Austin Mortgage Blog

For the week of January 23, 2012 – Vol. 10, Issue 4

>> Austin Mortgage Market Update 

QUOTE OF THE WEEK…“Happiness is not a state to arrive at, but a manner of traveling.” –Margaret Lee Runbeck

INFO THAT HITS US WHERE WE LIVE…Well, we can all make our way with a bit of a smile on our faces, courtesy of the latest Housing Starts numbers. At first blush, the December report seemed disappointing, down 4% for the month. But starts overall are UP 24.9% from a year ago and December’s drop was all from multi-family starts, very volatile month-to-month. Single-family starts were UP 4.4% for the month and UP 11.6% for the year. No wonder the National Association of Home Builders confidence index went to 25, its highest reading since 2007.

For those who still couldn’t put on a happy face, Friday’s data should have done the trick. Existing Home Sales were UP 5% in December, their third consecutive gain, to their highest level since January 2011. The inventory of existing homes is down 21% from last year and the months’ supply dropped to 6.2, the lowest level since April 2006. For all of 2011, sales of single-family homes, townhomes, condos and co-ops rose 1.7%, to 4.26 million units.

BUSINESS TIP OF THE WEEK… There are so many variables in business, you can’t know exactly how you will reach your goal. So what matters most is your determination to get there.

>> Review of Last Week

HAPPY NEW YEAR SO FAR…All three major market indexes ended ahead again for the week, chalking up very nice gains for the very young year–the Dow UP 4.1%, the S&P 500 UP 4.6% and the Nasdaq UP 7.0% thus far. Investor sentiment is generally a good leading indicator for the economy, but the recovery is still slow and the economic reports continue to deliver mixed messages.

Industrial Production, up 0.4% in December, fell short of expectations. Yet two regional manufacturing indexes did better for the month: the Empire State and the Philadelphia Fed. On the inflation front, producer prices were down 0.1%, though Core prices excluding food and energy were up 0.3%. The Consumer Price Index was unchanged, but Core CPI went up 0.1%. The best news? Weekly Initial Unemployment Claims fell to 352,000, their lowest level since April 2008.

For the week, the Dow ended UP 2.4%, at 12720; the S&P 500 closed UP 2.0%, to 1315; and the Nasdaq gained 2.8%, to 2787.

With stocks rallying, heavy selling in the bond market sent prices southward. Investors were also calmed by hopes of a Greek debt deal, though that hasn’t happened yet. The FNMA 3.5% bond we watch ended the week down .87 to $102.21. Freddie Mac’s survey of conforming mortgages showed national average mortgage rates virtually unchanged, staying at record low levels for another week.

DID YOU KNOW?…This week’s Advanced GDP number will be revised twice, with next month’s Preliminary GDP and then Final GDP a month later. These revisions can impact financial markets.

>> This Week’s Forecast

PENDING HOME SALES, NEW HOME SALES, THE FED, THE GDP… This week isn’t missing much in the way of interesting topics. December Pending Home Sales come Wednesday, forecast down a bit after a November gain. The Fed’s FOMC Rate Decision shouldn’t change anything, but for the first time, Fed member’s outlooks on interest rates will be released. Following this will be Chairman Bernanke’s press conference and that could be interesting.

December New Home Sales happen Thursday, projected to inch up a bit. Friday we get how the overall economy did in Q4, with the Advanced GDP estimate. Gross Domestic Product is expected to climb from an anemic 1.8% to a more acceptable 3.1%.

>> The Week’s Economic Indicator Calendar

Weaker than expected economic data tends to send bond prices up and interest rates down, while positive data points to lower bond prices and rising loan rates.

Economic Calendar for the Week of Jan 23 – Jan 27

>> Federal Reserve Watch   

Forecasting Federal Reserve policy changes in coming months… Virtually all the experts say the Fed Funds Rate will stay at its super low level coming out of this week’s FOMC meeting. Note: In the lower chart, a 1% probability of change is a 99% certainty the rate will stay the same.

Current Fed Funds Rate: 0%–0.25%

Probability of change from current policy:

For the week of January 16, 2012 – Vol. 10, Issue 3

>> Texas Mortgage Market Update 

QUOTE OF THE WEEK…“If you have to forecast, forecast often.”–Edgar R. Fiedler

INFO THAT HITS US WHERE WE LIVE…Economist Fiedler, Assistant Treasury Secretary under Presidents Nixon and Ford, knew that wise forecasters give themselves lots of opportunities for revisions. This time of year, the focus is on forecasts and even though many will soon be revised, some are worth considering. The chairman of the Fisher Center for Real Estate at the University of California, Berkeley, feels home prices have bottomed and are increasing, though not rebounding, where there’s strong job growth. But other economists anticipate a 5% decline in home prices over the next two years.

