Mortgage Outlook

Market Comment
Mortgage bond prices remained stable last week holding rates steady from the previous week. Interest rates rose earlier in the week, however, they recovered Friday with the release of some bond market friendly news. Retail sales and core producer price index data were lower than expected boosting hopes that the Fed may cease raising rates in early 2006.
For the week, interest rates on government and conventional loans remained unchanged.
The consumer price index Wednesday will be the most important release this week. Industrial production, capacity use, Fed "Beige Book", housing starts, Philadelphia Fed, and consumer sentiment data will also be important.
LOOKING AHEAD.

Fed "Beige Book"
The Fed "Beige Book" is a summary of economic conditions from each of the 12 Federal Reserve regional districts. The release takes place eight times a year approximately two weeks ahead of each of the Federal Open Market Committee meetings. The report is used at the FOMC meetings, which tends to be one of the most influential events in the market.
Market participants are continually attempting to determine what FOMC interest rate policy will be ahead of the next meeting. Any deviation from expectations usually results in extreme short-term market volatility. The timing of the "Beige Book" provides analysts a valuable look at one of the many factors the FOMC considers in setting interest rate policy. If the "Beige Book" shows signs of inflationary pressures, the Fed may decide to raise interest rates. However, if the report shows signs of difficulties, the Fed may lower rates to stimulate the economy.
Most analysts believe the Fed will raise interest rates again at the next meeting. Now is a great time to take advantage of rates at these favorable levels and to avoid future volatility.