Greg Adelman

To all,

"KNOWLEDGE IS POWER." It's a phrase used by many, and last week was an important one to be in the know, as Bonds and home loan rates were affected by many big newsmakers and market shakers. Bonds and home loan rates found some improvement in the early part of the week, leading into the Fed's big announcement on Wednesday of another .25% cut to the Fed Funds Rate. Typically, Bonds and home loan rates react poorly to Fed cuts, due to the increase in economic activity that lower Fed rates can cause, which turns into higher inflation. However, the Fed's Policy Statement hinted that the present rate-cutting cycle may be nearing an end. As a result, Bonds and home loan rates reacted favorably to the Fed's action.

However, speaking of inflation, the Fed's most favored measure of it - the Core Personal Consumption Expenditure Index - arrived on Thursday, showing core inflation at 2.1%, just a whisker above the Fed's desired range for inflation of 1 to 2%. This read wasn't great news for inflation-sensitive Bonds...but the resulting market action was nothing, compared to what happened when the Jobs Report arrived on Friday morning.

Talk about a real mover and shaker...the Jobs Report brought word of 20,000 jobs lost in April, which was better than market expectations of 75,000 jobs lost. Initially, Stocks rallied higher and Bonds worsened dramatically, as the headlines were so much better than had been anticipated. But when the details of the report were unpacked, showing prior months worsening revisions - as well as a sobering realization that 20,000 jobs lost is still lousy news - the markets quickly reversed direction, helping Bonds and home loan rates improve once again. Another ultra volatile week - and when the dust settled, home loan rates improved by about .125% overall.

To all:

Fed Focus

The Fed has been walking a delicate line of trying to stimulate the economy without stoking inflation too much. Unfortunately the Fed is faced with continued signs of economic weakness amid rising price pressures. Most analysts believe the Fed's biggest worry is the stumbling economy and will therefore cut rates again this week by 25 basis points. People often hear that the Fed is cutting rates and believe that mortgage interest rates will follow suit. This is usually not the case in the short-term as recent history shows. Mortgage interest rates have spiked higher following most of the recent rate cuts.

Remember, the Fed cuts rates to spur the economy. This is usually seen as positive for stocks at the expense of bonds. While nothing is set in stone and reactions can vary, floating into the Fed meeting is risky. The Federal Reserve has direct control over the level of short-term interest rates. The Fed's influence over longer-term interest rates is less certain. A cautious approach to float/lock decisions is prudent heading into the Fed meeting this week.

There is a lot of movement out there in the market. Make sure that you and your customers are part of it. Good luck and have a good week!

contact us at www.midwesthomecenter.com

And there were some big changes indeed for Bonds and home loan rates last week - but not necessarily all in the "right direction". For most of the week, Bond prices were pummeled lower, causing home loan rates to rise - and even after a Friday afternoon rally, home loan rates worsened by about .25% for the week overall.

One silver lining...some of the abuse that Bonds took was at the hands of somewhat positive economic news. Remember that positive or strong economic news tends to benefit Stocks, which in turn can pull money out of Bonds - which causes Bond prices to worsen and home loan rates to rise. So when news hit of a far better than forecast Retail Sales Report and much better than expected earnings reports from giants like Google, the financial markets responded by flowing money over into Stocks, and right out of Bonds, causing home loan rates to rise.

Also hurting Bonds was inflation chatter during speeches made by several Federal Reserve Presidents, who vocalized their concerns over the persistence of inflation in the current economy. Additionally, the Producer Price Index showed wholesale inflation to be climbing higher, thanks to record high oil prices and a seventeen-year high on food prices. Because inflation erodes the value of the fixed return provided by a Bond, the scent of inflation in the air always causes Bond prices to decline, and as a result, home loan rates will rise.

Even though Bond prices ended the week lower than they began, it is still a good time to take advantage of historically lower home loan rates before rising inflation continues to push rates higher. If you, or a friend, family member, neighbor or coworker needs advice on the latest changes in the market, please feel free to get in touch.