Several industry watchers expect mortgage rates to stay low in 2012, especially the first half of the year. But buyers and those looking to refinance shouldn’t drag their feet. Freddie Mac’s chief economist expects rates to rise at least somewhat during the second half of the year. Fannie Mae’s chief economist thinks rates will stay flat most of the year, but may go up a tick the last quarter. And he’s hopeful lenders will work with more buyers with good credit scores. 

BUSINESS TIP OF THE WEEK…Don’t fall victim to “analysis paralysis,” putting off a decision until you’ve evaluated every possible option. Successful people just focus on the critical details, then act.

>> Review of Last Week

SOMEHOW STAYING POSITIVE…From little guys to big time investors, we’re all trying to keep our spirits up on the good news and patiently wait out the bad. This week had a bit of both, ending Friday with the disappointing report that France lost its “AAA” credit rating and Italy and Spain are expected to drop a couple of notches in their ratings as well. But investors found enough encouragement to help stocks post a modest gain for the second trading week of the year.

One thing that made everyone upbeat was the latest University of Michigan Consumer Sentiment, which shot up from December’s 69.9 to a preliminary reading of 74.0 for January, its highest level since May 2011. But disappointing news came with December Retail Sales–up just 0.1% overall and down 0.2%, excluding autos. The Fed’s Beige Book noted a modest increase in economic activity but said nothing to allay concerns over the slow pace of recovery. Finally, the trade deficit grew to $47.8 billion with a drop in exports.

For the week, the Dow ended UP 0.5%, at 12422; the S&P 500 closed UP 0.9%, to 1289; and the Nasdaq gained 1.4%, to 2711.

The bond market enjoyed the benefits of the flight to safety by investors who had new reasons to fret over the European sovereign debt situation. The FNMA 3.5% bond we watch ended the week UP .03, at $103.08. National average rates for all types of mortgages tracked by Freddie Mac hit new lows for the week ending last Thursday.

DID YOU KNOW?…Inflation is the overall general upward price movement of goods and services in an economy, usually as measured by this week’s Consumer Price Index (CPI) and Producer Price Index (PPI).

>> This Week’s Forecast

HOME BUILDING, EXISTING HOME SALES, INFLATION… Housing news comes Thursday with December Housing Starts and Building Permits gauging the state of new construction. The annual rates are expected to dip a little, staying just under 700,000. Friday’s Existing Home Sales for December are expected to rise to 4.57 million, which is encouraging.

The week also features December PPI wholesale inflation readings, forecast holding in safe territory, and consumer CPI inflation numbers, also predicted to hold steady. Monday, U.S. markets are closed in observance of Martin Luther King, Jr., Day.

>> The Week’s Economic Indicator Calendar

Weaker than expected economic data tends to send bond prices up and interest rates down, while positive data points to lower bond prices and rising loan rates.

Economic Calendar for the Week of Jan 16 – Jan 20

>> Federal Reserve Watch   

Forecasting Federal Reserve policy changes in coming months… The experts expect the Fed Funds Rate to stay at super low levels. Note: In the lower chart, a 1% probability of change is a 99% certainty the rate will stay the same.

Current Fed Funds Rate: 0%–0.25%

Probability of change from current policy:

For the week of January 9, 2012 – Vol. 10, Issue 2

>> Texas Mortgage Market Update 

QUOTE OF THE WEEK…“Opportunities are disguised by hard work, so most people don’t recognize them.”–Ann Landers

INFO THAT HITS US WHERE WE LIVE…The latest opportunity in real estate came December 28, when the Federal Housing Administration extended the waiver of its “anti-flipping” rule through the end of 2012. This lets homebuyers, who need FHA-insured financing, purchase homes that were bought by the seller in the last 90 days. And it gives investors looking to rehab and flip properties an expanded market, including first-time homebuyers and others without large down payments, who need FHA-backed loans.

The Mortgage Bankers Association (MBA) reported that during 2011, near-record-low mortgage rates drove more homeowners to seek refinancing, moving that MBA index up more than 60%. But demand for purchase loans fell versus 2010, although that year’s activity was boosted by the homebuyer tax credit incentives.

BUSINESS TIP OF THE WEEK…It’s great to get organized at the start of a new year. The key is to begin. Focus on just one project. Then break it down into smaller parts and accomplish one thing each day, or week, until done!

>> Review of Last Week

UP START…For investors, 2012 began in the right direction as stocks ended the first week of the year UP. But this result was due mainly to an upsurge on Tuesday that was big enough to offset tepid performances the next three days, when traders got jittery over Europe. Spain was in the spotlight again, with new player Hungary now adding to the financial uncertainty. The net result was a weaker Euro, falling about 0.6% to a new 16-month low of $1.27. Time to take that European vacation.

