Is the Fed Done?

Looks like the boys of the Fed Reserve Board may be done for awhile (well at least raising rates). Seems like the markets are in good shape, U.S. payrolls increased at a healthy pace last month after closing 2006 on a very strong note, while the jobless rate ticked slightly higher and wage growth slowed, suggesting the favorable mix of solid economic growth and low inflation continued into 2007 (according to wsj.com) ....we have survived a wild ride in the crude markets (as well as an attack of Boston by Comedy Central), and soon enough, it's going to be election season...and you know that the Fed does not like to ticker too much w/ the economy when the politicians are out stumping.... so maybe 2007 will see few to no rate changes.

So what does this mean for the mortgage markets you might ask? My guess is that rates will stay in a pretty tight range. I think conforming (good credit, under $417K) should remain in the low 6s, while jumbos will trade slightly higher. Sub prime, on the other hand, is a different matter. Wall Street seems to have lost its appetite for the low end of the subprime market, and as such, it is now very hard for to find a home for the bottom tier sub prime stuff. The folks with the very low FICO scores and the very high loan to values are feeling real pain when their current adjustable loans re- set. The rates that they will have to pay are well above their initial start rates, and no new lenders are willing to extend them credit. These are the people who are going into foreclosure.....If they are smart, they will sell their homes at what ever their local market while allow, cash out their equity, and rent for a while. We see too many people who are frozen in disbelief, and take no action, and by the time their home is foreclosed on, they have give up any chance of at least walking away with a couple of $$ in their pockets. All part of the cycle, I suppose.....