THE BASIS POINT

WeeklyBasis 01/07/08: Issues To Watch In 1st Quarter

Glad to say that my first WeeklyBasis of 2008 is good news! Fixed and ARM rates are down .375% from pre-holiday levels, and it seems to be sticking because of continued recession signals implicit in recent economic data. The volatility I talked so much about in the 4Q2007 may return and make me eat those words, but to see rates to hold onto a .375% dip for even a week is a big deal lately. At least this week should be steady (in relative terms) since there’s not much in the way of data releases. But next week, we get the year’s first producer and consumer inflation readings, and we also get December retail sales. If you recall, I said the following in November: “I see August through December (the start of the credit blowup through the shopping season) as the most important short-term economic phase of the past five years, because it’s the first time since the housing boom really caught fire that consumers, who currently comprise 70% of US GDP, will be truly tested. The holiday shopping season will show how consumers make discretionary spending decisions knowing that they can’t just spend as much as they want and lean on increasing home equity to save the budget.”

Next week, we will see how markets react to the December consumer data, and this will set the tone for the Fed’s first 2008 rate policy meeting on January 30. I will be monitoring it as we go, and talking about all the other mortgage and housing issues in this critical year. The first quarter issues I will be watching are: ARM rate freeze, FNMA and FHA loan limits, and proposed lender/underwriting legislation. As always, I’ll try to do this in the context of what it means for clients. Looking forward to working with you this year, and best wishes to a happy, healthy year. Talk to you all soon…

Conforming ($200,000 – $417,000) – NO POINTS
30 Year: 5.75% (5.89% APR)
5/1 ARM: 5.75% (5.89% APR)
7/1 ARM: 6.625% (6.775% APR)

Jumbo ($417,001 – $650,000) – NO POINTS
30 Year: 6.875% (7.015% APR)
5/1 ARM: 6.375% (6.515% APR)
7/1 ARM: 6.375% (6.525% APR)