Encouragement came with manufacturing growing in December at its fastest pace in six months. Weekly initial jobless claims dropped again, to 372,000. The December employment report was an upside surprise, with 200,000 new nonfarm jobs showing up and the unemployment rate inching down to 8.5%. But a few observers were concerned there’s probably some seasonality in those numbers. ISM Services, which tracks the sector responsible for over 80% of U.S. jobs, came in a little lower than expected, although still in growth territory.

For the week, the Dow ended UP 1.2%, at 12360; the S&P 500 closed UP 1.6%, to 1278; and the Nasdaq gained 2.7%, to 2674.

The bond market elicited mixed results for the week, with Treasuries trending lower, but continuing Euro worries supported prices elsewhere. The FNMA 3.5% bond we watch ended the week UP .78, at $103.05. Average fixed mortgage rates across the U.S. started the new year at or near record lows as tracked by Freddie Mac’s weekly survey.

DID YOU KNOW?…”Home on the Range” is one of the most famous songs with “home” in its title. It was written by Dr. Brewster Higley in 1876 and is the official state song of Kansas.

>> This Week’s Forecast

FED OPINIONS, HOLIDAY SHOPPING, EXPORTS AND CONSUMER FEELINGS… Wednesday, the Fed’s Beige Book reveals views on the economy from Federal Reserve Districts around the country. Thursday will gauge the consumer’s enthusiasm for holiday shopping, as measured by December Retail Sales, forecast to be up.

The week ends with the November Trade Balance, expected to grow (not so good) and Michigan Consumer Sentiment, also predicted to increase (good).

>> The Week’s Economic Indicator Calendar

Weaker than expected economic data tends to send bond prices up and interest rates down, while positive data points to lower bond prices and rising loan rates.

Economic Calendar for the Week of Jan 9 – Jan 13

>> Federal Reserve Watch   

Forecasting Federal Reserve policy changes in coming months…Economists believe the Fed Funds Rate will stay at super low levels for awhile. Note: In the lower chart, a 1% probability of change is a 99% certainty the rate will stay the same.

Current Fed Funds Rate: 0%–0.25%

Probability of change from current policy:

For the week of January 2, 2012 – Vol. 10, Issue 1

>> Austin Mortgage Market Update 

QUOTE OF THE WEEK…“Of all the things you wear, your expression is the most important.” –Anonymous

INFO THAT HITS US WHERE WE LIVE…It’s good to show your best face to the world as the new year begins (see Business Tip of the Week, below) and that just got easier to do. Last week’s Pending Home Sales index from the National Association of Realtors (NAR) went UP 7.3% in November, hitting its highest level since April 2010! And that earlier reading was artificially boosted, as buyers rushed to beat the deadline for last year’s home buyer tax credit.

The NAR’s chief economist commented, “Housing affordability conditions are at a record high and there is pent-up demand from buyers who’ve been on the sidelines…. The sustained rise in contract activity suggests that closed existing-home sales…should continue to improve in the months ahead.” The S&P Case-Shiller index for October showed minor price drops in 19 of the 20 surveyed metro areas, but the index was UP 1.9% from its post-crisis low in March 2011.

BUSINESS TIP OF THE WEEK…The new year is a great time to remember that successful people think positive. They’re not unrealistic, but they do see the positive side of an opportunity and firmly believe in their ability to reach their goals.

>> Review of Last Week

GOODBYE, 2011!…The wild year on Wall Street ended not with a bang but a whimper, as stocks slumped slightly for the week on very light trading. Volatility was the theme for 2011, although when all was said and done, the broadly based S&P 500 stock index ended dead flat for the year. This reflects how many investors view the economy: recovering so slowly, its growth slope is practically horizontal. The year’s volatility was echoed in a 140-point drop Wednesday followed by a 136-point surge the very next day.

The week’s positive economic news included the Pending Home Sales gain covered above and initial jobless claims staying below 400,000 for another week. But none of this “good” news was very terrific, so economic emotions were held in check by the usual suspects: European debt worries and corporate underperformers. Sears announced it would close about 100 stores and American Airlines parent AMR Corp., which filed for bankruptcy protection last month, revealed its stock would be delisted from the Big Board. 

For the week, the Dow ended down 0.6%, at 12218 but UP 5.5% for the year; the S&P 500 also dipped 0.6%, to 1258 but was unchanged for the year; and the Nasdaq dropped 0.5%, to 2605 and was down 1.8% for the year.

Although it was a low volume week all around, the bond market behaved conventionally, prices heading north as stocks drifted south. The FNMA 3.5% bond we watch ended the week UP .95, at $102.27. According to Freddie Mac’s weekly survey, national average fixed mortgage rates inched up from the prior week’s record lows. But they’re expected to stay in super low territory for awhile.

DID YOU KNOW?…The FOMC Minutes released Tuesday give insight into the decision making process for monetary policy and what the Fed thinks about economic developments inside and outside the U.S.