ANOTHER KIND OF CHANGE IS COMING SOON, AS POSTAGE RATES WILL INCREASE ON MAY 12. BUT BELIEVE IT OR NOT...THE POSTAL SERVICE IS ACTUALLY OFFERING SOME PRICE REDUCTIONS TOO! GET THE WHOLE STORY - AND LEARN HOW YOU MIGHT SAVE SOME CHANGE - IN THIS WEEK'S MORTGAGE MARKET VIEW.

Forecast for the Week

After last week's barrage of economic news, the calendar will quiet down this coming week. However, we will get a good look at the housing market via the Existing Home Sales Report on Wednesday, and the New Home Sales Report on Thursday - as well as a read on Durable Goods Orders.

What are those "durable goods" anyways? Simply put, they are items that are durable, or made to last longer than three years, such as cars, furniture, electronics, appliances, business equipment, games, cameras, etc. This report shows a good measure of consumer and business consumption and buying behavior, and depending on the health of the report, could bring some activity to the volatile financial markets.

As you can see in the chart below, Bond prices ended the week with a move higher from a "floor of support" at the 200-day Moving Average...but are now headed back towards an overhead "ceiling of resistance" which could stop their progress higher. Remember that when Bond prices move higher, home loan rates move lower...and vice versa. If the news of the coming week isn't Bond-friendly enough to help them bash their way through the overhead ceiling, Bond prices and home loan rates may worsen once again.

Chart: Fannie Mae 5.5%% Mortgage Bond (Friday Apr 18, 2008)

The Mortgage Market View...

A PENNY FOR YOUR THOUGHTS

Starting May 12th, it'll cost you one extra little penny to mail someone your thoughts. That's right...the US Postal Service is getting ready to make some price changes, and the biggest change for most consumers will be a price increase for First Class stamps from 41c to 42c.

The news isn't all bad, though. That's because for the first time in the history of the US Postal Service, the new pricing structure will include online price reductions, rebates, commercial volume and contract prices, as well as several other new incentives. The heat must be on the USPS to be competitive in pricing, as according to Postmaster General John Potter: "These innovative pricing incentives will make our products more attractive to all shippers, especially small businesses. We're pricing our products to sell in today's competitive shipping market."

The information below can help you plan for your postal expenses - and figure out a few ways that you can save - starting next month.

New Prices as of May 12

Consistent with The Postal Accountability and Enhancement Act, the average increase of the prices is at or below the rate of inflation as measured by the Consumer Price Index. Here's what the new pricing will be:

First-Class Mail letter 1 oz. = 42c (current price = 41c)

First-Class Mail letter 2 oz. = 59c (current price = 58c)

Postcard = 27c (current price = 26c)

Certified Mail = $2.70 (current price = $2.65)

First-Class Mail International to Canada and Mexico 1 oz. = 72c (current price = 69c)

First-Class Mail International to all other countries 1 oz. = 94c (current price = 90c)

Ways to Save...

Forever Stamps - Last year, the US Postal Service introduced Forever Stamps... and this is your chance to reap the rewards! You can purchase Forever Stamps prior to May 12 at the lower 41c rate, and then use them even after the price change. Forever Stamps are widely available through Post Offices, Contract Postal Units, consignment locations, Automated Postage Centers, and The Postal Store®. To help meet increased demand before the price change, the US Postal Service plans to have 5 Billion Forever Stamps in stock. So you shouldn't have any problems getting your hands on them.

In addition to Forever Stamps, the US Postal Service is introducing all new ways to help you save, including the following new incentives:

Express Mail - With the new "zone-based pricing system," you'll pay less when you send a letter to a nearby destination using Express Mail. You can also save 3 percent when you purchase Express Mail online or through a corporate account. Finally, additional price reductions are available if you ship quarterly minimums.

Priority Mail - The new pricing structure includes a provision to help you save an average of 3.5 percent when you use electronic postage or meet other requirements.

Parcel Select - Large- and medium-size shippers will receive pricing and volume incentives under the "last mile" delivery provision.

Parcel Return Service - A new weight-based pricing system will result in significant price reductions for the return shipping of lighter packages.

