Events This Week:

Employment Fell

Pending Sales Lower

Productivity Rose

Manufacturing Down

________________________________

Events Next Week:

Thur 11/13
Trade Balance

Fri 11/14
Retail Sales
Import Prices
Sentiment

Economic Weakness Improves Rates

With few surprises in the election results, investors focused on the prospects for the economy. The outlook for economic growth moved progressively lower during the week, and Friday's weak Employment data reinforced this view. The reports on manufacturing, construction, and factory orders released this week showed declines as well. A sluggish economy is generally consistent with reduced inflationary pressures and is favorable for mortgage rates, and rates moved lower each day from Monday through Thursday.

Friday's mortgage market reaction to the weaker than expected Employment report appeared to be counterintuitive, as mortgage rates rose a little after the news, offsetting some of the rate improvement seen earlier in the week. The explanation is that the jobs data was so bad that investors now expect that another economic stimulus package will be implemented soon. The government will need to issue even more debt to pay for a stimulus package, and mortgage investors pushed rates higher on Friday on concerns about the added supply of debt.

As expected, the Employment report reflected weakness in the labor market. The economy lost -240K jobs in October, and the figures for August and September were revised lower as well. This marked ten straight months of job losses in 2008, bringing the total decline in jobs to 1.18 million so far this year. The manufacturing and construction sectors continued to show weakness.

Many Lenders have issued new guideline changes for those requiring Mortgage Insurance in lieu of 20% down. The greatest restrictions are on condominium projects with owner-occupancy below 70%. If you have a transaction that involves a condominium and mortgage insurance, it will need to close before December 1st in order to follow the old guidelines.
Please feel free to call me if you require more information.

The Federal Housing Finance Agency released late today new loan limits for 2009. For the first time certain metro areas of Hawaii have a different maximum loan limits. Honolulu is the highest at $721,050.
Kapaa on Kauai is now at $713,000, and Kahului & Wailuku are at $626,750. All other areas of Hawaii remain at $625,500. These limits are for conforming loans and not the loan limits for the High Balance conforming loans referenced here two weeks ago. The loan limits for the High Balance loans for Hawaii in 2009 will be $938,250.

Also Notable:

* The Unemployment Rate jumped to 6.5% from 6.1% in September
* Following a 7.5% increase last month, September Pending Home
Sales fell -4.6%
* The European Central Bank (ECB) cut rates by one half point, as
expected
* Oil prices fell as low as $60 per barrel, down from $147 per
barrel in July

Hawaii Mortgage Base Rates for the Week Ending 11/7/08

Average 30 yr fixed rate:

Last week:

+0.48%

This week:

-0.49%

Stocks (weekly):

Dow:

8,943.81

-393.12

NASDAQ:

1,647.40

-73.55

Week Ahead

The Economic Calendar will be much lighter next week. Friday's Retail Sales report will be the only major economic data next week. Consumers account for about 70% of economic activity, and the Retail Sales report is a major indicator of spending levels by consumers. Import Prices and Consumer Sentiment will also be released on Friday. Other than that, the only report will be the Trade Balance on Thursday. There will be Treasury auctions on Wednesday and Thursday. Mortgage markets will close early on Monday and will be closed on Tuesday in observance of Veterans Day.