>> This Week’s Forecast

MANUFACTURING, SERVICES, FED MINUTES, JOBS…The markets are closed today in observance of New Year’s, but the rest of the week is packed with economic data. ISM Manufacturing on Tuesday should remain in expansion territory just like ISM Services on Thursday. Tuesday’s FOMC Minutes from the Fed’s December 13 meeting may provide useful insight.

But the week’s highlight will be Friday’s December Jobs report.150,000 Nonfarm Payrolls should be added, which won’t do anything to help the Unemployment Rate, expected to creep back up to 8.7%.

>> The Week’s Economic Indicator Calendar

Weaker than expected economic data tends to send bond prices up and interest rates down, while positive data points to lower bond prices and rising loan rates.

Economic Calendar for the Week of Jan 2 – Jan 6

>> Federal Reserve Watch   

Forecasting Federal Reserve policy changes in coming months…The expectation is for the Fed Funds Rate to remain at its rock bottom level well into the future. Note: In the lower chart, a 1% probability of change is a 99% certainty the rate will stay the same.

Current Fed Funds Rate: 0%–0.25%

Probability of change from current policy:

For the week of December 27, 2011 – Vol. 9, Issue 52

>> Austin Mortgage Market Update 

QUOTE OF THE WEEK…“…never retreat, never retract…never admit a mistake.”–Napoleon Bonaparte

INFO THAT HITS US WHERE WE LIVE…Wisely, the National Association of Realtors (NAR) did not follow the diminutive Emperor’s advice last week, admitting they uncovered some mistakes in the statistical model used to estimate national Existing Home Sales the past few years. They therefore had to revise those sales down 14%, to a 4.42 million annual rate in November. Nevertheless, Existing Home sales were UP 4% for the month and UP 12% versus a year ago. And the inventory is down 18% versus last year, now at a 7 months’ supply!

In line with that, Housing Starts were UP 9.3% for November and UP 24.3% versus a year ago, while Building Permits were UP 5.7% for the month. November New Home Sales came in Friday UP 1.6%, with the supply dropping to 6 months, its lowest level since early 2006! The numbers of unsold new homes under construction and unsold completed new homes are also at or near record lows. The FHFA price index for homes financed by conforming mortgages was down just 0.2% in October and is down only 2.8% versus a year ago.

BUSINESS TIP OF THE WEEK…Start on a goal right away. Get the momentum going by taking action immediately–flesh out the schedule, reserve important dates, get delivery commitments from others.

>> Review of Last Week

SANTA CAME EARLY…It was a little early for a “Santa Claus rally” (see below), but it sure seemed like the big man in red was giving Wall Street investors a nice holiday gift–to wit, a better than 3.5% weekly gain in stock prices, recouping the prior week’s slide. Recent European worries were assuaged by improving German sentiment data, an encouraging Spanish bond auction and the European Central Bank’s Long-term Refinancing Operation (LTRO), which promised greater stability in the region, at least for awhile.

We also had better economic news on our side of the pond. Initial jobless claims dropped to 364,000, the lowest level since April 2008, and continuing claims dropped to 3.55 million, the lowest since September 2008. Durable Goods orders were up 3.8% in November, beating expectations. On the inflation front, Core PCE Prices were up just 0.1% in November and well within the Fed’s target range, at 1.7% for the year. But Q3 GDP was revised down to a sobering 1.8%.

For the week, the Dow ended UP 3.6%, at 12294; the S&P 500 shot UP 3.7%, to 1265; and the Nasdaq went UP 2.5%, to 2619.

As stocks soared, it was a tough week in the bond market. The FNMA 3.5% bond we watch ended the week down .90, to $101.32. But national average fixed mortgage rates remained at or near their all-time record lows according to Freddie Mac’s weekly survey.

DID YOU KNOW?…A “Santa Claus rally” is a rise in stock prices that sometimes occurs the week after Christmas. It often anticipates the “January Effect”–a rise in stock prices the first month of the year.

>> This Week’s Forecast

YEAR ENDING ON HOME SALES PENDING…Thursday’s Pending Home Sales for November, indicating how actual sales might go the next few months, should be up slightly. December Consumer Confidence is also forecast up a bit, perhaps due to the slowly improving jobs picture, with weekly Initial Unemployment Claims predicted to remain below 400,000. The Chicago PMI, a bellwether for manufacturing overall, is expected to stay in expansion mode.

Next Monday, January 2, 2012, the stock market will be closed in observance of New Year’s Day. May the coming year bring all the best to you and yours!

>> The Week’s Economic Indicator Calendar

Weaker than expected economic data tends to send bond prices up and interest rates down, while positive data points to lower bond prices and rising loan rates.

Economic Calendar for the Week of Dec 26 – Dec 30

>> Federal Reserve Watch   

Forecasting Federal Reserve policy changes in coming months…There are virtually no economists who expect the Fed to hike the Funds Rate any time in the near future. Note: In the lower chart, a 1% probability of change is a 99% certainty the rate will stay the same.

