With a light schedule of economic events, Texas investors focused on a stream of Fed officials making appearances last week, and two conflicting themes emerged. Thursday, the Fed’s Fisher emphasized that the risk of higher future inflation remains a concern, and Texas mortgage rates rose after his comments. Friday, however, the Fed’s Yellen pointed out that the risk of slower economic growth or recession has increased. A decline in economic growth generally leads to lower inflation, so it was viewed as good news for mortgage markets. As a result, mortgage rates fell, ending the week just a little higher than the previous week. In contrast, slower economic growth and higher inflation are both unfavorable for stocks, and the Dow suffered a 500 point loss during the week. Friday, the government moved closer to passing an economic stimulus package which President Bush has signed, is expected to boost economic activity as well as help the housing market, and the passage of the bill appears to be imminent. Under the terms of the pending legislation, Fannie Mae and Freddie Mac will temporarily be allowed to purchase or insure loans up to 125% of the median home price in the area, subject to a maximum cap of about $730,000, which means that in some markets loans above the current limit of $417,000 will be considered conforming loans. FHA loan limits will increase as well, according to a similar formula and subject to a maximum of 175% of the current limit. Qualifying loans should have lower rates than if the limits were not increased, making homes more affordable and refinancings more attractive. In the Houston, TX housing sector, the December Pending Home Sales index fell more than the expected from November, and the index was down -24% from one year ago. Pending Home Sales are a leading indicator of future housing market activity, so the next Existing and New Home Sales reports may show declines. The National Association of Realtors (NAR) latest forecast predicted that conditions will remain soft for the first half of 2008, but that activity will pick up during the second half of the year.