News for January 29th 2008

For current rates http://www.youtube.com/watch?v=s0iiiSoGbZ4&feature=channel_page

Mortgage Market Minute: We are backing off a bit this morning with the FNMA 4.0% MBS down -.19 to 99.75, and the 4.5% MBS down -.16 to 101.03. The 5.0% MBS is also down, -0.125 to 101.875. Later we should get a recap of this week’s Fed buying activity. Friday we get an advance look at GDP (expect -5%), the Chicago Manufacturing Index (expect 33.0), and Consumer Sentiment (expect 62.0).House passes Obama’s $819B stimulus plan – now goes to the Senate. The House of Representatives passed Barack Obama's $819B stimulus plan Wednesday night, at the urging of the new President. Before the vote, Obama spoke to leaders, calling the crisis a “perilous moment” and saying "We don't have a moment to spare." Billions will go towards welfare, food stamps, unemployment benefits, infrastructure, healthcare, schools, energy projects, and research. The two-year spending plan includes some tax cuts, though less than Republicans wanted. Republicans spoke out against aspects of Obama's plan today, calling it "wasteful spending" and proposed a plan that would cost half as much and create 6.2 million jobs - more than double the job creation in Obama's proposal. Many of them feel that Obama’s team used inflated and untested multipliers when computing the number of jobs expected from an unprecedented level of government spending. Along similar lines, Goldman Sachs economists said the stimulus bill "is a major step in the right direction," but that the package is too small to be sufficient, inferring that a larger amount of spending would be needed to actually accomplish the stated objectives. The White house wants to spend 75% of the money in the first 18 months, however the CBO (Congressional Budget Office) believes that it will take much longer. The plan’s tax cuts would have a more near-term effect than long-term infrastructure spending. The government wouldn't be able to spend at least one-fourth plan until after 2010, according to a preliminary report by the Congressional Business Office that suggests it may take longer than expected to boost the economy.

Mortgage rates remain stable (nice and low).This morning, Freddie Mac in it’s Primary Mortgage Market Survey showed that the 30-year fixed-rate mortgage averaged 5.10% and 0.7 point during the week ended January 29. A week earlier the average was 5.12%, also and 0.7 point. The 15-year fixed remained unchanged from the average of 4.80% and 0.7 point during the week ended on January 22. Five-year Treasury-indexed hybrid ARMs averaged 5.27% and 0.6 point during the week, up slightly from 5.24% and 0.6 point the week before. The one-year Treasury-indexed ARM was down two basis points to 4.90%. "Mortgage rates held steady this week," said Frank Nothaft, Freddie Mac vice president and chief economist. "The index of leading indicators rose 0.3 percent in December, the first increase in 6 months, fueled by an expansion in the money supply.” New home sales fall more than expected, hit record lows.New home sales volume fell to an annualized pace of 331,000, representing a -14.7% decline from November, and more than expected, to their slowest pace on record, the Commerce Department reported Tuesday. The previous month's reading of 407,000 units was revised down to 388,000. Economists were expecting a 2.5% drop to 437,000. The median sale price fell to $206,500 down from $220,400 in November. Annually, prices have fallen -9.3%. Inventories rose to a pace of 12.9 months, up from an 11.5-month supply in November. In the West, the pace of sales fell to 71,000 in December from 89,000 in November, while sales in the Midwest fell to 51,000 from 54,000. Prior to the release, Mike Englund, chief U.S. economist from Action Economics, said it's still too early for markets to be looking for a bottom in housing sales. "Falling rates should have a beneficial effect as we approach the Spring housing season, and the period just prior to this, such as January or February, would be a more likely timing for a bottom than December."

On today’s date: January 29…1861: Kansas becomes 34th state1886: 1st successful gasoline-driven car patented, Karl Benz, Karlsruhe1920: Walt Disney starts 1st job as an artist; $40 week with Kansas City Slide Co.1924: Ice cream cone rolling machine patented by Carl Taylor, Cleveland1944: 285 German bombers attack London1951: Liz Taylor's 1st divorce, Conrad Hilton, Jr.1984: President Reagan formally announces he will seek a 2nd term1987: William J Casey, ends term as 13th director of CIA

The last word:“If you owe the bank $100 that's your problem. If you owe the bank $100 million, that's the bank's problem.”--J. Paul Getty.
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