For the week of September 5, 2011 – Vol. 9, Issue 36

Please note: We all know mortgage rates are extremely low and refinance activity has increased; however, our primary focus is, and always will be, on providing professional, caring service to our partners. Thank you for trusting us to get the job done for you and your clients.

>> Austin Mortgage Market Update 

QUOTE OF THE WEEK…“Believing in progress does not mean believing that any progress has yet been made.”–Franz Kafka


INFO THAT HITS US WHERE WE LIVE…Major progress has yet to be made in the housing recovery, but we can keep believing in it, since the data isn’t all negative. For example, Pending Homes Sales (contracts on existing homes) were down 1.3% in July, but were UP 2.4% in June, so Existing Home Sales should be up for August. In addition, July’s reading was UP 14.4% over last year. The National Association of Realtors chief economist said, “rising rents, record high affordability conditions and investors buying real estate as a future inflation hedge” bode well for real estate.


The latest Case-Shiller National Home Price Index reported home prices UP 3.6% in the second quarter compared to the first, though still down 5.9% from a year ago. This puts home prices at the level they were in early 2003. The 20-city composite index was UP 1.1% for June, but down 4.5% versus last year. Best of all, none of the 20 cities posted monthly declines in June and 19 out of 20 showed increases. Also, data aggregator and analytics firm CoreLogic reported home prices up in July for the fourth month in a row.


BUSINESS TIP OF THE WEEK…Be prepared to succeed when the chance presents itself. We can’t control when an opportunity will happen, but we can control how well we’re prepared for it.

>> Review of Last Week

NO JOBS…No new jobs were added to payrolls in August, according to the national Employment Report released Friday. That was all investors needed to hear to start a stock selling spree, as the Dow lost 253 points for the day and ended down a fraction for the week. Jobs are important to the health of the housing market, but real estate is local. So earlier in the week it was encouraging to see the Bureau of Labor Statistics report that unemployment rates in July fell, compared to a year ago, in 69% of the 372 metro areas they track.


A mix of good and bad news continued. The Consumer Confidence Index for August hit its lowest level since April 2009. But the August ISM Manufacturing Index came in better than expected, a tick above 50, still indicating expansion. Final Q2 Productivity was down a trifle, but Personal Income was up for July. And Core PCE inflation (excluding food and energy) was well within the Fed’s target range, up only 1.6% since last year.


For the week, the Dow ended down 0.4%, at 11240; the S&P 500 was down 0.2%, to 1174; and the Nasdaq was flat, at 2480.


The weak jobs report, combined with continued concerns over European sovereign debt, had investors scurrying to the safe haven of bonds, sending prices higher. The FNMA 3.5% bond we’re tracking closed Friday at $101.22, up .97 for the week. With mortgage bond prices up, rates were down, as national average mortgage rates stayed at or near historic lows. 


DID YOU KNOW?…This week’s Fed Beige Book is a summary of economic conditions in each Federal Reserve region around the country. It’s an indicator of what the central bank may do at its meeting in two weeks.

>> This Week’s Forecast

HAPPY LABOR DAY!…All the best to you this Labor Day, as we honor the contribution that working men and women make to our country.


The financial markets are closed today and the rest of the week is light on economic news. ISM Services should stay above 50, showing modest expansion in this sector of the economy, which accounts for about 85% of our jobs. Initial Unemployment Claims are expected to hold just above 400,000, not where they should be, but well below their worst levels. The July Trade Balance is forecast to shrink a bit with more export activity from U.S. firms.

>> 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 Sep 5 – Sep 9


 Date Time (ET) Release For Consensus Prior Impact

Sep 6

10:00 ISM Services Aug 51.0 52.7 Moderate

Sep 7

14:00 Fed Beige Book Sep NA NA Moderate

Sep 8

08:30 Initial Unemployment Claims 9/3 400K 409K Moderate

Sep 8

08:30 Continuing Unemployment Claims 8/27 3.700M 3.735M Moderate

Sep 8

08:30 Trade Balance Jul -$51.5B -$53.1B Moderate

Sep 8

11:00 Crude Inventories 9/3 NA 5.281M Moderate


>> Federal Reserve Watch   

Forecasting Federal Reserve policy changes in coming months…Since the Fed announced the Funds Rate should stay near zero through the first half of 2013, no one is predicting any hikes. 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  
Sep 20 0%–0.25%  
Nov 2 0%–0.25%  
Dec 13 0%–0.25%