For the week of March 7, 2011 – Vol. 9, Issue 10

>> Austin Mortgage Market Update

QUOTE OF THE WEEK…“There are no constraints on the human mind, no walls around the human spirit, no barriers to our progress except those we ourselves erect.”–Ronald Regan

INFO THAT HITS US WHERE WE LIVE…We should be especially careful to not erect barriers to our progress just because of a minor setback, like the one we had with last week’s Pending Home Sales. The National Association of Realtors (NAR) index of signed contracts on existing homes slipped in January for the second month in a row. But the drop wasn’t as bad as expected and, as the NAR’s chief economist said: “We should not expect the recovery to be in a straight upward path–it will zig-zag at times.”


The latest NAR overall forecast gave an interesting picture of that recovery. Existing home sales should grow 8.1% this year and another 5.2% in 2012, with the median price essentially flat in 2011 before gaining over 3% next year. New home sales are forecast up about 5% this year, then up over 55% for 2012, with the median price up a bit in 2011, then up 3.5% next year. Fannie Mae’s latest National Housing Survey reported that the vast majority of people believe housing prices will hold firm in 2011 and that Hispanics, African-Americans and Generation Y (18–34 years old) are more positive than other Americans about homeownership.

BUSINESS TIP OF THE WEEK…Do you know what’s the most precious commodity in business? Time! Return calls and e-mails immediately, deliver what clients want sooner than they expect and you’ll enhance your competitive edge.

>> Review of Last Week

SQUEAKING HIGHER…Investors who were worried about oil prices hitting two-year highs amidst Libyan turmoil sent stocks down Tuesday. But economic data continued to portray a steady if slow recovery. So stocks shot back up Thursday by enough to put all three indexes ahead for the week, even after dipping a bit on Friday.


Encouraging economic news appeared on all fronts. The ISM Services index, tracking the sector that employs over 85% of our workforce, reached its highest level since 2005. ISM Manufacturing also hit a multi-year high. Meanwhile, inflation measured by Core PCE Prices, was up just 0.1% in January and 0.8% the past year, well within the Fed’s acceptable range. Then Friday we had the February Employment Report with 192,000 new jobs overall. The private sector contributed 222,000 jobs, its 12th monthly gain in a row. And the unemployment rate unexpectedly dropped again, this time to 8.9%!

For the week, the Dow ended up 0.3%, at 12,170; the S&P 500 was up 0.1%, to 1,321; and the Nasdaq was up 0.1%, ending at 2,785.


Bond prices were hurt by the improving economic data, but went back up as a result of the safe-haven buying driven by continuing tensions in the Middle East and rising oil prices. The FNMA 4.0% bond we watch ended down slightly for the week, closing at $98.14. Mortgage rates dropped for the third week in a row according to Freddie Mac’s weekly survey of conforming mortgages. But buyers should note that these low rates will not last forever, as the improving employment picture will eventually edge them back up.

DID YOU KNOW?…The median home price is the midpoint price for all homes sold. 50% of selling prices were above it, 50% were below. It is less biased than the average home price, which can be skewed upward by a few high-priced homes.

>> This Week’s Forecast

WHAT’S UP WITH THE CONSUMER?…Frankly, it’s a pretty quiet week for economic news, but there are a few significant readings on the state of the consumer at the very end. Friday we see February’s Retail Sales reports, which are expected to show continued growth, both with and without auto sales included. The University of Michigan Consumer Sentiment Index should show consumer confidence holding pretty steady. Thursday, you’ll want to take note of Initial and Continuing Jobless Claims, as jobs remain key to the economic and housing market recovery.

>> 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 March 7 – March 11


Date Time (ET) Release For Consensus Prior Impact

Mar 9

10:30 Crude Inventories 3/5 NA 0.364M Moderate

Mar 10

08:30 Initial Unemployment Claims 3/5 382K 368K Moderate

Mar 10

08:30 Continuing Unemployment Claims 2/26 3.750M 3.774M Moderate

Mar 10

08:30 Trade Balance Jan –$41.5B –$40.6B Moderate

Mar 11

08:30 Retail Sales Feb 1.0% 0.3% HIGH

Mar 11

08:30 Retail Sales ex-auto Feb 0.6% 0.3% HIGH

Mar 11

09:55 U. of Michigan Consumer Sentiment Mar 76.5 77.5 Moderate

Mar 11

10:00 Business Inventories Jan 0.8% 0.8% Moderate


>> Federal Reserve Watch

Forecasting Federal Reserve policy changes in coming months…Last week Chairman Ben Bernanke told the Senate Finance Committee that even though economic conditions were improving, rates should stay low for his familiar “extended period” until he sees stronger job creation. 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%

After FOMC meeting on: Consensus
Mar 15 0%–0.25%
Apr 27 0%–0.25%
Jun 22 0%–0.25%


Probability of change from current policy:


After FOMC meeting on: Consensus
Mar 15 <1%
Apr 27 <1%
Jun 22 <1%