Texas Mortgage Market Update – For the week of November 11, 2013

For the week of November 11, 2013 – Vol. 11, Issue 45

>> Texas Mortgage Market Update

QUOTE OF THE WEEK… “For those who believe, no proof is necessary. For those who don’t believe, no proof is possible.” –Stuart Chase, American economist

INFO THAT HITS US WHERE WE LIVE… People who don’t believe in the housing recovery will no doubt ignore the latest proof of its strength. The National Association of Realtors (NAR) reported that most metro areas saw solid year-over-year price gains in the third quarter. The national median price posted its strongest annual growth in almost eight years. For existing single-family homes, the median price rose in 88% of the markets measured, based on Q3 closings, compared to last year.

However, with “the ongoing situation of more buyers than sellers in the market,” the NAR’s chief economist expects prices “to rise slowly at a single-digit growth rate in 2014.” This of course is good news for anyone worried about homes becoming less affordable. In addition, the National Association of Home Builders (NAHB) said builder confidence in the 55+ housing market continued to improve in Q3 compared to a year ago. The single-family index hit the highest third quarter level since 2008, posting the eighth straight quarter of year-over-year gains.

BUSINESS TIP OF THE WEEK… People can hit a wall when they’re 95% of the way to a goal, becoming complacent, hesitant, or even negative about what’s been accomplished. Instead, they should use that 95% as the springboard to reach what they want to achieve.

>> Review of Last Week

NICE JOBS… Friday gave us a very much stronger than expected October jobs report, which then did a nice job on stock prices. The Dow set a new record high by the close of festivities, while the broadly based S&P 500 registered its fifth straight weekly gain. The tech-heavy Nasdaq failed to join the party, down a tick for the second week in a row. The good news amounted to 204,000 payrolls added to the U.S. economy in October, over twice the number expected. Unfortunately, the unemployment rate ticked up to 7.3%, as the labor force dropped by 720,000.

Other news of the week included the Advanced estimate for real GDP growth in Q3 hitting 2.8%, matching its biggest increase in a year. Investment in the housing sector stayed strong, up 14.6%, but consumer spending slowed to a 1.5% gain. Good economic news continued with the ISM Services index showing greater than expected growth for October. Even weekly jobless claims dropped by 9,000. So, despite the predictions from politicians and pundits that the partial government shutdown would have significant economic effects, the private sector doesn’t seem to have been listening.

The week ended with the Dow up 0.9%, to 15762; the S&P 500 up 0.5%, to 1771; but the Nasdaq slipped 0.1%, to 3919.

The October jobs surprise slammed bonds hard. The prospect of a healthier economy and a sooner start to the Fed tapering its bond purchases sent prices southward. The FNMA 3.5% bond we watch ended the week down 1.73, to $100.28. National average fixed mortgage rates rebounded slightly in Freddie Mac’s Primary Mortgage Market Survey for the week ending November 7. Their chief economist put it to the “more positive economic data releases.” Remember, mortgage rates can be extremely volatile, so check with your mortgage professional for up to the minute information.

DID YOU KNOW?… GDP growth is an increase in the production of goods and services. “Nominal” growth includes inflation, while “real” GDP growth is nominal growth minus inflation.

>> This Week’s Forecast

TRADE DEFICIT WIDENS, PRODUCTIVITY SLIDES, MANUFACTURING SO-SO… This week is relatively quiet, but we may see some useful data. The Trade Balance for September is expected to come in with the deficit unchanged, as exports continue to trail imports. Productivity during the three months ending September 30 is forecast down, but still expanding. Manufacturing is predicted to grow slowly, with Industrial Production up a tad for October and the NY Empire Manufacturing Index ahead for November.

The stock markets will be open on Veteran’s Day, today, but the bond market will be closed.

>> 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 11 – Nov 15

 Date Time (ET) Release For Consensus Prior Impact
W
Nov 13
14:00 Federal Budget Oct NA –$120.0B Moderate
Th
Nov 14
08:30 Initial Unemployment Claims 11/9 330K 336K Moderate
Th
Nov 14
08:30 Continuing Unemployment Claims 11/2 2.862M 2.868M Moderate
Th
Nov 14
08:30 Trade Balance Sep –$38.8B –$38.8B Moderate
Th
Nov 14
08:30 Productivity – Prelim. Q3 2.0% 2.3% Moderate
Th
Nov 14
11:00 Crude Inventories 11/9 NA 1.577M Moderate
F
Nov 15
08:30 NY Empire Manufacturing Index Nov 4.3 1.5 Moderate
F
Nov 15
09:15 Industrial Production Oct 0.2% 0.6% Moderate
F
Nov 15
09:15 Capacity Utilization Oct 78.3% 78.3% Moderate

>> Federal Reserve Watch

Forecasting Federal Reserve policy changes in coming months… The debate continues about when the Fed will start tapering its bond purchases, but economists pretty much agree the Funds Rate won’t budge, well into 2014. 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
Dec 18 0%–0.25%
Jan 29 0%–0.25%
Mar 19 0%–0.25%

Probability of change from current policy:

After FOMC meeting on: Consensus
Dec 18      <1%
Jan 29      <1%
Mar 19      <1%

 

Texas Mortgage Market Update – For the week of November 4, 2013

For the week of November 4, 2013 – Vol. 11, Issue 44

>> Texas Mortgage Market Update

QUOTE OF THE WEEK… “There are two ways of spreading light: to be the candle or the mirror that reflects it.” –Edith Wharton, American writer

INFO THAT HITS US WHERE WE LIVE… This week we’ll have to be the candle that spreads light on the housing recovery, as the September Pending Home Sales Index didn’t shine too brightly. This measure of contracts signed on existing homes fell 5.6% from August to September, suggesting a dip in closings for that type of property during Q4. The September drop was put to a lower level of consumer confidence, plus higher mortgage rates and home prices, although home price gains also reassure buyers that they’re making an appreciating investment.

But please note. Those slightly higher mortgage rates were still near historical lows and have since receded. In addition, 2013 should be a solid year for home sales overall, with the National Association of Realtors (NAR) predicting total existing home sales 10% higher than in 2012. The NAR also expects this year’s 11% to 11.5% price gain to be followed by a 5% to 6% increase for 2014. The S&P/Cash Shiller 20-City Composite index of home prices showed a 12.8% annual gain in August, its biggest since February 2006.

BUSINESS TIP OF THE WEEK… You always want to hit all the points you’ve worked into your pitch. But if the other person starts tuning you out, change the conversation to his or her needs. It gets you closer to the sale and leaves a good impression.

>> Review of Last Week

MIXED BAG… Inspired by decent manufacturing data and corporate earnings, investors sent the Dow and S&P 500 upward for the fourth week in a row, but the tech-heavy Nasdaq dipped, ending its two week winning streak. The Fed met and although they didn’t begin to taper their bond buying program, their policy statement was read as a bit hawkish, indicating tapering could start sooner. This was because they deleted the reference to “tightening financial conditions” from their September statement and did not cite any negative economic impact from the partial government shutdown.