Current Fed Funds Rate: 0%–0.25%

Probability of change from current policy:

For the week of December 19, 2011 – Vol. 9, Issue 51

>> Austin Mortgage Market Update 

QUOTE OF THE WEEK…“Do what you can with what you have where you are.”–Theodore Roosevelt

INFO THAT HITS US WHERE WE LIVE…The famous President’s sage advice from a century ago is still the appropriate approach to today’s housing market. In the midst of all the media noise, it’s always good to check what we do have and where we really are. For example, the Census Bureau reported that although the median sale price of new homes in October was down 15% over the last five years, it’s actually up 26% over the last ten. More evidence that housing still is a good investment over the long term.

A recent economic forecast from the National Association of Realtors (NAR) reports existing home sales are expected to grow by 1.2% this year and 5.1% in 2012. And although the median existing home price is predicted to dip about 4% this year, it should recover and go UP 2.6% in 2012. Sales should also jump to 5.22 million units from this year’s projected 4.97 million.

BUSINESS TIP OF THE WEEK…Now is a good time to think about setting goals. The key is to make those goals concrete–as specific as you can–with a time frame for when you want to achieve them.

>> Review of Last Week

EURO TRASH…It was another week of European worries trashing stock prices. The Euro Summit the week before failed to come up with the “bazooka” solution investors had been looking for. Then ratings agencies warned of potential further downgrades in the region. All this made Wall Streeters feel quite risk averse, causing them to exit the equity markets, which sent all three major indexes decidedly down for the week.

With our own economy, things weren’t so bad. Retail Sales were up for November, though less than expected, but up 6.7% versus a year ago. This wasn’t enough to impress the Fed, whose meeting Tuesday made it three years of interest rates at near-zero levels. The economic data isn’t great, but it is somewhat improving. Initial weekly jobless claims hit a 43-month low of 366,000. The Empire State and Philadelphia Fed Surveys of manufacturing in those regions were better than expected, although industrial production overall dropped a bit. 

For the week, the Dow ended down 2.6%, at 11866; the S&P 500 slipped down 2.8%, to 1220; and the Nasdaq dropped 3.5%, to 2555.

Investors were still nervous about Europe and the Fed’s statement didn’t say anything to concern traders, so bond prices held up well. The FNMA 3.5% bond we watch ended the week UP .91, at $102.22. This is of course good for interest rates and, once again, Freddie Mac’s weekly survey had national average fixed mortgage rates remaining at or near their all-time lows.

DID YOU KNOW?… This week’s PCE (Personal Consumption Expenditures) measures inflation by tracking changes in prices. Unlike last week’s Consumer Price Index, based on a fixed basket of goods and services, the PCE changes with consumer spending habits.

>> This Week’s Forecast

HOUSING, GDP, INFLATION…The week jams in a bunch of housing market reports and they’re mixed. On Tuesday, November Housing Starts and Building Permits should come in down a tad, but November Existing Home Sales are predicted to rise north of five million units. Friday, we’ll see November New Home Sales, forecast to edge up to a 313,000 annual rate.

Thursday will feature the Third Estimate for Third Quarter GDP, expected to stay an anemic 2.0%. Friday, Core PCE Prices, the Fed’s key measure of inflation, is forecast flat for November, which should make everyone happy. The stock market will be closed next Monday, December 26, in observance of the Christmas holiday.

>> The Week’s Economic Indicator Calendar

Weaker than expected economic data tends to send bond prices up and interest rates down, while positive data points to lower bond prices and rising loan rates.

Economic Calendar for the Week of Dec 19 – Dec 23

>> Federal Reserve Watch   

Forecasting Federal Reserve policy changes in coming months…Last week, the Fed kept the Funds Rate unchanged and that’s where economists expect it to stay well into the future. Note: In the lower chart, a 1% probability of change is a 99% certainty the rate will stay the same.

Current Fed Funds Rate: 0%–0.25%

Probability of change from current policy:

For the week of December 12, 2011 – Vol. 9, Issue 50

>> Austin Mortgage Market Update 

QUOTE OF THE WEEK…“Be not afraid of going slowly; be only afraid of standing still.”–Chinese Proverb

INFO THAT HITS US WHERE WE LIVE…The housing recovery may be proceeding slowly, but things are definitely not at a standstill. Earlier this year, an industry rent vs. buy index found it is more affordable to buy than rent a two-bedroom home in 72% of America’s 50 biggest cities. In fact, renting was less expensive than buying only in New York, Kansas City, San Francisco and Seattle. And in 10 of the cities where renting was relatively affordable versus ownership, people felt buying may still be a financially sound long-term decision.

A recent consumer study showed people are getting the message. With home prices now at such affordable levels, 62% of those surveyed said buying in today’s market is a good investment over the next 10 years. The most popular advice people would give to anyone thinking of purchasing a home is to avoid buying more house than they can afford. Good advice indeed.

