Weekly Mortgage Review
November 5, 2008
Last Week
Although the US economy has been widely speculated to already be in a recession, the first hard core signs appeared in this morning’s 3rd Quarter Advance GDP. The textbook definition of a recession is two consecutive quarters of negative GDP…and this morning’s report showed the economy contracting at a -0.3% annualized rate, as consumer spending declined at the fastest pace in 28 years. This report reflects the largest quarterly decline since the end of the last recession in 2001, and comes on the heels of a 2.8% rise in the 2nd Quarter. One positive – the reading was actually better than expectations of -0.5%.
As expected, the Fed cut the Fed Funds Rate by .50%, lowering it to 1.00%. The Fed statement really discounted inflation threats and said that the slowing economic growth should lower inflation pressures over time, but added that downside risks to economic growth remain. And seeing today’s negative GDP reading is confirmation that things have slowed quite a bit. Initially, both Stocks and Bonds had little reaction to the Fed cut, but as we have seen so many times before, Mortgage Bonds finally started to sell off and eventually finished lower on the day.
Stocks, which usually perform better following rate cuts, are trading higher after Wednesday’s modest losses. Stocks around the globe are also trading higher at the moment, as several foreign central banks followed the Fed’s lead, with Hong Kong cutting their lending rate by .50%, while Taiwan cut by .25%. The cuts by other nations are helping to stabilize the US Dollar, which typically loses ground after our Fed cuts rates, because of the lower yield offered comparatively offered in the US. And since oil is Dollar denominated, the price per barrel typically jumps after our Fed cuts rates, because of the decline in the value of the Dollar. This artificially cheapens oil, therefore causing oil prices to rise to balance the drop in the Dollar’s value. Wednesday, oil prices jumped by $4/barrel after the Fed cut, but are back down $2 today after the move by other foreign central banks to cut rates, which has helped the Dollar stabilize again.
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This Week
The votes are in and counted. Barack Obama has been elected as the 44th President of the United States, winning both the majority and popular vote. President-Elect Obama will have an arduous task ahead of him as his administration tries to deal with current economic conditions.
Mortgage Bonds are following through on yesterday’s huge rally, and are getting an additional boost from today’s weak ADP Employment Report. ADP reported that there were 157,000 jobs lost in October, the most in 6 years and was larger than the 100,000 job losses that were expected. Job terminations were widespread, hitting automakers, financial and housing related, retailers and other service sectors. Friday’s official Jobs Report is expected to show a loss of 200,000 jobs last month.
Coming Up
Friday November 7, 2008 Jobs Report
Tuesday December 16 2008 Federal Reserve Open Market Meeting
Ben Black
Vice President/Mortgage Loan Officer
Bank of America Mortgage
1960 Riviera Drive, Suite A
Mount Pleasant, SC 29464
843.216.7377
866.517.4161 Fax
843.345.2266 Cell
800.405.8221 ext 5
benjamin.black@bankofamerica.com Email
http://mortgage.bankofamerica.com/benjaminblack Website
Contact Ben Black to find out the latest rates!!!
Call me regarding any real estate questions you may have-Linda Gordon (843)324-3476
