Austin Mortgage Market Update – For the week of August 15, 2011

For the week of August 15, 2011 – Vol. 9, Issue 33

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…“Fear tends to manifest itself much more quickly than greed, so volatile markets tend to be on the downside.”–Philip Roth

 

INFO THAT HITS US WHERE WE LIVE…It certainly was a volatile week for stocks (see below), but mortgage rates just calmly headed lower. This of course was directly related to the turbulent stock market, which sent investors to the relative safety of bonds, pushing mortgage bond prices up and interest rates down. Last week, rates on 30-year fixed-rate mortgages hit a new low for the year, while rates on 15-year fixed-rate mortgages, 5-year adjustable-rate mortgages (ARMs) and 1-year ARMs all registered new all-time lows. Small wonder purchase loan demand was up a bit over a year ago.

 

The National Association of Realtors (NAR) reported the median sale price for existing single-family homes fell 2.8% in Q2 compared to a year ago. Yet 41 metro areas saw price gains, up from 34 in Q1. The NAR’s chief economist said, “Median home prices have been moving up and down in a relatively narrow range in many markets, which shows a stabilization trend.” Another survey showed two-thirds of the markets reported bigger price gains in Q2 versus Q1.

 

BUSINESS TIP OF THE WEEK…Maintaining a high level of customer service is key to success. Have customers fill out customer satisfaction surveys to pinpoint areas that need improvement. Ask for testimonials and post them on your website.

>> Review of Last Week

FASTEN YOUR SEATBELTS…Last week’s stock market gave investors a very bumpy ride. As of Thursday, the Dow had changed direction each day for the prior seven. Things calmed down Friday enough to deliver a second day of gains, leaving all three market indexes down for the week just a tad. In case you were in a news blackout, the negatives the media kept hammering were: S&P’s downgrade of U.S. debt, worries over European banks and “double dip” recession fears.

 

The Fed met Tuesday, said the recovery is “considerably slower” than expected, so they’ll keep the Funds Rate at 0.0%-0.25% “at least through mid-2013.” Consumer confidence hit its lowest level since 1980, probably because it was measured during the debt ceiling fiasco. There is still no hard evidence we’re falling into recession. In fact, for July, Retail Sales posted their biggest gain in four months, UP 0.5%, and UP 8.5% in the last year. Initial jobless claims fell to 395,000, way below April’s high of 474,000. The economy isn’t booming, but it isn’t collapsing either.

 

For the week, the Dow ended down 1.5%, to 11269; the S&P 500 was down 1.7%, to 1179; and the Nasdaq was down 1%, to 2508.

 

There were enough stock market swings and economic worries to send investors to the safety of bonds. With current higher bond prices, we will now be tracking the FNMA 3.5% bond, which closed on Friday at $101.05. National average mortgage rates edged down to some new record lows, as covered above.

 

DID YOU KNOW?…A “constant dollar plan,” or “dollar cost averaging,” is an investment strategy to reduce volatility. Securities are bought in fixed dollar amounts at regular intervals, no matter which way the market is moving. So, as prices rise, fewer shares are bought and when prices fall, more are purchased.

>> This Week’s Forecast

HOME BUILDING, EXISTING HOME SALES, INFLATION, MANUFACTURING…This week’s broad look at things economic features July Housing Starts and Building Permits on Tuesday, expected off a little, followed by Thursday’s July Existing Home Sales, forecast up, heading back to the 5 million per year level. PPI wholesale inflation and CPI consumer inflation are predicted to stay well within the Fed’s guidelines.

 

We’ll also see some key reads on manufacturing, with the Empire State Index for the New York region expected up, but the Philadelphia Fed Index for that area down from the prior 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 15 – Aug 19

 

 Date Time (ET) Release For Consensus Prior Impact
M

Aug 15

08:30 Empire State Manufacturing Index Aug -0.4 -3.76 Moderate
Tu

Aug 16

08:30 Housing Starts Jul 608K 629K Moderate
Tu

Aug 16

08:30 Building Permits Jul 606K 624K Moderate
Tu

Aug 16

09:15 Industrial Production Jul 0.4% 0.2% Moderate
Tu

Aug 16

09:15 Capacity Utilization Jul 77.0% 76.7% Moderate
W

Aug 17

08:30 Producer Price Index (PPI) Jul 0.0% -0.4% Moderate
W

Aug 17

08:30 Core PPI Jul 0.2% 0.4% Moderate
W

Aug 17

10:30 Crude Inventories 8/13 NA -5.225M Moderate
Th

Aug 18

08:30 Initial Unemployment Claims 8/13 400K 395K Moderate
Th

Aug 18

08:30 Continuing Unemployment Claims 8/6 3.698M 3.688M Moderate
Th

Aug 18

08:30 Consumer Price Index (CPI) Jul 0.2% -0.2% HIGH
Th

Aug 18

08:30 Core CPI Jul 0.2% 0.3% HIGH
Th

Aug 18

10:00 Existing Home Sales Jul 4.87M 4.77M Moderate
Th

Aug 18

10:00 Philadelphia Fed Manufacturing Index Aug 1.00 3.20 HIGH
Th

Aug 18

10:00 Leading Economic Indicators (LEI) Index Jul 0.2% 0.3% Moderate

 

>> Federal Reserve Watch   

Forecasting Federal Reserve policy changes in coming months…The Fed’s pronouncement after last week’s FOMC meeting told us the rate will stay rock bottom for the next two years. Nothing’s ever certain, though, so the probability of change stays a smidge above 0. 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%

 

Probability of change from current policy:

 

After FOMC meeting on: Consensus  
Sep 20      <1%  
Nov 2      <1%  
Dec 13      <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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