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Builders lead the way in energy efficient housing

Apr 23, 2008

The Mortgage Press Gauge: May 2008 Part IMortgagePress.comIndustry Statistics, Market Watch, Consumer Habits, Industry Trends Provided exclusively to The Mortgage Press by David Beadle, president of BestInfo Inc., the BestRates cell, pager and e-mail rate alert service for mortgage industry subscribers. Send your inquiry to [email protected] for full details on a free two-week trial subscription. A reading of "1" has the lowest impact on rates, while "10" has the highest. Although carefully verified, data are not guaranteed as to accuracy or completeness. BestInfo Inc. cannot be held responsible for any direct or incidental loss or liability incurred by applying any of the information or opinions in this feature. May 2 April Employment Rate Impact: 10 In the wake of the dramatic 80,000 decline in March non-farm payrolls reported on April 4, along with the rise in the unemployment rate to 5.1 percent, traders will be focused on whether or not the job-loss process accelerated in April or reversed direction. Put another way, is the widely presumed recession about to intensify? There's a camp which says things will get better for awhile and then reverse once again, creating the first "double-dip" recession since the early 1980s. The one piece of good news in the first half of April was the fact a steep rise in first-time claims for weekly state unemployment benefits reversed itself. The question is if the weekly claims data are in synch with the monthly employer and household surveys. Of secondary importance to the Federal Reserve in today's release will be the average hourly wage. It has remained contained as employees find it challenging to ask for a raise despite the current inflationary environment. May 5 April Services Rate Impact: 8 The service side of the economy is 80 percent of the total. In early April, we were informed the sector was hovering near the "50" dividing line between economic expansion and contraction during March with a result almost identical to the one in February. The low point occurred in January with a plunge to 44 from December's 53. Thus, there is hope the Federal Reserve will have been correct (in retrospect) when it says the economy was weak during the first half of this year with a recovery in the second half. In fact, the entire financial system is banking on such a prediction coming true because to believe otherwise would indicate a protracted downturn with more nasty surprises for Wall Street as well as Main Street, not to mention the U.S. Treasury and taxpayers. May 13 April Retail Sales Rate Impact: 9 Analysts were somewhat surprised when the March results were slightly above unchanged. Many had been expecting a flat to negative reading. But an early Easter helped as did the resilience of the American consumer in the face of the daunting rise in food and energy prices. Also assisting was foreign buying of U.S. goods during tourist shopping sprees to both the East and West coasts as well as the northern border states. After all, it only took 63 euro cents recently to purchase one American dollar, thereby creating an "instant" 37 percent off discount. The currency mismatch helped many high-end retailers enjoy brisk sales results. And it also appeared to assist our stock and bond markets thanks to continued foreign investment. Of course, the big problem is the price of oil and how that translates into higher consumer fuel prices. But since sales results are denominated in dollars rather than volume, higher inflation can make the figures look better than may actually be the case for many retailers. May 14 April Consumer Prices Rate Impact: 7 The Federal Reserve has been so preoccupied with rescuing the national economy from the abyss that it spent a lot of time during the first three months of this year dismissing inflation as an afterthought. The idea was that if the problem were ignored, it would simply go away due to a decelerating gross domestic product. When the overall rate of inflation rose, the Fed said it was important to concentrate on the core rate excluding food and energy. When the core rate rose, the Fed said it was transitory and would subside. When the core rate kept rising, the Fed said the safety and soundness of the financial system was paramount. However, there have been hints from Federal Open Market Committee meeting minutes that when the credit crunch eases, the FOMC may move aggressively to hike rates back toward the previous level of 5.25 percent. That will come as welcome news to savers (including retirees) who have been punished by precipitous interest rate declines. But before the Fed reverses course, it is more important than ever for those with adjustable-rate mortgages to consider their next move carefully. The FOMC gave them a window of opportunity to switch to a fixed-rate mortgage. And that window may slam shut at any moment.
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