That was corroborated by Friday’s ISM Manufacturing index, which was up for October. Popular opinion during the federal shutdown was that manufacturing would suffer. So much for popular opinion. September Industrial Production enjoyed the biggest monthly gain since February, hitting its highest level since March 2008. Inflation stayed under control, the wholesale Producer Price Index (PPI) down a tad and the Consumer Price Index (CPI) up just a bit for September. Unfortunately, September Retail Sales dipped a little and Pending Home Sales a lot.

The week ended with the Dow up 0.3%, to 15616; the S&P 500 up 0.1%, to 1762; but the Nasdaq slid 0.5%, to 3922.

The Fed policy statement wasn’t as dovish as some had expected, sparking a wave of bond selling. The FNMA 3.5% bond we watch ended the week down .21, at $102.01. For the week ending October 31, national average mortgage rates dropped again in Freddie Mac’s Primary Mortgage Market Survey. Their chief economist noted that coming out of the Fed meeting, “there was no policy change, which should help sustain low mortgage rates in the near future.” Remember, mortgage rates can be extremely volatile, so check with your mortgage professional for up to the minute information.

DID YOU KNOW?… The Fed’s statements are called hawkish when they favor increasing interest rates and tapering bond buying, dovish when they favor maintaining low interest rates and current bond buying levels.

>> This Week’s Forecast

GDP AND JOB GROWTH TEPID, BUT INFLATION IN CHECK… The first, or “Advanced” estimate of GDP for Q3 is expected to show the economy growing even more slowly, dipping down below 2%. Friday we get the October Employment Report and job growth won’t be very hot either, just 100,000 new Nonfarm Payrolls forecast for the month and the Unemployment Rate back up to 7.3%. At least inflation is predicted to stay under control, Core PCE Prices remaining within Fed guidelines.

>> 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 4 – Nov 8

 Date Time (ET) Release For Consensus Prior Impact
Tu
Nov 5
10:00 ISM Services Oct 54.0 54.4 Moderate
W
Nov 6
10:00 Leading Economic Indicators (LEI) Sep 0.6% 0.7% Moderate
W
Nov 6
10:30 Crude Inventories 11/2 NA 4.087M Moderate
Th
Nov 7
08:30 Initial Unemployment Claims 11/2 335K 340K Moderate
Th
Nov 7
08:30 Continuing Unemployment Claims 10/26 2.863M 2.881M Moderate
Th
Nov 7
08:30 GDP–Advanced Q3 1.9% 2.5% Moderate
Th
Nov 7
08:30 GDP Chain Deflator–Adv. Q3 1.4% 0.6% Moderate
F
Nov 8
08:30 Average Workweek Oct 34.4 34.5 HIGH
F
Nov 8
08:30 Hourly Earnings Oct 0.2% 0.1% HIGH
F
Nov 8
08:30 Nonfarm Payrolls Oct 100K 148K HIGH
F
Nov 8
08:30 Unemployment Rate Oct 7.3% 7.2% HIGH
F
Nov 8
08:30 Personal Income Sep 0.2% 0.4% Moderate
F
Nov 8
08:30 Personal Spending Sep 0.2% 0.3% HIGH
F
Nov 8
08:30 Core PCE Prices Sep 0.1% 0.2% HIGH
F
Nov 8
09:55 Univ. of Michigan Consumer Sentiment Nov 75.3 73.2 Moderate

>> Federal Reserve Watch

Forecasting Federal Reserve policy changes in coming months… No matter when tapering of the Fed’s bond purchases begins, economists expect the Funds Rate to stay right where it is well into next year. 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
Dec 18 0%–0.25%
Jan 29 0%–0.25%
Mar 19 0%–0.25%

Probability of change from current policy:

After FOMC meeting on: Consensus
Dec 18      <1%
Jan 29      <1%
Mar 19      <1%

Texas Mortgage Market Update – For the week of August 12, 2013

For the week of August 12, 2013 – Vol. 11, Issue 32

>> Texas Mortgage Market Update

QUOTE OF THE WEEK… “The best way out is always through.” –Robert Frost, American poet

INFO THAT HITS US WHERE WE LIVE… We’re definitely working our way through the housing recovery, with the latest data showing strong year-over-year gains in prices and sales. The National Association of Realtors (NAR) reported the national median existing home price increasing at an annual rate of 12.2% in Q2, from $181,300 to $203,500. That’s the biggest yearly price boost since Q4 of 2005. Sales didn’t do too badly either, up 12.3% annually in Q2 versus a year ago. The 5.06 million annual rate for the quarter was the highest reached since Q2 of 2007.

A leading provider of real estate data and analytics recorded home prices up 1.9% in June, gaining for the 16th month in a row. For the year, they had home prices increasing 11.9%, trending at the fastest upward pace since 1977. Finally, it was reported that Fannie Mae posted a $10.1 billion profit in Q2, almost double the Q2 profit of a year ago. They will now pay a $10.2 billion dividend to the Treasury, which owns $117.1 billion of the company’s senior preferred stock. This is quite a turnaround for Fannie Mae from the dark days of 2008.

BUSINESS TIP OF THE WEEK… The digital world has created some bad communication habits. Shooting emails back and forth can hurt productivity and distract you from doing tasks that really matter. If an email chain goes beyond two replies, pick up the phone.

>> Review of Last Week

QUIET DOWN… Those two words perfectly describe the week’s stock market performance. The Nasdaq was down, while the Dow and the S&P 500 fell from their record highs, with the Dow ending its longest weekly winning streak since August of last year. But these down movements could be explained by the fact that Wall Street was very quiet, with low trading volumes and a paucity of quarterly corporate earnings reports. There was also negative economic data, with wholesale inventories down 0.2% in June after being off 0.6% in May.

But the rest of the economic reports were actually encouraging. The trade deficit dropped by 22.4% in June, to $34.2 billion, the smallest recorded since October 2009. The ISM Services index showed stronger than expected growth in that important job-creating sector of the economy. Weekly initial jobless claims came in at 333,000 versus the 340,000 expected. And jobless claims have now fallen in the last month to their lowest level since 2007.

The week ended with the Dow down 1.5%, to 15426; the S&P 500 down 1.1%, to 1691; and the Nasdaq down 0.8%, to 3660.

Bonds were hurt by the good economic data, but helped by falling stocks. The FNMA 3.5% bond we watch ended the week up just .02, to $100.32. Freddie Mac’s Primary Mortgage Market Survey had national average fixed mortgage rates little changed for the week ending August 8. Remember, mortgage rates can be extremely volatile, so check with your mortgage professional for up to the minute information. The Mortgage Bankers Association’s purchase loan index was up 1% for the week ending August 2, and up 8% over a year ago.

DID YOU KNOW?… The median is a type of average found by arranging values in order and then selecting the one in the middle. The median is useful where there are very large extreme values that would skew the data.

