North Idaho Janna

MARKET RECAP

Bailout fatigue is beginning to weigh on elected officials, at least if the latest bailout vote is any indication. Late Thursday, the U.S. Senate rejected a $14 billion short-term lifeline for the Detroit Three automakers. That said, a bailout of Detroit is still possible. Even though fatigue is setting in and some members of Congress have drawn a line in the sand, odds favor some form of assistance. Indeed, the White House and the Treasury gave strong indications Friday that the U.S. government, at least temporarily, would help prop up the auto industry.

Fatigue is understandable. After all, the tally to keep the economy afloat is expected to exceed $2 trillion. Just last month, the federal government announced plans to buy $500 billion of mortgage-backed securities and $100 billion of debt issued by government-sponsored mortgage financiers Fannie Mae and Freddie Mac. The moves are intended to reduce interest rates and get more home buyers into the market to stabilize prices.

As far as housing is concerned, the jury is still out on the effectiveness of the sundry stimulus packages. Foreclosures remain at record levels, but the market is showing signs of stabilizing. Last week, an index of sales contracts on previously owned homes fell 0.7% in October from the prior month. The results were mixed regionally, with declines of 8.7% in the West, and 4.3% in the Midwest . Meanwhile, there were gains of 7.8% in the South and 0.6% in the Northeast.

The mortgage market, in contrast, has demonstrated more immediate improvement as rates continue to fall and application activity, particularly on the refinance side, continues to rise. The trend should continue this week, given that mortgage rates have fallen six consecutive weeks to their lowest levels in months. According to Bankrate's latest national survey, the prime 30-year fixed-rate mortgage is averaging 5.8%, the prime 15-year fixed-rate mortgage is averaging 5.51%, and the prime 5/1 adjustable-rate mortgage is averaging 6.17%.