Daily Market Update 10/31/08

Mortgage rates improved Friday following an abundance of negative economic data. Consumer Spending fell 0.3% in September, the largest monthly decline in 4 years. Consumer Sentiment registered the largest drop in 30 years, and the Chicago Purchasing Managers Index fell to 37.8 in September from 56.7 in August, the largest monthly decline in the 40-year history of the index. Surprisingly, stocks were little changed and the dollar moved higher against the euro. A growing chorus of analysts are calling on the Federal Government to officially take over Fannie Mae and Freddie Mac. An explicit guarantee of their securities would likely push mortgage rates significantly lower, more in line with Treasuries. Stubbornly high mortgage rates have contributed to the current housing crisis by preventing bargain-hunting homebuyers from entering the market. Fixed rates of 5% or less would provide a much-needed stimulus for the housing industry. No decision is expected until after next week's election.

Daily Market Update 10/30/08

Mortgage rates moved slightly higher Thursday following this morning's release of preliminary third quarter GDP figures. According to the data, the economy contracted 0.3% in the three months ending September 30. Although this was the first negative reading since 2002, traders had anticipated an even larger contraction. Stocks initially moved higher on the announcement. Later, gains were pared as analysts focused on a troubling component of the report, a 3.1% annual drop in consumer spending, the first decline since 1991. A significant reduction in spending could result in a far deeper and more sustained economic downturn. On a more positive note, the recent freeze in credit markets showed signs of easing, as the market for commercial paper expanded for the first time in seven weeks.

Daily Market Update 10/29/08

Mortgage rates were little changed Wednesday ahead of today's Federal Open Market Committee decision regarding short term interest rates. The Fed is widely expected to cut the Fed Funds rate from 1.50% to 1.00%. Their announcement will be made at 2:15 PM et. Mortgage rates have risen in the past week as many investment funds have been forced to sell mortgage-backed securities to reduce their leverage and raise capital. Under normal market conditions, the vast majority of significant rate movements are the result of economic news. The fundamental economic data clearly supports lower rates, but until the market stabilizes, unusual volatility and upward pressure on mortgage rates will continue.

Daily Market Update 10/28/08

Rates inched higher Tuesday as mortgage-backed securities markets remained extremely volatile. Mortgage rates have increased by about 3/4% since last Wednesday, driven by the continued liquidation of investments by hedge funds and financial institutions. In economic news, Consumer Confidence fell to its lowest reading on record in October, far below consensus. Rate volatility is likely to continue throughout the week with key economic data being released each day starting Wednesday plus tomorrow's meeting of the Federal Open Market Committee of the Federal Reserve.

Daily Market Update 10/27/08

Rates were little changed Monday as traders looked ahead to a flurry of economic news later this week. The Federal Open Market Committee (FOMC) of the Federal Reserve meets Wednesday to determine short term interest rate policy. Many analysts are expecting a 1/2% cut in the Fed Funds rate. Durable Goods Orders will also be released Wednesday. Advanced third quarter GDP will be released Thursday and is expected to show a 0.1% decline in economic growth for the period. Rounding out the week will be Friday's release of the Chicago Purchasing Managers Index. In other economic news, New Home Sales rose 2.7% last month, propelled by lower home prices. Stocks were modestly lower.

Daily Market Update 10/24/08

Mortgage-backed securities moved in opposite directions with Treasuries again Friday as nervous investors sought to minimize risk. Mortgage rates inched higher while Treasury rates dropped. Global stock markets plummeted on growing economic fears. Existing Home Sales rose unexpectedly last month by 5.5% as lower prices attracted more buyers. Oil prices fell to $64 per barrel in spite of an announced 5% production cutback by OPEC. The dollar moved higher.

Daily Market Update 10/23/08

Mortgage rates inched higher Thursday after falling steadily over the past week. Weekly Jobless Claims came in at 478K, slightly higher than expected. FDIC chief Sheila Bair announced guarantees to encourage loan modifications by servicers in an effort to prevent "avoidable" foreclosures. Stocks moved higher. The Federal Reserve Open Market Committee (FOMC) meets next Wednesday and is expected to lower the Fed Funds Rate by 1/4%.