>> This Week’s Forecast

CONSUMERS SPEND, PRICES HOLD, FACTORIES HUM, BUILDERS UPBEAT… With economic data, it’s feast or famine. This week offers a smorgasbord of statistics expected to show the recovery continuing its slow but steady pace. July Retail Sales should reveal another month of growth in consumer spending at stores. Maybe that’s because prices are still under control, according to the July Consumer Price Index (CPI) forecast. The prices businesses pay, measured by the Producer Price Index (PPI), are also predicted to be holding.

On the factory front, the Philadelphia Fed and NY Empire Manufacturing indexes and Industrial Production and Capacity Utilization should all register higher numbers. We’ll also take the pulse of home builders, who are expected to be feeling upbeat, if not yet thrilled, about the future. July Housing Starts and Building Permits are forecast modestly up for the month.

>> 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 Aug 12 – Aug 16

 Date Time (ET) Release For Consensus Prior Impact
M
Aug 12
14:00 Federal Budget Jul –$96.0B –$69.6B Moderate
Tu
Aug 13
08:30 Retail Sales Jul 0.2% 0.4% HIGH
Tu
Aug 13
10:00 Business Inventories Jun 0.1% 0.1% Moderate
W
Aug 14
08:30 Producer Price Index (PPI) Jul 0.3% 0.8% Moderate
W
Aug 14
08:30 Core PPI Jul 0.2% 0.2% Moderate
W
Aug 14
10:30 Crude Inventories 8/10 NA –1.320M Moderate
Th
Aug 15
08:30 Initial Unemployment Claims 8/10 339K 333K Moderate
Th
Aug 15
08:30 Continuing Unemployment Claims 8/3 3.000M 3.018M Moderate
Th
Aug 15
08:30 Consumer Price Index (CPI) Jul 0.2% 0.5% HIGH
Th
Aug 15
08:30 Core CPI Jul 0.2% 0.2% HIGH
Th
Aug 15
08:30 NY Empire Manufacturing Index Aug 6.0 9.46 Moderate
Th
Aug 15
09:15 Industrial Production Jul 0.4% 0.3% Moderate
Th
Aug 15
09:15 Capacity Utilization Jul 78.0% 77.8% Moderate
Th
Aug 15
10:00 Philadelphia Fed Index Aug 10.0 19.8 HIGH
F
Aug 16
08:30 Housing Starts Jul 895K 836K Moderate
F
Aug 16
08:30 Building Permits Jul 934K 911K Moderate
F
Aug 16
08:30 Productivity – Prelim. Q2 0.0% 0.5% Moderate
F
Aug 16
09:55 Univ. of Michigan Consumer Sentiment Aug 85.1 85.1 Moderate

>> Federal Reserve Watch

Forecasting Federal Reserve policy changes in coming months… There’s still a lot of yak about the Fed tapering its bond buying program, but no one expects them to touch the Funds Rate for quite 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%

After FOMC meeting on: Consensus
Sep 18 0%–0.25%
Oct 30 0%–0.25%
Dec 18 0%–0.25%

Probability of change from current policy:

After FOMC meeting on: Consensus
Sep 18      <1%
Oct 30      <1%
Dec 18      <1%

 

Texas Mortgage Market Update – For the week of August 5, 2013

For the week of August 5, 2013 – Vol. 11, Issue 31

>> Texas Mortgage Market Update

QUOTE OF THE WEEK… “Discontent is the first necessity of progress” –Thomas Edison, American inventor

INFO THAT HITS US WHERE WE LIVE… Many people were not very content with last week’s Pending Home Sales report. This measure of contracts signed to buy existing homes fell 0.4% in June. For some observers, that raised concerns about future Existing Home Sales. However, the prior month’s report measured Pending Home Sales up 5.8%, so one could reasonably expect a rebound in existing home closings come July. We’ll see.

There was absolutely no discontent expressed around the Standard & Poor’s/Case-Shiller home price index. This revealed home prices in 20 major U.S. metros were up 1% in May and up a very impressive 12.2% versus a year ago. By this index’s measure, home prices are still down from their peak in 2006. But the peak-to-trough decline is now about a third smaller than it was as recently as March 2012. This is a national average. Home prices in two of Case-Shiller’s 20 cities have actually hit all-time highs, going past peaks set in 2007 and 2006!

BUSINESS TIP OF THE WEEK… Productivity experts suggest following a simple daily routine to stay on track. Take 5 minutes at the start to set the day’s goals. Then check how you’re doing every hour. Spend a few minutes at the end of the day to evaluate your results.

>> Review of Last Week

JOBS DOWN, STOCKS UP… Friday, the July Employment Report’s nonfarm payrolls number fell short of estimates, but two major stock indexes still logged small gains, to close the week at record highs, the Dow for the 30th time and the S&P 500 for the 25th time this year. The tech-heavy Nasdaq index didn’t do too badly either. July’s 162,000 new nonfarm payrolls were joined by downward revisions to prior months for a net gain of only 136,000 jobs. But the unemployment rate dipped to 7.4%, although about half of the decline was attributed to a reduction in the labor participation rate, resulting in a drop in the labor force of 37,000 people.

This weaker than expected jobs report followed a Fed meeting that called economic growth “modest” now, instead of “moderate.” Those words are synonyms in the real world, but in Fedspeak, they signal a downgrade. The Fed therefore said it wasn’t going to taper bond purchases just yet, which totally pleased investors. There was also good news that actually was good. The advanced estimate for Q2 GDP pegged growth at 1.7%, beating estimates. Manufacturing surprised to the upside, with the ISM up to 55.4, ahead of forecasts. In addition, new weekly jobless claims fell by 17,000 to 326,000.

The week ended with the Dow up 0.6%, to 15658; the S&P 500 up 1.1%, to 1710; and the Nasdaq up 2.1%, to 3690.

A roller coaster week in the bond market ended on an uptick, as the disappointing jobs report inspired a flight to the safety of bonds. The FNMA 3.5% bond we watch ended the week up .02, to $100.30. Freddie Mac’s Primary Mortgage Market Survey for the week ending August 1 reported national average fixed mortgage rates edged up after two weeks of declines. This didn’t reflect the bond market’s reaction to the Fed statement, which came the next day. Remember, mortgage rates can be extremely volatile, so check with your mortgage professional for up to the minute information.

DID YOU KNOW?… Fiscal policy refers to decisions by the President and Congress that usually relate to taxation and government spending and have the goals of full employment, price stability, and economic growth.

>> This Week’s Forecast

SERVICES SECTOR UP, TRADE DEFICIT DOWN… A very quiet week for economic reports, a welcome respite after last week’s data derby plus Fed meeting melodrama. The ISM Services index is expected to show continued expansion in July. That sector of the economy generates well over 80% of U.S. jobs, so growth there bodes well for the recovery.

The Trade Balance for June unfortunately is forecast still north of $40 billion for June, although this is down from May’s reading. It should be noted that a big part of the country’s imports expenditure is for oil.