BUSINESS TIP OF THE WEEK…Most people don’t base their buying decisions solely on logic. So if you’re having trouble trying to change someone’s mind, try instead to change their mood.

>> Review of Last Week

ANOTHER EUROPEAN TRIP…Investors again spent the week in Europe, at least as far as their mental focus was concerned. S&P put all 17 Euro nations on a ratings downgrade watch and the European Central Bank gave a cautious economic outlook. This bit of news sent stocks on an almost 200-point slide on Thursday. No matter. Last week’s summit meeting of eurozone officials announced tighter fiscal controls and help from both the European Central Bank and the International Monetary Fund, so stocks shot back up and ended the week ahead in all three major indexes.

Elsewhere, the economic data showed progress. China’s sharp decline in inflation for November was encouraging. Over here, initial jobless claims surprised to the upside, coming in at 381,000, while continuing claims dropped to 3.583 million, the first time they’ve been that low in a while. The preliminary Michigan Consumer Sentiment Survey for December hit a six-month high, which bodes well for consumer spending. 

For the week, the Dow ended UP 1.4%, at 12184; the S&P 500 moved UP 0.9%, to 1255; and the Nasdaq was UP 0.8%, to 2647.

Friday’s big day for stocks led to heavy selling in the bond market, as the news from Europe made investors way less risk averse. The FNMA 3.5% bond we watch ended the week down .75, at $101.31. National average mortgage rates on 30-year fixed-rate mortgages remained at record low levels for the sixth week in a row, as reported in Freddie Mac’s weekly survey.

DID YOU KNOW?… The European Central Bank, now much in the news, is the bank created to administer monetary policy for the countries which converted their currency to the Euro.

>> This Week’s Forecast

RETAIL, INFLATION, THE FED…There are no big housing reports this week. But there will be a few other economic topics worth noting. November Retail Sales on Tuesday are expected to remain in growth mode, encouraging evidence that consumers are still doing their best to support the recovery.

Later that day, we’ll hear from the Fed’s last meeting of the year. They’ll keep the Rate where it is, but their policy statement will be scrutinized as usual. The only thing that could shake our central bank from its low rate stance is a bump in inflation. But wholesale PPI inflation on Thursday and consumer CPI inflation on Friday are both expected to stay at benign levels.

>> The Week’s Economic Indicator Calendar

Weaker than expected economic data tends to send bond prices up and interest rates down, while positive data points to lower bond prices and rising loan rates.

Economic Calendar for the Week of Dec 12 – Dec 16

>> Federal Reserve Watch   

Forecasting Federal Reserve policy changes in coming months…This week, the Fed’s last meeting of the year is not expected to result in any change in the Fed Funds Rate. Economists feel this situation will remain for some time. Note: In the lower chart, a 1% probability of change is a 99% certainty the rate will stay the same.

Current Fed Funds Rate: 0%–0.25%

Probability of change from current policy:

For the week of December 5, 2011 – Vol. 9, Issue 49

>> Austin Mortgage Market Update 

QUOTE OF THE WEEK…“Motivation is the art of getting people to do what you want them to do because they want to do it.”–Dwight D. Eisenhower

INFO THAT HITS US WHERE WE LIVE…Enough people were motivated to buy new homes in October to push monthly sales up 1.3% to a 307,000 annual rate. Even better, the motivation was strong enough to send the median price to $212,300, UP 4% over a year ago. Going forward, what should motivate everyone is that the supply of new homes fell to 6.3 months. Nonetheless, new home sales need to get to an annual rate around 950,000 and some observers say that will take another few years.

Housing market pessimists had to be really disappointed by October’s Pending Home Sales. This measure of signed contracts for existing home sales that have not yet closed was UP 10.4% for the month and is 9.2% higher than it was a year ago. This bodes well for existing home sales a few months out. Additional home price data went in opposite directions. The Case-Shiller home price index in the 20 largest metros was down 0.6% in September, but the FHFA index registered a 0.9% price increase for homes financed with conforming mortgages.

BUSINESS TIP OF THE WEEK…A great thought this time of year: give generously without expecting anything in return–it will pay off in the long run.

>> Review of Last Week

YO-YO MARKETS…That’s how one chief investment officer described what’s been happening on Wall Street. The worst ever Thanksgiving week for stocks was followed by the S&P 500′s biggest weekly gain since March 2009, the Dow’s largest weekly gain since July 2009 and a seriously strong upturn for the Nasdaq. The bulls got back in control starting with some reassuring news for Europe. The Fed and five other central banks agreed to lower the cost of borrowing dollars for foreign banks. This doesn’t solve fiscal problems for the Europeans, but it does keep the money flowing to buy them more time.

