20071208 - Avg Rates Down - Look out next week!

30 yr – 5.96% w/ 0.4% in fees. DOWN from 6.10%. 1 yr ago - 6.11%
15 yr – 5.65% w/ 0.5% in fees. DOWN from 5.73%. 1 yr ago – 5.84%
5/1 ARM – 5.75% w/ 0.5% in fees. DOWN from 5.86%. 1 yr ago – 5.95%
1 yr ARM - 5.46% w/ 0.6% in fees. SAME. 1 yr ago – 5.43%
(Average mortgage rates according to Freddie Mac’s Primary Mortgage Market Survey®, as of 12-6-07)

Note: These rates should be used for trend line analysis only, NOT for comparison shopping. Your rate will vary depending on multiple factors. In general, this simply helps demonstrate which direction mortgage rates have moved from week to week.

Summary: On average, mortgage rates followed the trend of US Treasuries and fell as weaker economic reports were released this week. Lower consumer spending and personal income for October were the notable items. Keep in mind though, these averages DO NOT include the last few days of the week, which included the big employment report for November, which is very often a market moving report. Rates did indeed increase on Friday however, as employment remained strong.

Employment: Non farm payroll employment continued to trend up in November (94,000), and the unemployment rate held at 4.7 percent. Job growth continued in professional and technical services, health care, and food services. Employment continued to decline in manufacturing and also fell in several housing-related industries, including construction, credit inter mediation, and real estate. Average hourly earnings rose by 8 cents over the month.

Worker Productivity: Worker productivity rose by an annual rate of 6.3 percent in Q3’07, the most since 2003, while labor costs fell 2.0 percent. Greater efficiencies and lower costs ease pressures for companies to raise prices and help keep wage inflation from expanding into the market. This is turn allows The Fed to feel better about lowering short-term rates because it could be argued that inflation is not a big risk. Inflation can often result when The Fed lowers rates, which results in more cash into the marketplace. More money chasing the same goods is an economic 101 recipe for inflation (i.e. rising prices). Currently, the futures markets have predicted an almost 100% chance that The Fed will lower rates in its December 11th meeting.

Outlook: Average rates will likely increase next week as the strong employment report boosted mortgage rates on Friday. Next week will feature reports on wholesale and consumer inflation, retail sales and balance of trade.

Thought of the Week: “If you can dream it, then you can achieve it.” Zig Ziglar