>> 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 Aug 5 – Aug 9

 Date Time (ET) Release For Consensus Prior Impact
M
Aug 5
10:00 ISM Services Jul 53.2 52.2 Moderate
Tu
Aug 6
08:30 Trade Balance Jun –$43.4B –$45.0B Moderate
W
Aug 7
10:30 Crude Inventories 8/3 NA 0.431M Moderate
Th
Aug 8
08:30 Initial Unemployment Claims 8/3 340K 326K Moderate
Th
Aug 8
08:30 Continuing Unemployment Claims 7/27 2.975M 2.951M Moderate

>> Federal Reserve Watch

Forecasting Federal Reserve policy changes in coming months… With the Fed’s dimmer view of economic growth coming out of last week’s meeting, the Funds Rate is expected to remain super low well into 2014. 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 18 0%–0.25%
Oct 30 0%–0.25%
Dec 18 0%–0.25%

Probability of change from current policy:

After FOMC meeting on: Consensus
Sep 18      <1%
Oct 30      <1%
Dec 18      <1%

 

Texas Mortgage Market Update – For the week of July 29, 2013

For the week of July 29, 2013 – Vol. 11, Issue 30

>> Texas Mortgage Market Update

QUOTE OF THE WEEK… “If you don’t understand the details of your business, you are going to fail.” –Jeff Bezos, founder and CEO of Amazon.com

INFO THAT HITS US WHERE WE LIVE… It was certainly important to understand the details of last week’s Existing Home Sales report. The headline numbers showed June Existing Home Sales were down a disappointing 1.2%, to a 5.08 million annual rate. But other details were encouraging. Existing Home Sales are up 15.2% over a year ago. The median price of an existing home rose and is now up 13.5% from a year ago. Sales are near their highest levels since November 2009, when they were spiked by the big home buyer tax credit. Existing home sales remain above the 5 million a year threshold, a very decent place to be.

No need to dig into the details of New Home Sales to see success. New single-family home sales shot up 8.3% in June, to a 497,000 annual rate, their highest level since May 2008. These sales are now up a humongous 38.1% versus a year ago. The median price of a new home also gained for the month and is now up 7.4% from a year ago. For those worried about how the recent uptick in mortgage rates would affect sales, this first look at purchase contracts signed in June shows no impact. The FHFA index of prices for homes financed with conforming mortgages was up 0.7% in May, up 7.3% over a year ago.

BUSINESS TIP OF THE WEEK… Learn all you can about the people you want as clients. Check into their social networks and blogs. Then when you get together, you can offer them something meaningful and create immediate rapport.

>> Review of Last Week

TWO UP, ONE SIDEWAYS… The Dow and Nasdaq stock indexes both closed the week marginally ahead, while the S&P 500 essentially went sideways, off less than half a point. These tepid performances reflected the wary mood of investors, as corporate earnings reports were mixed, surprising both to the upside and the down. Wall Street may also have been cautiously looking ahead to this week, packed with market-moving items, including Q2 GDP, another Fed meeting, and the July Employment Report. This isn’t to say investors aren’t still hopeful, as the Dow and S&P 500 are up 19% on the year and the Nasdaq is up 20%!

The economic data reported during the week continued to deliver mixed messages. June Durable Goods Orders beat expectations, but when the volatile transportation sector was excluded, the number missed estimates, coming in flat. New Home Sales were up for June, but Existing Home Sales dipped. Continuing unemployment claims slid below the 3 million threshold, but new weekly jobless claims edged up to 343,000. Happily, on Friday, the University of Michigan Consumer Sentiment Index blew past analyst predictions.

The week ended with the Dow up 0.1%, to 15559; the S&P 500 flat, at 1692; and the Nasdaq up 0.7%, to 3613.

The bears were back in control of the bond market, as the light week of economic data was positive enough to nudge prices down. The FNMA 3.5% bond we watch ended the week down .82, to $100.28. Freddie Mac’s Primary Mortgage Market Survey for the week ending July 25 showed national average fixed mortgage rates easing for the second week in a row. Remember, mortgage rates can be extremely volatile, so check with your mortgage professional for up to the minute information. The Mortgage Bankers Association’s Purchase Loan Index was off 2% for the week ending July 19, but up 6% over a year ago.

DID YOU KNOW?… This week’s Employment Report is released by the Commerce Department, one of 15 departments in the executive branch of the federal government. Commerce looks after a wide range of U.S. economic and business activities.

>> This Week’s Forecast

PENDING HOME SALES AND GDP SLIDE, THE FED MEETS, JOBS HOLD… What an action packed week if you’re into economic data (like we are). Pending Home Sales should be down a tad for June, and the Advanced GDP reading for Q2 is forecast to show economic growth even slower than it’s been. We’ll see what the Fed says about that, coming out of their FOMC Rate Decision meeting on Wednesday.

The week ends with the July Employment Report, expected to register 188,000 new Nonfarm Payrolls, as job creation holds to a moderate pace. The Unemployment Rate is predicted to inch down to 7.5%. Inflation should be OK, according to Core PCE Prices, and manufacturing should show growth in the ISM Index and Chicago PMI. Enough data for you?

>> 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 July 29 – Aug 2

 Date Time (ET) Release For Consensus Prior Impact
M
Jul 29
10:00 Pending Home Sales Jun –1.7% 6.7% Moderate
Tu
Jul 30
10:00 Consumer Confidence Jul 81.6 81.4 Moderate
W
Jul 31
08:30 GDP – Advanced Q2 1.1% 1.8% Moderate
W
Jul 31
08:30 GDP Chain Deflator – Advanced Q2 1.2% 1.2% Moderate
W
Jul 31
08:30 Employment Cost Index Q2 0.4% 0.3% HIGH
W
Jul 31
09:45 Chicago PMI Jul 51.5 51.6 HIGH
W
Jul 31
10:30 Crude Inventories 7/27 NA –2.825M Moderate
W
Jul 31
14:00 FOMC Rate Decision 7/31 0%–0.25% 0%–0.25% HIGH
Th
Aug 1
08:30 Initial Unemployment Claims 7/27 345K 343K Moderate
Th
Aug 1
08:30 Continuing Unemployment Claims 7/20 2.995M 2.997M Moderate
Th
Aug 1
10:00 ISM Index Jul 51.5 50.9 HIGH
F
Aug 2
08:30 Average Workweek Jul 34.5 34.5 HIGH
F
Aug 2
08:30 Hourly Earnings Jul 0.2% 0.4% HIGH
F
Aug 2
08:30 Nonfarm Payrolls Jul 175K 195K HIGH
F
Aug 2
08:30 Unemployment Rate Jul 7.5% 7.6% HIGH
F
Aug 2
08:30 Personal Income Jun 0.5% 0.5% Moderate
F
Aug 2
08:30 Personal Spending Jun 0.4% 0.3% HIGH
F
Aug 2
08:30 PCE Prices – Core Jun 0.2% 0.1% HIGH