Decent economic data kept the bulls on their charge. In addition to the housing news, sales for the first full weekend of holiday shopping were UP 16.4% over last year according to the National Retail Federation. ComScore reported Black Friday online sales were up 26% from last year. Then Friday’s November Employment Report showed 120,000 new jobs, plus revisions to October and November added another 72,000 payrolls. The unemployment rate dropped to 8.6%, but this was due to a decrease in the labor force of 315,000. There was also concern over the 0.1% drop in average hourly earnings. 

For the week, the Dow ended UP 7%, at 12019; the S&P 500 went UP 7.4%, to 1244; and the Nasdaq was UP 7.6%, to 2627.

Stocks were surging, so bonds should have tanked if things had gone by the book. But these days, not many things financial follow a predictable course. Bond performance was actually mixed, which turned out well for the FNMA 3.5% bond we watch. It ended the week up .86, to $102.06. According to Freddie Mac’s weekly survey, national average mortgage rates remained at or near record lows for the fifth week in a row.

DID YOU KNOW?… The Trade Balance reported this week is the country’s exports, minus imports. It is the largest component of our balance of payments.

>> This Week’s Forecast

LIGHT ON THE NEWS… This week won’t have much in the way of economic data, but it’s good to keep a watch on ISM Services, as that sector provides the vast majority of our jobs. This index is expected to be up a bit for November and still expanding. The Trade Balance is forecast to show a slightly higher deficit for October, while University of Michigan Consumer Sentiment should also stay near previous levels.

>> The Week’s Economic Indicator Calendar

Weaker than expected economic data tends to send bond prices up and interest rates down, while positive data points to lower bond prices and rising loan rates.

Economic Calendar for the Week of Dec 5 – Dec 9

>> Federal Reserve Watch   

Forecasting Federal Reserve policy changes in coming months…Economists see no change coming in the Fed Funds Rate well into next year. Of course, inflation will have to be watched. Note: In the lower chart, a 1% probability of change is a 99% certainty the rate will stay the same.

Current Fed Funds Rate: 0%–0.25%

Probability of change from current policy:

For the week of November 28, 2011 – Vol. 9, Issue 48

>> Austin Mortgage Market Update 

QUOTE OF THE WEEK…“One who is a master of patience is master of everything else.”–George Savile (1633–1695), English statesman, writer and politician

INFO THAT HITS US WHERE WE LIVE…The patient approach advocated by the 1st Marquess of Halifax is proving to be the right tactic for mastering today’s housing market. Last week, October Existing Home Sales inched up to an annual rate just under 5 million units. And although things appear to be improving only slowly, existing home sales are actually UP 13.5% from a year ago.

Even better, the months’ supply of existing homes fell to 8.0 and inventory is now down 13.8% versus a year ago. The naysayers jumped on the fact that the median price was also down. But a large portion of October sales came from distressed properties whose prices are heavily discounted. Although some see this as a negative, it’s what’s needed for inventories to be worked down and for the housing market to recover.

BUSINESS TIP OF THE WEEK…Planning is important but stay flexible. The unexpected often happens in business and flexibility keeps you open to the creative thinking needed to succeed.

>> Review of Last Week

NO THANKS… People feel positive around Thanksgiving, but folks on Wall Street spent the week in a decidedly negative mood. They were put there at the start by Congressional leaders who couldn’t get past partisan politics to deal with our nation’s fiscal issues. Then Moody’s fed the down vibe with cautious comments about France’s debt rating outlook. A third bummer came with Tuesday’s downward revision to Q3 GDP, coming in at a measly 2.0%. The net result? The worst ever Thanksgiving week for stocks.

There really were some things to be thankful for. The Q3 GDP report showed business investment growing at its fastest pace this year. Chain store sales were UP 3.7% over last year by one study and UP 2.8% by another. Incomes grew in October more than predicted, although spending grew less. Initial jobless claims stayed below 400,000. Finally, October Durable Goods orders were down slightly for the month, but if you take out volatile transportation, they are UP 11.7% from a year ago.

For the week, the Dow ended down 4.8%, at 11232; the S&P 500 went down 4.7%, to 1159; and the Nasdaq sank 5.1%, to 2442.

With stocks having such an awful week, you’d expect bonds to benefit immensely. Not so this time. With volumes down as usual on Black Friday’s shortened trading day, bond performance was mixed. The FNMA 3.5% bond we watch ended the week down .02, at $101.20. National average mortgage rates remained at or near record lows for the fourth week in a row, according to Freddie Mac’s weekly survey.

DID YOU KNOW?… The 1792 Buttonwood Agreement created the New York Stock Exchange. It was signed by 24 stockbrokers under a buttonwood tree outside 86 Wall Street.

>> This Week’s Forecast

NEW HOME SALES, PENDING HOME SALES, JOBS… Of great interest this week will be more housing market reports and the jobs numbers that are key to the real estate recovery. October New Home Sales are expected to hold steady, above the 300,000 level. September Pending Home Sales, indicating Existing Home Sales a few months out, look to be up a tad.

