The week in review
Friday March 21st, 2008 - 5:21:12 am
Dan Reddell Email




Ramie Manderscheid
Scenic Coast Sales Representative
rmanderscheid@fnf.com
Office: 805.771.1920
Cell: 805.235.4411

FIDELITY NATIONAL TITLE
780 Monterey Avenue, # A
Morro Bay, CA 93442






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Volume 14, Number 11 Economic Highlights for the Week Ending March 21, 2008


MONDAY, March 17th
The NAHB housing market index was unchanged at a level of 20 in March. Builders’ ratings of current single-family home sales were unchanged while ratings of sales six months from now fell a point. Foot traffic through model homes was stable. Home builders are pessimistic about the housing market but at least the deterioration in sentiment has stopped for now, signaling perhaps that the bottom has been reached.
The Fed continued its campaign to increase liquidity in financial markets over the weekend, by making funds available to securities dealers to borrow like they do the banks, and lowering the overnight rate that they charge for borrowing from the discount window. The Fed dropped the discount rate by 25 basis points to 3.25% Sunday. These actions, combined with earlier liquidity programs, the Term Auction Facility (TAF started in December) and now the Term Securities Lending Facility (TSLF will begin on March 27) were taken to stem further fallout from the credit market crisis.

TUESDAY, March 18th
The producer price index climbed 0.3% in February less than an expected increase of 0.4%. The PPI has increased 6.8% over the past year, one of the fastest paces over the past 25 years. The core PPI which excludes food and energy prices shot 0.5% higher to gain 2.5% in the last year, higher than the Fed’s implicit target for core inflation.
Housing starts fell 0.6% in February to an annual rate of 1.065 million from an upwardly revised pace of 1.071 million in January. While better than expected in the last two months, total housing starts have declined 28.4% over the last year. Gains in multifamily starts continue to offset weakness in the single-family sector.
The FOMC cut key rates by 75 basis points at their policy meeting today. The fed funds rate now stands at 2.25%, its lowest rate since December 2004. The discount rate was also cut by the same amount to 2.50%. Under financial market turmoil and economic contraction, the Fed has abandoned a gradualist approach to monetary policy, cutting the fed funds rate by 300 basis points over the last six months. The policy statement cited softer consumer spending and job growth, tighter credit and the housing downturn as reasons for the large, simulative cuts. The Fed also warned that inflation expectations have risen, but noted that they expect inflation to ease under slower economic growth. The Fed has room to cut further as is deemed necessary to promote moderate growth over time and price stability.

WEDNESDAY, March 19th
The MBA mortgage applications index fell 2.9% to 652.0% for the week ending March 14. The purchase index slipped 1.0% on the week while the refinance index fell 4.6%. Refinance applications accounted for 49.7% of total applications. Mortgage application activity continues to reflect tighter credit standards and interest rate volatility.
The Office of Federal Housing Enterprise Oversight (OFHEO) said today that it would reduce the capital Fannie Mae and Freddie Mac must hold in reserve. The rule change lowers capital requirements for the two mortgage finance giants to 20% from 30% currently. The move should free up $200 billion in immediate liquidity in the mortgage-backed securities market.

THURSDAY, March 20th
Long term mortgage rates fell sharply in the past week as the Federal Reserve cut rates to stimulate the economy and increased liquidity to shore up financial markets. 30-year fixed rates averaged 5.87% this week compared to 6.13% last week according to Freddie Mac’s mortgage market survey.
Jobless claims jumped 22k to 378k for the week ending March 15. The elevated level of claims is consistent with weaker labor market conditions, an accelerated pace of layoffs and sluggish hiring. These data portend another dismal employment report, due out on April 4.

FRIDAY, March 21st
GOOD FRIDAY
All Markets Closed


Stock Market Close for the Week
Index Latest A Week Ago Change
DJIA 12361.32 11951.09 +410.23 or +3.43%
NASDAQ 2258.11 2212.49 +45.62 or +2.06%



WEEK IN ADVANCE
The housing market remains central to the interest rate and economic outlook. New and existing home sales in the week ahead provide the most comprehensive look inside the market.
Key Interest Rates Latest 6 Mos Ago 1 Yr Ago
Prime Rate 5.25 8.11 8.25
Fed Discount 2.50 5.61 6.25
Fed Funds 2.25 5.12 5.25
11th District COF 3.970 4.277 4.392
10-Year Note 3.33 4.57 4.58
30-Year Treasury Bond 4.17 4.83 4.74
30-Yr Fixed (FHLMC) 5.87 6.34 6.16
15-Yr Fixed (FHLMC) 5.27 5.98 5.90
1-Yr Adj (FHLMC) 5.15 5.65 5.40
6-Mo Libor (FNMA) 2.93125 5.53500 5.3212
Sources: IBC' s Money Fund Report; Bank Rate Monitor; Federal Home Loan Bank of San Francisco








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