>> Federal Reserve Watch

Forecasting Federal Reserve policy changes in coming months…Even if the Fed’s bond purchases start to taper, Chairman Bernanke has stated they won’t raise the super low Funds Rate until unemployment drops to 6.5%, a level not expected any time soon. 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
Jul 31 0%–0.25%
Sep 18 0%–0.25%
Oct 30 0%–0.25%

Probability of change from current policy:

After FOMC meeting on: Consensus
Jul 31      <1%
Sep 18      <1%
Oct 30      <1%

Texas Mortgage Market Update – For the week of July 15, 2013

For the week of July 15, 2013 – Vol. 11, Issue 28

>> Texas Mortgage Market Update

QUOTE OF THE WEEK… “Difficulties are just things to overcome, after all.” –Ernest Shackleton, Antarctic explorer

INFO THAT HITS US WHERE WE LIVE… Some see the recent rise in mortgage rates as a difficulty, but the latest Fannie Mae National Housing Survey posits a different point of view. Their chief economist says: “The spike in mortgage rate expectations this month…may increase housing activity in the near term by driving urgency to buy.” He explains: “Consumers may recognize that today’s still favorable mortgage rates and homeownership affordability levels will recede over time…. More prospective homebuyers may be deciding that now is the time to get off the fence.”

The share of survey respondents who believe mortgage rates will increase hit a record high 57%. And the share who believe home prices will go up in the year also came in at a record 57%. So guess what? 72% of respondents believe now is a good time to buy! Rates may ease anyway. The current rise was attributed to the Fed’s announcement it could begin tapering its bond purchases as soon as September. This sent bond prices down and mortgage rates up. But last week, comments from the Fed Chairman, reported below, implied the tapering is off.

BUSINESS TIP OF THE WEEK… As your last task of the workday, create tomorrow’s to-do list. Then next day, make those tasks your primary focus: if it’s not on the list, don’t do it.

>> Review of Last Week

THANKS, BEN… Wall Street owes a big thank you to Fed Chairman Ben Bernanke. The Dow and S&P 500 both ended the week at all-time highs, while the Nasdaq, ahead seven sessions in a row, enjoyed its longest winning streak in two years. Observers credited these blowout performances to remarks from Bernanke. The minutes from the last Fed meeting had left investors worried because some central bankers feel a tapering of their bond purchases could happen “soon.” But later, the Chairman clearly stated: “Highly accommodative monetary policy for the foreseeable future is what’s needed.” He said low inflation and high unemployment mean the Fed needs to press on with its stimulus.

Stimulus, of course, means the Fed’s $85 billion a month bond buying spree and rock-bottom Federal Funds Rates. All of this is good for business, while the Fed’s mortgage bond purchases keep those prices up and mortgage rates down. Bernanke was so successful in relieving investors’ fears, that they basically ignored the economic data that missed estimates. PPI wholesale inflation ran hotter than expected in June and Michigan Consumer Sentiment slipped below expectations for July. New weekly jobless claims were up 16,000, to 360,000, and continuing claims went up 24,000, to 2.98 million.

The week ended with the Dow up 2.2%, to 15464; the S&P 500 up 3.0%, to 1680; and the Nasdaq up 3.5%, to 3600.

Bond prices recovered last week on the disappointing economic data and Bernanke’s comments. The FNMA 3.5% bond we watch ended the week up 1.77, to $100.08. According to Freddie Mac’s Primary Mortgage Market Survey, national average mortgage rates continued to trend higher for the week ending July 11. This was based on market speculation that the Fed will reduce future bond purchases. Remember, mortgage rates can be extremely volatile, so check with your mortgage professional for up to the minute information. Rates are still at attractive levels.

DID YOU KNOW?… Monetary policy is the process by which a central bank controls the supply of money to promote economic growth and stability. The goals usually include an inflation target and low unemployment.

>> This Week’s Forecast

CONSUMERS ARE BUYING, INFLATION’S OK, HOME BUILDERS HAPPY, FACTORIES SLIP… This week should show that consumers continue to do their part to help the recovery, with Retail Sales predicted up a healthy 0.7% for June. That month’s Consumer Price Index should indicate inflation still under control.

Builders continue to boost the housing recovery, with Housing Starts expected up again for June and Building Permits predicted to hit a 1 million unit annual rate. Things aren’t quite so copacetic on the factory scene, with both the NY Empire and Philadelphia Fed Manufacturing Indexes off for July, though still showing expansion.

>> 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 July 15 – July 19

 Date Time (ET) Release For Consensus Prior Impact
M
Jul 15
08:30 Retail Sales Jun 0.7% 0.6% HIGH
M
Jul 15
08:30 NY Empire Manufacturing Index Jul 3.6 7.8 Moderate
M
Jul 15
10:00 Business Inventories May –0.1% 0.3% Moderate
Tu
Jul 16
08:30 Consumer Price Index (CPI) Jun 0.3% 0.1% HIGH
Tu
Jul 16
08:30 Core CPI Jun 0.2% 0.2% HIGH
Tu
Jul 16
09:15 Industrial Production Jun 0.3% 0.0% Moderate
Tu
Jul 16
09:15 Capacity Utilization Jun 77.7% 77.6% Moderate
W
Jul 17
08:30 Housing Starts Jun 958K 914K Moderate
W
Jul 17
08:30 Building Permits Jun 1000K 974K Moderate
W
Jul 17
10:30 Crude Inventories 7/13 NA –9.874M Moderate
W
Jul 17
14:00 Fed’s Beige Book Jul NA NA Moderate
Th
Jul 18
08:30 Initial Unemployment Claims 7/13 348K 360K Moderate
Th
Jul 18
08:30 Continuing Unemployment Claims 7/6 2.950M 2.977M Moderate
Th
Jul 18
10:00 Philadelphia Federal Index Jul 5.3 12.5 HIGH
Th
Jul 18
10:00 Leading Economic Indicators (LEI) Jun 0.3% 0.1% Moderate

>> Federal Reserve Watch

Forecasting Federal Reserve policy changes in coming months… The Fed made it clear last week that it would do nothing to hamper the recovery, so economists now expect to see a super low Funds Rate 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%

After FOMC meeting on: Consensus
Jul 31 0%–0.25%
Sep 18 0%–0.25%
Oct 30 0%–0.25%

Probability of change from current policy:

After FOMC meeting on: Consensus
Jul 31      <1%
Sep 18      <1%
Oct 30      <1%

Texas Mortgage Market Update – For the week of June 24, 2013

For the week of June 24, 2013 – Vol. 11, Issue 25

>> Texas Mortgage Market Update

QUOTE OF THE WEEK… “In order to succeed, we must first believe that we can.” –Michael Korda, American writer, novelist, and editor

INFO THAT HITS US WHERE WE LIVE… There appears to be plenty of real estate people who believe they can succeed, as last week saw more housing numbers go through the roof. Existing Home Sales were up 4.2% in May to a 5.18 million unit annual rate, up 12.9% over a year ago. The median price climbed to $208,000, up 15.4% over a  year ago, while average prices are up 11.2% over last year. The months’ supply dipped to 5.1, all due to the faster sales pace, as inventories were up 7,000, increasing four months in a row. And the median time on the market for all homes was 41 days, down from 72 days a year ago.

