Monday, February 25, 2008

Finance Market Update-Wk of February 25, 2008, Brentwood TN Real Estate

Brentwood TN Real Estate

Mortgage bond prices fell last week pushing mortgage interest rates higher. Stock strength the beginning of the week hurt mortgage bonds. Stronger than expected inflation data also pressured bonds. Inflation erodes the value of money received in the future. Bond investors require a higher rate of return as inflation rises. Fortunately bonds bounced back erasing some of the earlier losses towards the end of the week with some stock weakness Thursday afternoon and a significantly weak Philadelphia Fed survey. For the week, interest rates on government and conventional loans rose by 3/8 of a discount point.

The gross domestic product data Thursday will be the most important event this week. Producer price index, consumer confidence, durable goods, new home sales, income, outlays, and sentiment data also have the real potential to cause mortgage interest rate volatility.

Economic Factors

Economic Indicator Release Date Time Consensus Estimate Analysis
Existing Home Sales Monday, Feb. 25, 2008 Down 1.8% Low importance. An indication of mortgage credit demand. A significant decrease may lead to lower rates.
Producer Price Index Tuesday, Feb. 26, 2008 Up 0.4%, Core up 0.2% Important. An indication of inflationary pressures at the producer level. Lower figures may lead to lower rates.
Consumer Confidence Tuesday, Feb. 26, 2008 83.0 Important. An indication of consumers' willingness to spend. Weakness may lead to lower mortgage rates.
Durable Goods Orders Wednesday, Feb. 27, 2008 Down 3.5% Important. An indication of the demand for "big ticket" items. Weakness may lead to lower rates.
New Home Sales Wednesday, Feb. 27, 2008 Down 0.6% Important. An indication of economic strength and credit demand. Weakness may lead to lower rates.
Preliminary Q4 GDP Thursday, Feb. 28, 2008 Up 0.7% Very important. The aggregate measure of US economic production. Weakness may lead to lower rates.
Personal Income and Outlays Friday, Feb. 29, 2008 Up 0.2%, Core up 0.2% Important. A measure of consumers' ability to spend. Weakness may lead to lower mortgage rates.
U of Michigan Consumer Sentiment Friday, Feb. 29, 2008 None Important. An indication of consumers' willingness to spend. Weakness may lead to lower mortgage rates.

Preliminary GDP

The Gross Domestic Product (GDP) is one the most important reports during any given quarter. GDP is a measure of US economic output and spending. The report is significant in that it provides investors, analysts, traders, and economists with a comprehensive report of the direction of the economy. In addition, it also influences the decisions of Federal Reserve policy makers, Congressional budget employees, and corporate financial planners.
GDP is the sum total of goods and services produced by the United States. The initial report is often based on incomplete data. Therefore, additional revisions are released over the following two months. There are often substantial differences between the initial release and the revisions. The mortgage-backed security market generally responds favorably to weaker GDP growth.
The preliminary fourth quarter gross domestic product data this week has the potential to move mortgage interest rates. A cautious approach is necessary to protect against market volatility*Information courtesy Tonya Esquibel, WR Starkey Mortgage, Franklin TN*

Vanessa Stalets
Brentwood TN Real Estate
RE/MAX Elite

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