You can learn more about the new pricing structure at www.usps.com/prices, and you can purchase Forever Stamps at your local Post Office or online at The Postal Store®.

The Week's Economic Indicator Calendar

Remember, as a general rule, weaker than expected economic data is good for rates, while positive data causes rates to rise.

Economic Calendar for the Week of April 21 - April 25

Date ET Economic Report For Estimate Actual Prior Impact

Tue. April 22 10:00 Existing Home Sales Mar 4.92M 4.93M 5.03M Moderate

Wed. April 23 10:30 Crude Inventories 4/19 NA 2421K -2356K Moderate

Thu. April 24 08:30 Durable Goods Orders Mar 0.1% -0.3% -0.9% Moderate

Thu. April 24 08:30 Jobless Claims (Initial) 4/19 375K 342K 375K Moderate

Thu. April 24 10:00 New Home Sales Mar 585K 526K 575K Moderate

Fri. April 25 10:00 Consumer Sentiment Index (UoM) Apr 64.2 63.2 Moderate

The material contained in this newsletter has been prepared by an independent third-party provider. The content is provided for use by real estate, financial services and other professionals only and is not intended for consumer distribution. The material provided is for informational and educational purposes only and should not be construed as investment and/or mortgage advice. Although the material is deemed to be accurate and reliable, there is no guarantee it is not without errors.

To all,

New Home Sales data is compiled monthly by the Department of Commerce's Census Bureau and is gathered from builders throughout the country. The data represents new home sales for the nation as well as four areas of the country: the Northeast, the Midwest, the South, and the West. Information on the average price of a home, the number of homes for sale, and the supply of unsold homes are also provided. The data is an important indicator because it shows any strength or weakness in the housing sector. The housing sector data is valuable because when consumer spending changes, it appears in this sector first. Consequently, a chain reaction typically occurs. A slowdown in new home sales tends to lead to a slowdown in housing starts, which will continue to affect other indicators possibly resulting in a recession, as has been the recent concern of most everyone.

If interest rates rise, further weakness could be placed on new home sales. However, if interest rates remain steady, new home sales may be able to stabilize.

The risks of floating far outweigh the potential benefits. Therefore, a cautious approach is necessary to protect against short-term movements in mortgage interest rates. Now is a great time to take advantage of mortgage interest rates at their relatively favorable levels. While it is a good time to take advantage of rates, and has been for some time, rates did drop late Friday afternoon. Give me some time to let my investors get in for those with true rate lock questions.

Greg Adelman

http://www.midwesthomecenter.com/

To all,

Regardless of market trends, buyers and mortgage lenders rely on independent professional appraisers to provide an impartial valuation of the property.

New York Attorney General, Andrew Cuomo, has recently reached an agreement with Fannie Mae and Freddie Mac which specifies that as of 2009, Fannie Mae and Freddie Mac will only buy loans from banks that meet the requirements of the "New Home Value Protection Code."

With Fannie Mae and Freddie Mac currently purchasing more than 60% of all home loans in the country, the agreement could have a monumental impact on the appraisal industry.

Some Implications of the New Home Value Protection Code include:

• Mortgage brokers will be prohibited from selecting appraisers.
• Lenders will be prohibited from using "in-house" staff appraisers to conduct initial appraisals.
• Lenders will be prohibited from using appraisal management companies that they own or control by more than 20%.
• Lenders will be prohibited from using appraisers employed by an affiliate of the lender; an entity that is owned in whole or in part by the lender; or an entity that is owned in whole or in part by settlement services provider.

There is little doubt that ensuring the independence of professional appraisers is the most viable and expeditious solution to restoring consumer confidence in local residential markets.

While the final outcome of the agreement is still unclear, there will likely be some kind of restructuring of the industry to support the new standards.

The agreement is subject to revision, and Cuomo's office will be accepting comments from industry sources and other interested parties through April 30, 2008. In the meantime, we will continue to attend relevant industry meetings and events which will enable us to keep our clients better informed on pending issues. We look forward to sharing future updates with you as additional details are disclosed.

contact us at www.midwesthomecenter.com for all you housing needs