Housing Starts were up 6.8% in May. Although most of the gain came from multi-family units, single-family starts were also up for the month and are now up 16.3% versus last year. The total number of homes under construction has been up 21 months in a row. Looking at where starts may be a few months out, Building Permits in May dipped a bit overall, but single-family permits were up for the month and are up 24.6% versus last year. Not surprisingly, the NAHB index of home builder confidence went from 44 to 52, its highest level since March 2006 and its biggest monthly gain in over 10 years.

BUSINESS TIP OF THE WEEK… After you’ve powered through work for a few hours, give your mind a rest. Go for a walk, have a snack, work out, or just sit quietly. You actually get more done in a day by regularly taking time to clear your head.

>> Review of Last Week

BEN’S BANTER SINKS STOCKS… The major stock indexes fell for the week as investors bailed on equities thanks to Fed Chairman Ben Bernanke’s comments after the Fed meeting. The written FOMC Statement indicated the Fed would keep buying $85 billion per month worth of mortgage bonds and Treasuries in its quantitative easing program to boost the economy and keep interest rates down. But Bernanke later commented that if positive trends continue, the Fed could reduce bond purchases later this year and stop them completely by mid-2014. Some experts suggested investors overreacted, and it will be a long time before the Fed raises short-term interest rates.

It didn’t help that the economic data coming in was positive, indicating things are indeed improving. The Empire State index of manufacturing in the New York region hit a three-month high in June, showing strong expansion after contracting in May. May Existing Home Sales and the NAHB home builders index surprised to the upside, as did the Philadelphia Fed index, which registered solid expansion for manufacturing in that region. But worried Wall Streeters should have noted CPI inflation was just 0.1% for the month and the May unemployment rate of 7.6% is a long way from the Fed’s 6.5% target.

The week ended with the Dow down 1.8%, to 14799; the S&P 500 down 2.1%, to 1592; and the Nasdaq down 1.9%, to 3357.

Fears the Fed might taper its bond buying sooner than expected hammered Treasuries and mortgage bonds. The FNMA 3.5% bond we watch ended the week down 3.04, at $100.12. Yet national average mortgage rates slipped last week, after edging up for over a month, according to Freddie Mac’s Primary Mortgage Market Survey. Rates are still up a tad from a year ago, but remain at historically attractive levels. The Mortgage Bankers Association reported purchase loan demand down slightly for the week, but up 12% from a year ago,.

DID YOU KNOW?… Although investors worried the Fed might soon tighten monetary policy, during the past four Fed tightening cycles since the 1980s, the economy was growing an average of 3.68%, versus an average growth rate over the last 12 months of 1.8%.

>> This Week’s Forecast

NEW HOME SALES UP, GDP TEPID, INFLATION AND MANUFACTURING OK… Economic data this week should show mild but steady growth, offset by some minor disappointments. New Home Sales are expected to continue their move upward in May, while Pending Home Sales should indicate existing home sales will increase a few months out. The GDP Third Estimate is predicted to show continued economic growth at a modest rate.

Brighter news should come Thursday when Core PCE Prices are forecast to reveal inflation well under control in May. Personal Spending is expected to indicate the beleaguered consumer is staying in the game. The Chicago PMI reading of manufacturing health in the Midwest should dip a little but remain in expansion territory.

>> 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 June 24 – June 28

 Date Time (ET) Release For Consensus Prior Impact
Tu
Jun 25
08:30 Durable Goods Orders May 3.0% 3.5% Moderate
Tu
Jun 25
10:00 Consumer Confidence Jun 74.9 76.2 Moderate
Tu
Jun 25
10:00 New Home Sales May 460K 454K Moderate
W
Jun 26
08:30 GDP – Third Estimate Q1 2.4% 2.4% Moderate
W
Jun 26
08:30 GDP Deflator – Third Estimate Q1 1.1% 1.1% Moderate
W
Jun 26
10:30 Crude Inventories 6/22 NA 0.313M Moderate
Th
Jun 27
08:30 Initial Unemployment Claims 6/22 345K 354K Moderate
Th
Jun 27
08:30 Continuing Unemployment Claims 6/15 2.958M 2.951M Moderate
Th
Jun 27
08:30 Personal Income May 0.2% 0.0% Moderate
Th
Jun 27
08:30 Personal Spending May 0.4% 0.2% HIGH
Th
Jun 27
08:30 PCE Prices – Core May 0.1% 0.0% HIGH
Th
Jun 27
10:00 Pending Home Sales May 1.5% 0.3% Moderate
F
Jun 28
09:45 Chicago PMI Jun 55.5 58.7 HIGH
F
Jun 28
09:55 U. of Michigan Consumer Sentiment – Final Jun 82.6 82.7 Moderate

>> Federal Reserve Watch

Forecasting Federal Reserve policy changes in coming months… Even though there is talk of the Fed tapering its bond buying, economists still don’t see the Fed raising the super low Funds Rate until the recovery is strong enough to bring unemployment down to 6.5%. 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
Jul 31 0%–0.25%
Sep 18 0%–0.25%
Oct 30 0%–0.25%

Probability of change from current policy:

After FOMC meeting on: Consensus
Jul 31      <1%
Sep 18      <1%
Oct 30      <1%

Texas Mortgage Market Update – For the week of June 17, 2013

For the week of June 17, 2013 – Vol. 11, Issue 24

>> Texas Mortgage Market Update 

QUOTE OF THE WEEK… “The greatest weapon against stress is our ability to choose one thought over another.” –William James, American psychologist and philosopher

INFO THAT HITS US WHERE WE LIVE… Here are two thoughts that should relieve some stress for those of us working in the housing market. Fannie Mae’s May 2013 National Housing Survey reported that the share of American’s who think now is a good time to sell and the share of those who think now is a good time to buy spiked sharply from April to May. 40% of respondents think it’s a good time to sell, up from 30% the month before, the largest gain in the survey’s 3-year history. And 76% of respondents think it’s a good time to buy!

They also reported that respondents expect home prices to go up 3.9% in the next 12 months, another record high for the 3-year survey. Later in the week, Fannie Mae’s Mid-Year Outlook predicted housing starts should be up 25% and home sales up 7% for the year. Their economists also feel that any mortgage rate increases are unlikely to trip up the recovery, since affordability remains near historical highs. An online listing site estimated rates could rise to 10.5% on a 30-year fixed-rate mortgage with 20% down payment before it’s more affordable to rent than to buy.

BUSINESS TIP OF THE WEEK… Attack your most challenging tasks early in the day when you’re most fresh. Save any busy work you have for the afternoon when your energy may slump a little.