Friday, we get the November Employment Report. Although payrolls should rise, the number of new jobs is still not enough to bring down the unemployment rate.

>> The Week’s Economic Indicator Calendar

Weaker than expected economic data tends to send bond prices up and interest rates down, while positive data points to lower bond prices and rising loan rates.

Economic Calendar for the Week of Nov 28 – Dec 2

>> Federal Reserve Watch   

Forecasting Federal Reserve policy changes in coming months…The Fed says it wants to keep the Funds rate where it is through mid-2013 and economists expect that they will. Note: In the lower chart, a 1% probability of change is a 99% certainty the rate will stay the same.

Current Fed Funds Rate: 0%–0.25%

Probability of change from current policy:

For the week of November 14, 2011 – Vol. 9, Issue 46

>> Austin Mortgage Market Update 

QUOTE OF THE WEEK…“Life will always be to a large extent what we ourselves make it.”–Samuel Smiles, Scottish author and reformer 

INFO THAT HITS US WHERE WE LIVE…Like life, the situation in the housing market depends on what we make of it. Last week, both options were covered in the latest quarterly report from the National Association of Realtors (NAR). The good option: home sales in Q3 rose in all 50 states and Washington, D.C. The negative: the median existing single-family home price rose in only 39 of 150 metro areas, declining in 111 of them. Yet the NAR chief economist pointed out that the sales data was encouraging, because “Home sales need to recover first–only then can prices stabilize.”

More good news: inventory levels have been trending gradually down. Good reason for that was offered by NAR President Ron Phipps: “Housing affordability conditions have been at a record high this year, rents are rising and homes are selling for less than the cost of construction in most of the country. For people with secure jobs, good credit and long-term plans, today’s conditions will be remembered as a golden opportunity to enter the housing market.” Another survey told us a mere 5% boost in prices would motivate 11.7% of owners to sell their home.

BUSINESS TIP OF THE WEEK…Failure is a learning opportunity and nothing creative, innovative or exciting happens without risking failure.

>> Review of Last Week

ARRIVEDERCI, PRIME MINISTERS…Wall Street investors maintained their focus on Europe, but last week the developments were much more positive. Greek Prime Minister George Papandreou stepped down after upsetting everyone by proposing a popular vote on his country’s bailout package. Italy’s Prime Minister Silvio Berlusconi followed suit on Saturday. Earlier in the week, investor fears of political turmoil were allayed by a successful auction of Italian bonds. Stocks went in both directions, but by the end of hostilities on Friday, the Dow and S&P 500 were up for the week, with the Nasdaq off just a smidge.

Economic data over here was sparse but not terrible. Initial jobless claims came in 10,000 less than the week before, at 390,000. Continuing unemployment claims dropped 92,000 to 3.62 million. The trade deficit shrank in September, which hadn’t been expected. And even same-store chain store sales keep gaining, up around 3% from a year ago according to two different surveys.

For the week, the Dow ended UP 1.4%, to 12154; the S&P 500 was UP 0.8%, to 1264; but the Nasdaq slipped 0.3%, to 2677.

The European debt situation also had the bond market experiencing swings in both directions. But when all was said and done, mortgage bond prices suffered a little, as stocks surged on Friday. The FNMA 3.5% bond we watch ended the week down .86, to $101.19. National average mortgage rates were little changed, according to Freddie Mac’s weekly survey, staying at their recent extremely low levels.

DID YOU KNOW?… Building Permits reports the number of residential building permits issues the prior month. Investors use it to gauge consumer confidence in the economy. Any weakness suggests consumer spending contraction.

>> This Week’s Forecast

HOME BUILDING, INFLATION, RETAIL, MANUFACTURING… There’s lots to ponder this week and high on the list will be Thursday’s Housing Starts, expected to be down a bit for October, and Building Permits, expected to be up. We’ll also get the Fed’s favorite reading on inflation, the Core Consumer Price Index (Core CPI), which excludes volatile food and energy prices, and is forecast to remain under control.

Tuesday’s October Retail Sales are predicted up a tad, although at a lower rate than last month. Manufacturing should also be gaining, as measured by New York and Philly indexes, as well as Industrial Production and factory capacity.                            

>> The Week’s Economic Indicator Calendar

Weaker than expected economic data tends to send bond prices up and interest rates down, while positive data points to lower bond prices and rising loan rates.

Economic Calendar for the Week of Nov 14 – Nov 18

>> Federal Reserve Watch   

Forecasting Federal Reserve policy changes in coming months…The Funds rate should stay where it is through mid-2013, since that’s the Fed’s stated goal. They’re of course betting on inflation remaining under control during that time. Note: In the lower chart, a 1% probability of change is a 99% certainty the rate will stay the same.

Current Fed Funds Rate: 0%–0.25%

Probability of change from current policy: