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Strategies & Market Trends : Mish's Global Economic Trend Analysis -- Ignore unavailable to you. Want to Upgrade?

To: Knighty Tin who wrote (10129)	8/3/2004 9:28:19 AM
From: mishedlo	Read Replies (1) \| Respond to of 116555

WASHINGTON, D.C. (July 28, 2004)—The Mortgage Bankers Association (MBA) today released its Weekly Mortgage Applications Survey for the week ending July 23. The Market Composite Index of mortgage loan applications - a measure of mortgage loan applications - was 621.4, an increase of 0.6 percent on a seasonally adjusted basis from 617.9 one week earlier. On an unadjusted basis, the Index increased by 0.6 percent compared with last week but was down 34.7 percent compared with the same week one year earlier. The MBA seasonally adjusted Purchase Index increased by 1.0 percent to 444.8 from 440.3 the previous week. The seasonally adjusted Refinance Index decreased by 0.1 percent to 1648.8 from 1651.1 one week earlier. Other seasonally adjusted index activity included the Conventional Index, which increased 0.6 percent to 913.7 from 908.7 the previous week. The Government Index increased 0.8 percent to 133.9 from 132.8 the previous week. The refinance share of mortgage activity decreased to 36.8 percent of total applications from 37.1 percent the previous week. The adjustable-rate mortgage (ARM) share of activity increased to 33.3 percent of total applications from 31.3 percent the previous week. "The purchase market continues very strong, in line with the numbers we have seen for new home and existing homes sales. In addition, while the number of purchase applications has increased by 4 percent over the last year, the dollar volume of applications has increased by more than 15 percent, driven by an average purchase loan size that has increased to $215,800 last week versus $194,900 one year ago," said Jay Brinkmann, MBA's vice president of Research and Economics. The average contract interest rate for 30-year fixed-rate mortgages increased to 5.97 percent from 5.96 percent one week earlier, with points remaining at 1.32 (including the origination fee) for 80 percent loan-to-value (LTV) ratio loans. The average contract interest rate for 15-year fixed-rate mortgages decreased to 5.33 percent from 5.34 percent one week earlier, with points increasing to 1.41 from 1.38 the previous week (including the origination fee) for 80 percent LTV loans. The average contract interest rate for one-year ARMs increased to 4.04 percent from 3.93 percent one week earlier, with points increasing to 1.16 from 1.12 from the previous week (including the origination fee) for 80 percent LTV loans. mbaa.org

To: Knighty Tin who wrote (10129)	8/3/2004 9:29:22 AM
From: Haim R. Branisteanu	Read Replies (2) \| Respond to of 116555

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To: Knighty Tin who wrote (10129)	8/3/2004 11:51:08 AM
From: mishedlo	Read Replies (1) \| Respond to of 116555

GM incentives The bonus cash program varies by region of the country and by model, she said. But in some cases, GM (GM: Research, Estimates) consumers could get a total cash rebate of up to $6,000 on vehicles from the 2004 model year. Is there ANY profit built into their give-aways? money.cnn.com

To: Knighty Tin who wrote (10129)	8/3/2004 12:11:55 PM
From: mishedlo	Respond to of 116555

Has the Consumer Train Reached the Station? by Brian Deese July 30, 2004 Many economy-watchers are responding to today's lower-than-expected GDP growth figures with a combination of surprise and concern. The truth is they should be less surprised, but perhaps even more concerned. The American economy grew at a 3 percent rate in the second quarter, down from the 5.4 percent average growth rate in the year ending in March, and well below consensus expectations. For most of June, forecasters had been projecting growth of over 4 percent. Even in recent weeks as a stream of lackluster data poured in and Federal Reserve Chairman Alan Greenspan acknowledged our economy had hit a "soft patch," the consensus estimate was only revised down to 3.8 percent. The primary culprit for the shattering of expectations was a sharp drop-off in consumer spending, which accounts for more than two-thirds of our nation's economic activity. The amount of economic activity driven by consumers in the second quarter grew by only 1 percent, the weakest since the recession and a sharp decline from the 4.1 percent clip in the first quarter of 2004. Since 1992, this is only the third quarter where consumer spending growth was so slow, and it is less than a third of the historical average growth rate of 3.6 percent over the past 50 years. While forecasters are renowned for being wrong more than right, this type of decline should not have been that surprising to them. The American consumer is the battered warrior of our anemic recovery – continuing to spend beyond anyone's expectations in the face of real wages that are lower today than when the recovery began and sharp increases in healthcare costs and oil prices, which hit an all-time high this week. Yet many have been arguing for months and even years that this resilience could not last forever. Consumers almost single-handedly kept the 2001 recession from being more severe and were the force behind keeping the anemic recovery above water. During the first three years of President Bush's term, consumer spending rose 9 percent while business investment fell 7 percent and exports declined 3 percent. With an increasing squeeze on average consumers, it was only a matter of time before spending cooled off. More worrying is that we have now finally reached the moment when we have to answer the question: what happens when consumer spending is no longer driving our economic train? Today's GDP numbers reinforce the findings of the Federal Reserve's Beige Book earlier this week that consumer spending moderated across much of the country in June and early July – New York, Philadelphia, Cleveland, Atlanta, Chicago, Dallas, and San Francisco all reported softening spending since their last reports. And these came on top of a disappointing finding that retail sales fell in June, and were especially week at big chains serving lower- and middle-income Americans like Wal-Mart and Target. In addition, the exact nature of the recent resilience of consumer spending casts doubt on the ability of consumers to return to a healthy pace again in the quarters to come. Consumers are literally living on borrowed time – financing their purchases over the last year to a large extent through credit card debt and mortgage refinancing. Christian Weller of the Center for American Progress has found that, while households traditionally use about 1 percent of personal income a year to pay down the principal on outstanding mortgage debt, during 2003, homeowners not only failed to pay down the principal on mortgages but actually increased purchasing power by nearly 4 percent beyond their personal income by refinancing and increasing their outstanding mortgage debt. Yet in June 2004, the Mortgage Bankers Association's refinancing index was down nearly 90 percent from its record high in 2003. As a result, the extra 4 percent of personal income that consumers were using to make purchases in this recovery is not likely to be around in the upcoming year. The debt-driven consumption trend has also made many American consumers highly leveraged in interest rate sensitive industries, which throws further water on the ability of consumer train to keep on chugging. As the Fed continues its "measured" interest rate increase over the course of the year and the markets finally begin to price in the reality of $500 billion deficits as far as the eye can see, increased rates will further squeeze Americans ability to consume. With American consumers finally in a soft patch, other components of our economy will need to perform stronger to keep growth from moderating further. There was good news from the GDP report on the level of business investment, which more than doubled to 8.9 percent from 4.2 percent in the first quarter, and spending on equipment and software rose 10 percent. Yet we will have to see stronger signs in coming months to be comforted that without the heroic American consumer this recovery can continue to move forward. americanprogress.org