Austin Mortgage Market Update – For the week of November 15, 2010

For the week of November 15, 2010 – Vol. 8, Issue 46
>> Austin Mortgage Market Update

INFO THAT HITS US WHERE WE LIVE The National Association of Realtors (NAR) reported that home prices stayed essentially flat in the third quarter compared to the same time frame a year ago. This price stabilization is encouraging, given that sales of existing homes in the period did drop compared to both the prior quarter this year and to the same quarter a year ago. Of course, both those time periods saw buyers rushing in to take advantage of the federal tax credits.

On the mortgage front, national average mortgage rates dipped again according to Freddie Mac’s weekly survey. This was considered by most experts to be the result of the Federal Reserve’s recent announcement of their second round of “quantitative easing,” dubbed “QE2.” This is the plan in which the Fed will buy up to $600 billion in Treasuries from now till the end of June next year. Not surprisingly, mortgage applications spiked up 5.8% for the week for both purchase and refinance loans, according to the Mortgage Bankers Association.

>> Review of Last Week

COULDN’T MAKE IT SIX… The broadly based S&P 500 stock market index was up five weeks in a row, but just couldn’t score that sixth up week. In sympathy, the Dow and the Nasdaq indexes also dropped for the week as Wall Street investors passed over some of the positive economic reports, preferring instead to dwell on the negative news.

Things to worry about now have an international flavor, beginning with, once again, guess what, European sovereign debt. This time the speculation was that Ireland couldn’t afford to bail out its financial sector, so the European Union might have to step in. Another continent away, there were fears China will raise its interest rates to tame its growing inflation. Here in the U.S. we had tech bellwether Cisco trimming profit projections for the rest of its fiscal year.

Meanwhile, those sensing a quickening of the pace of recovery latched onto news of September’s shrinking trade deficit, which featured a $0.5 billion increase in exports, always a nice thing to see. Best of all was the report that new unemployment claims dropped 24,000 for the week, to 435,000. This is the first weekly reading for jobless claims since the recession began that was below 440,000, not using any statistical or seasonal biases to get there. Some analysts saw this drop in initial claims as an encouraging sign that hiring could soon pick up.

For the week, the Dow was down 2.2%, to 11192.58; the S&P 500 was also down 2.2%, to 1199.21; and the Nasdaq dropped 2.4%, to 2518.21.

The week in the bond market closed with prices under pressure. Most observers put this to rising Chinese inflation because no matter where it originates, inflation drives bond prices down. The FNMA 30-year 4.0% bond we watch ended down 113 basis points for the week, closing at $102.06.

Nonetheless, as mentioned above, national average rates for fixed-rate mortgages hit historic lows, according to Freddie Mac’s weekly survey of conforming loans.

>> This Week’s Forecast

A BIT OF EVERYTHING… In contrast to last week, we get wall-to-wall economic reports this time around. Monday’s October Retail Sales are expected to reveal a slight increase in the consumer’s participation in the recovery. We’ll get manufacturing in the New York region on Monday (expected down) and in the Philadelphia region on Friday (expected up) with Industrial Production and Capacity Utilization (both up a tad) in between. Inflation is forecast up a trifle but well under control in both Wednesday’s Consumer Price Index (CPI) and Tuesday’s Producer Price Index (PPI).

Also on Wednesday, we’ll see how home builders were feeling in October, with Housing Starts and Building Permits expected to remain at their modest levels. Thursday’s Leading Economic Indicators (LEI) Index is forecast to show the recovery still slowly inching forward.

>> 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 November 15 – November 19

Date Time (ET) Release For Consensus Prior Impact
M

Nov 15

08:30 Retail Sales Oct 0.7% 0.6% HIGH
M

Nov 15

08:30 Retail Sales ex-auto Oct 0.4% 0.4% HIGH
M

Nov 15

08:30 Empire State Manufacturing Index Nov 11.7 15.7 Moderate
M

Nov 15

10:00 Business Inventories Sep 0.9% 0.6% Moderate
Tu

Nov 16

08:30 Producer Price Index (PPI) Oct 0.8% 0.4% Moderate
Tu

Nov 16

08:30 Core PPI Oct 0.1% 0.1% Moderate
Tu

Nov 16

09:15 Industrial Production Oct 0.3% –0.2% Moderate
Tu

Nov 16

09:15 Capacity Utilization Oct 74.9% 74.7% Moderate
W

Nov 17

08:30 Consumer Price Index (CPI) Oct 0.3% 0.1% HIGH
W

Nov 17

08:30 Core CPI Oct 0.1% 0.0% HIGH
W

Nov 17

08:30 Housing Starts Oct 600K 610K Moderate
W

Nov 17

08:30 Building Permits Oct 565K 539K Moderate
W

Nov 17

10:30 Crude Inventories 11/13 NA –3.27M Moderate
Th

Nov 18

08:30 Initial Unemployment Claims 11/13 442K 435K Moderate
Th

Nov 18

08:30 Continuing Unemployment Claims 11/6 4.300M 4.301M Moderate
Th

Nov 18

10:00 Leading Economic Indicators (LEI) Index Oct 0.6% 0.3% Moderate
Th

Nov 18

10:00 Philadelphia Fed Index Nov 4.5 1.0 HIGH

>> Federal Reserve Watch

Forecasting Federal Reserve policy changes in coming months The Fed’s $600 billion worth of Treasury purchases are slated to continue through the first half of 2011. Experts say the Fed Funds Rate should stay at its rock bottom level during that time, as long as inflation remains tame. 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 14 0%–0.25%
Jan 26 0%–0.25%
Mar 15 0%–0.25%

Probability of change from current policy:

After FOMC meeting on: Consensus
Dec 14 <1%
Jan 26 <1%
Mar 15 <1%

About Max Leaman Austin Mortgage

GREAT RATES, LOW FEES, CLOSE ON TIME™ ---- 2012 Ranked #1 Austin Residential Mortgage Lender (Austin Business Journal) 2010, 2011 & 2012 Five Star Professional (Texas Monthly) 2009, 2010, 2011, 2012, 2013 PrimeLending Chairman's Circle Award 2009, 2010, 2011, 2012 Scotsman Guide Top Originator (Top 200 Mortgage Professionals in U.S.A.) Better Business Bureau "A+ Rating" National Lender Rankings (Scotsman Guide): Top Purchase Volume (No. 10) Most Loans Closed (No. 32) Top Dollar Volume (No. 88)

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