>> Review of Last Week

STOCKS FALL ON FED FEARS… Last week investors got nervous that the Fed may begin tapering its bond buying program at this week’s meeting, from the current $85 billion a month rate. The program has helped keep stock prices up and interest rates down, so traders see any tapering as a negative and their fears sent all three stock indexes south for the third week out of the last four. The Fed’s bond buying will end when the economy or inflation picks up, so better than anticipated May Retail Sales and hotter than expected PPI producer prices kept many people skittish in the markets.

But wait. There was also evidence the economy is a long way from recovery. The manufacturing sector reported that Industrial Production was flat in May and factory Capacity Utilization dropped for the month. Then the University of Michigan Consumer Sentiment Index dipped more than expected in the preliminary June report. Lastly, continuing unemployment claims went up by 2,000. But on a better note, initial weekly jobless claims fell by 12,000, to 334,000.

The week ended with the Dow down 1.2%, to 15070; the S&P 500 down 1.0%, to 1627; and the Nasdaq down 1.3%, to 3424.

There was enough weakness in stocks and the economic data to send investors back into bonds, pushing up prices after six weeks of declines. The FNMA 3.5% bond we watch ended the week up .10, at $103.16. National average mortgage rates edged up again, but are still at historically attractive levels. As evidence of that, demand for purchase loans was up 5% for the week, and up 6% from a year ago, according to the Mortgage Bankers Association.

DID YOU KNOW?… Analysts feel mortgage rates could rise if the Fed stops its bond buying program. But last week, FOMC member James Bullard said, “…surprisingly low inflation readings may mean the Committee can maintain its aggressive program over a longer time frame.”

>> This Week’s Forecast

NO INFLATION, NO RATE CHANGE, MORE HOME BUILDING, MORE HOME SALES… The closely watched Consumer Price Index (CPI) is expected to show no huge move up for May. The FOMC Rate Decision on Wednesday should leave the Fed Funds Rate untouched. The policy statement will of course be examined for any indications of future Fed moves, as well as for the central bank’s overall take on the state of the economy.

On the housing front, analysts predict May Housing Starts will move ever closer to an annual rate of one million units. While more new homes are going up, more Existing Home Sales are being closed. That number is forecast to hit the 5 million unit annual rate for May.

>> 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 June 17 – June 21

 Date Time (ET) Release For Consensus Prior Impact
M
Jun 17
08:30 NY Empire Manufacturing Index Jun 0.8 –1.4 Moderate
Tu
Jun 18
08:30 Consumer Price Index (CPI) May 0.2% –0.4% HIGH
Tu
Jun 18
08:30 Core CPI May 0.1% 0.1% HIGH
Tu
Jun 18
08:30 Housing Starts May 950K 853K Moderate
Tu
Jun 18
08:30 Building Permits May 983K 1.017M Moderate
W
Jun 19
10:30 Crude Inventories 6/15 NA 2.523M Moderate
W
Jun 19
14:00 FOMC Rate Decision 6/19 0%–0.25% 0%–0.25% HIGH
Th
Jun 20
08:30 Initial Unemployment Claims 6/8 340K 334K Moderate
Th
Jun 20
08:30 Continuing Unemployment Claims 6/1 2.967M 2.973M Moderate
Th
Jun 20
10:00 Existing Home Sales May 5.00M 4.97M Moderate
Th
Jun 20
10:00 Philadelphia Fed Index Jun –0.2 –5.2 HIGH
Th
Jun 20
10:00 Leading Economic Indicators (LEI) May 0.2% 0.6% Moderate

>> Federal Reserve Watch

Forecasting Federal Reserve policy changes in coming months… Economists don’t see the Fed touching the super low Funds Rate at this week’s FOMC meeting. The Fed is waiting for a 6.5% unemployment rate or a serious spike in inflation. 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
Jun 19 0%–0.25%
Jul 31 0%–0.25%
Sep 18 0%–0.25%

Probability of change from current policy:

After FOMC meeting on: Consensus
Jun 19      <1%
Jul 31      <1%
Sep 18      <1%

Texas Mortgage Market Update – For the week of June 3, 2013

For the week of June 3, 2013 – Vol. 11, Issue 22

>> Texas Mortgage Market Update 

QUOTE OF THE WEEK… “There is always room at the top.” –Daniel Webster, American statesman and senator

INFO THAT HITS US WHERE WE LIVE… Last week, Pending Home Sales took their place at the top, hitting their highest level since April 2010, when folks were rushing to close before the homebuyer tax credit expired. April Pending Home Sales, based on signed contracts for existing homes, were up 0.3% over March and up 10.3% over last year, according to the National Association of Realtors (NAR). Their chief economist predicts, “Total existing home sales are expected to rise just over 7%, to about 5 million this year.”

The NAR’s economic honcho also feels that in 2013, “Because of inventory shortages, higher home sales will push up home values to the highest level in five years.” Those values appear to be well on their way up. Evidence? The latest S&P/Case-Shiller 20-City Composite index was up 10.9% in March compared to a year ago, the highest annual home price gain since 2006. In addition, all 20 cities tracked registered annual increases and all showed monthly gains for the fifth month in a row!

BUSINESS TIP OF THE WEEK… Ask your clients how you could improve. Requesting their input helps you upgrade products and services and makes clients feel more invested in your brand. It’s a win-win.

>> Review of Last Week

UP MONTH ENDS DOWN… Stocks were down again for the week, yet all three major indexes ended up for the month: the Dow up 1.9%, the S&P 500 up 2.1%, and the Nasdaq up 3.8%. The Dow saw its sixth straight monthly gain and the S&P 500 its seventh, the longest monthly win streak since the one that ended in September 2009. All three indexes are also up solidly for the year. Dragging things down last week were a lower GDP-2nd Estimate (2.4%), flat Personal Income, and a drop in Personal Spending, all missing expectations.

But the good economic data was quite good. Pending Home Sales and the Case-Shiller Home Price Index showed housing recovering. Consumer Confidence and Michigan Consumer Sentiment both beat estimates, reflecting a more optimistic mindset among Americans. The Chicago PMI index indicated strong expansion for Midwest manufacturing. Core PCE Prices confirmed inflation is under control. So why did stocks dip for the week? Analysts say some investors are now afraid the economy is strengthening too quickly. Go figure.

The week ended with the Dow down 1.2%, to 15116; the S&P 500 down 1.1%, to 1631; and the Nasdaq down 0.1%, to 3456.

While stocks slipped, bonds plunged, as positive economic data made investors worry the Fed might soon slow its bond-buying program that’s kept prices up and interest rates down. The FNMA 3.5% bond we watch ended the week down .97, at $103.21. In Freddie Mac’s Primary Mortgage Market Survey, national average mortgage rates were up from both the week before and a year ago. But they’re still at attractive levels, so the Mortgage Bankers Association saw applications for purchase loans up a seasonally adjusted 3%.

DID YOU KNOW?… A service is an economic activity that is intangible, not stored, doesn’t result in ownership, and is consumed at the point of sale. This week’s ISM Services index measures the health of this business sector.

