Marina's Blog

TUESDAY AFTERNOON UPDATE:

Tuesday, December 16, 2008

Today's FOMC meeting has adjourned with an announcement of a .750 cut to key short-term interest rates. This brings the benchmark Fed Funds rate to a record low of .250%. The post meeting statement also indicated that rates will likely remain that low for some time. They noted that the economy could get weaker and that the threat of inflation had eased "appreciably."

The reaction in the markets was favorable for stocks and bonds. The Dow closed up 360 points while the Nasdaq closed up 81 points. Despite those gains, the bond market did well also, currently up 47/32, which will likely improve this afternoon's mortgage rates by approximately .375 of a discount point.

The Labor Department gave us this week's most important economic news with the release of November's Consumer Price Index (CPI). They reported that the overall index reading fell 1.7% last month. This was a larger drop than was expected and the lar gest monthly decline since February 1947, indicating that prices for energy are still falling rapidly. The core data reading, that excludes volatile food and energy prices, was unchanged last month. Analysts were expecting to see a slight increase in the core reading. This means that prices at the consumer level of the economy were lower than expected, which is good news for bonds and mortgage rates because falling prices means inflation is not really a threat.

November's Housing Starts was also posted this morning and also showed a record low. It revealed a decline in starts of new homes of nearly 19% and a drop of 15% in permits for new construction starts. This means that the housing sector is still weakening and appears to be well off a "bottom" that people are trying to predict.

There is no relevant economic news scheduled for release tomorrow, so look for today's events to carry into tomorrow's trading. The next piece of relevant economic da ta will be November's Leading Economic Indicators (LEI) late Thursday morning.

If I were considering financing/refinancing a home, I would.... Lock if my closing was taking place within 7 days... Float if my closing was taking place between 8 and 20 days... Float if my closing was taking place between 21 and 60 days... Float if my closing was taking place over 60 days from now... This is only my opinion of what I would do if I were financing a home. It is only an opinion and cannot be guaranteed to be in the best interest of all/any other borrowers.