the end of this year.

The NAR's chief economist made an insightful point: "We've added 30 million people to the U.S. population over the past ten years, but sales are where they were in 2000, so there appears to be a sizable pent-up demand that could come to the market once the economy gathers momentum." Other analysts commented that "decade low mortgage rates and near record highs in affordability should help stabilize sales in the near term, however it will take meaningful improvement in the labor market to drive housing going forward."

>> Review of Last Week

UP WE GO AGAIN... Stock market investors pushed the Dow UP to its highest level since September 8, 2008, which was just before the economy headed south. In fact, all the major market indexes registered two year highs last week, as Wall Street reacted to the midterm elections on Tuesday, the Federal Reserve's announcement on Wednesday, and the October Jobs report on Friday.

The week began on a bit of a sour note, with September Personal Income down 0.1% and Personal Spending up only 0.2%, both missing expectations. But consumer inflation was up just 0.1% for the month and up 1.4% over a year ago. Core inflation, excluding food and energy, was up only 1.2% from a year ago, well within Fed guidelines. October ISM Manufacturing and ISM Services indexes were both UP, beating expectations and showing business growth.

Tuesday's election results were expected, with Republicans taking the House and Democrats keeping control of the Senate despite losing six seats to Republicans. Wednesday the Fed announced their second round of quantitative easing (QE 2). The Fed will be purchasing $600 billion in long-term Treasury securities from now till the middle of next year to help further stimulate the economy. The big upside surprise was Friday's employment report. 151,000 new jobs were created in October, versus the mere 60,000 expected. The private payroll gain was 159,000, which puts the private sector up by more than 100,000 jobs for each of the last four months. Unfortunately, the workforce increase kept the unemployment rate at 9.6%.

For the week, the Dow was UP 2.9%, to 11444.08; the S&P 500 ended UP 3.6%, at 1225.85; and the Nasdaq was UP 2.9%, to 2578.98.

It was a movable feast last week in the bond market, with prices moving up on the Fed's announcement, then pulling back with the unexpectedly positive jobs report. Nonetheless, the FNMA 30-year 4.0% bond we watch ended UP 17 basis points for the week, closing at $103.19.

According to Freddie Mac's weekly survey of conforming loans, national average rates for fixed-rate mortgages remain at historic lows, even lower than predicted for this time frame.

>> This Week’s Forecast

QUIET TIME... What a change from last week. No economic reports on Veteran's Day Thursday and the rest of the week is fairly sedate. Wednesday, we'll want to keep an eye on Initial Weekly and Continuing Unemployment Claims, although they're forecast to stay pretty much where they've been. This is still not at a level that will start reducing the Unemployment Rate, which is the good news we need for the housing recovery. The week will close out with preliminary November Michigan Consumer Sentiment, expected to rise just a bit.

>> 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 November 8 – November 12

Date Time (ET) Release For Consensus Prior Impact

Nov 10 08:30 Initial Unemployment Claims 11/6 450K 457K Moderate

Nov 10 08:30 Continuing Unemployment Claims 10/30 4.350M 4.340M Moderate

Nov 10 08:30 Trade Balance Sep –$45.0B –$46.3B Moderate

Nov 10 10:30 Crude Inventories 11/6 NA 1.95M Moderate

Nov 12 09:55 Univ. of Michigan Consumer Sentiment Nov 69.0 67.7 Moderate Federal Reserve Watch

Forecasting Federal Reserve policy changes in coming months The Fed has said their quantitative easing Treasury purchases can continue through the first half of 2011. So economists expect the Fed Funds Rate to stay at its rock bottom level during that time, unless inflation becomes a problem, which it hasn't up till now. Note: In the lower chart, a 1% probability of change is a 99% certainty the rate will stay the same.

Current Fed Funds Rate: 0%–0.25%

After FOMC meeting on: Consensus

Dec 14 0%–0.25%

Jan 26 0%–0.25%

Mar 15 0%–0.25%

Probability of change from current policy:

After FOMC meeting on: Consensus

Dec 14 <1%

Jan 26 <1%

Mar 15 <1%

This e-mail is an advertisement for Virna Brown. The material provided is for informational and educational purposes only and should not be construed as investment and/or mortgage advice, or a commitment to lend. Although the material is deemed to be accurate and reliable, there is no guarantee of its accuracy. The material contained in the newsletter is the property of Greenpark Mortgage Company and cannot be reproduced for any use without prior written consent. It is designed for real estate and other financial professionals only. It is not intended for consumer distribution. The material does not represent the opinion of Greenpark Mortgage Company.

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