>> This Week’s Forecast

FACTORIES OK, FED OBSERVATIONS, A FEW MORE JOBS… This week’s ISM Index should show factory activity barely expanding in May, while ISM Services is forecast to report stronger growth for that sector. The Fed’s Beige Book reveals anecdotal economic info from Fed Districts across the country. Experts expect a tone of cautious optimism. Nothing new there.

Friday it’s the always important Employment Report. Economists think that new Nonfarm Payrolls in May will stay in the modest range we’ve been seeing. This job growth isn’t outpacing workforce growth, so the Unemployment Rate should remain at 7.5%

>> 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 June 3 – June 7

 Date Time (ET) Release For Consensus Prior Impact
M
Jun 3
10:00 ISM Index May 50.9 50.7 HIGH
Tu
Jun 4
08:30 Trade Balance Apr –$41.1B –$38.8B Moderate
W
Jun 5
08:30 Productivity – Rev. Q1 0.6% 0.7% Moderate
W
Jun 5
10:00 ISM Services May 53.5 53.1 Moderate
W
Jun 5
10:30 Crude Inventories 6/1 NA 3.0M Moderate
W
Jun 5
14:00 Fed’s Beige Book Jun NA NA Moderate
Th
Jun 6
08:30 Initial Unemployment Claims 6/1 347K 354K Moderate
Th
Jun 6
08:30 Continuing Unemployment Claims 5/25 2.960M 2.990M Moderate
F
Jun 7
08:30 Average Workweek May 34.5 34.4 HIGH
F
Jun 7
08:30 Hourly Earnings May 0.2% 0.2% HIGH
F
Jun 7
08:30 Nonfarm Payrolls May 164K 165K HIGH
F
Jun 7
08:30 Unemployment Rate May 7.5% 7.5% HIGH

>> Federal Reserve Watch

Forecasting Federal Reserve policy changes in coming months… Economists see no signs the Fed will touch its super low Funds Rate at the next FOMC meeting a couple of weeks away. The central bankers want to see unemployment down to 6.5%, which doesn’t look likely any time soon. 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
Jun 19 0%–0.25%
Jul 31 0%–0.25%
Sep 18 0%–0.25%

Probability of change from current policy:

After FOMC meeting on: Consensus
Jun 19      <1%
Jul 31      <1%
Sep 18      <1%

Texas Mortgage Market Update – For the week of May 20, 2013

For the week of May 20, 2013 – Vol. 11, Issue 20

>> Texas Mortgage Market Update 

QUOTE OF THE WEEK… “Optimism is essential to achievement and it is also the foundation of courage and true progress.” –Nicholas Murray Butler, American diplomat and educator

INFO THAT HITS US WHERE WE LIVE… It definitely takes guts to remain optimistic in the face of some of the housing data coming at us these days. Last week, for example, we were greeted with a 16.5% drop in Housing Starts for April. It helps to dig into these reports. The dip was mostly due to multi-family starts, which are very volatile month to month, and were down 38.9%. Turns out, single-family starts were off just 2.1%. Taking a long-term view helps even more. Starts overall are up 13.1% versus a year ago, with single-family starts up a healthy 20.8%. So there.

It didn’t take any effort at all to stay optimistic in the face of the April Building Permits report. New building permits rose 14.3% during the month to a 1.02 million annual rate. Permits for single-family homes are now up 27.5% over a year ago, and multi-family permits are up a whopping 50.9%. An analysis of U.S. Department of Housing and Urban Development data revealed that 64% of building permits issued in the first quarter of this year were for single-family homes. And they were at the highest level since Q1 of 2008.

BUSINESS TIP OF THE WEEK… Use social media to give something back. Shining the light on others doing good in the community attracts attention to yourself in the best way possible.

>> Review of Last Week

BULL-IEVE IT!… Given the week’s mostly disappointing economic data, it was hard to believe the bulls prevailed on Wall Street again, pushing stocks to their fourth weekly gain in a row with the Dow and the S&P 500 indexes setting new records. To be fair, the bulls did have some decent reports on which to base their enthusiasm. April Retail Sales, Building Permits, and Leading Economic Indicators all surprised to the upside. The Michigan Consumer Sentiment index for May also handily beat estimates.

However, a plethora of indicators headed to the downside, starting with weak readings for April Industrial Production and the New York Empire Manufacturing Index for May. The disappointing economic news continued with higher than expected Initial Unemployment Claims, a dip in Housing Starts, and a lower than expected Philadelphia Fed Index of manufacturing for that region. But the CPI reading for April showed that consumer price inflation is staying well under control.

The week ended with the Dow up 1.6%, to 15354; the S&P 500 up 2.1%, to 1667; and the Nasdaq up 1.8%, to 3499.

As equity markets hit new all-time highs, bonds came under considerable selling pressure and prices slid. The FNMA 3.5% bond we watch ended the week down .14, at $105.04. National average mortgage rates rose again in Freddie Mac’s weekly Primary Mortgage Market Survey, although they remain well below levels of a year ago. The Mortgage Bankers Association (MBA) reported purchase loan demand off for the week but still up 10% from a year ago.

DID YOU KNOW?… A bond is a debt instrument issued for a period of more than one year with the purpose of raising capital by borrowing. An investor who buys a bond becomes a creditor of the issuer but does not gain any ownership rights, as in the case of stocks.

>> This Week’s Forecast

HOME SALES GAIN, DURABLE GOODS RECOVER, FED CHITCHAT… Additional data on the housing recovery comes in this week and more progress is expected for April. Existing Home Sales are forecast to inch higher to just below a 5 million unit annual rate. New Home Sales should also continue edging up farther into 400K territory.

Wednesday’s FOMC Minutes from the Fed’s May 1 meeting will spark interest, as we see whether the discussion sheds any more light on the central bank’s view of the economy. The week ends with April Durable Goods, predicted to bounce back into positive territory, showing a healthier market for long-term purchases.

>> 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 May 20 – May 24

 Date Time (ET) Release For Consensus Prior Impact
W
May 22
10:00 Existing Home Sales Apr 4.98M 4.92M Moderate
W
May 22
10:30 Crude Inventories 5/18 NA –0.624M Moderate
W
May 22
14:00 FOMC Minutes 5/1 NA NA HIGH
Th
May 23
08:30 Initial Unemployment Claims 5/18 348K 360K Moderate
Th
May 23
08:30 Continuing Unemployment Claims 5/11 3.005M 3.009M Moderate
Th
May 23
10:00 New Home Sales Apr 425K 417K Moderate
F
May 24
08:30 Durable Goods Orders Apr 1.6% –6.9% Moderate

>> Federal Reserve Watch

Forecasting Federal Reserve policy changes in coming months… Nothing happened last week to change the prevailing view of economists that the Fed will keep the Funds Rate at exceptionally low levels at least until the last three months of this year. 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
Jun 19 0%–0.25%
Jul 31 0%–0.25%
Sep 18 0%–0.25%

Probability of change from current policy:

After FOMC meeting on: Consensus
Jun 19      <1%
Jul 31      <1%
Sep 18      <1%