Austin Mortgage Market Update – For the week of April 11, 2011

For the week of April 11, 2011 – Vol. 9, Issue 15

>> Austin Mortgage Market Update

QUOTE OF THE WEEK…“Whether you think you can or think you can’t–you are right.”–Henry Ford

INFO THAT HITS US WHERE WE LIVE…Those of us who think we can participate in a housing market recovery sooner rather than later just got welcome support from some industry experts. As reported by Fortune on CNNMoney.com, “After four years of plunging home prices, the most attractive asset class in America is housing.” Research firm Metrostudy, which tracks new-home inventories for 65% of the U.S. market, reports that the steep drop in construction over the last few years has reversed the supply glut, with starts now well below closings. The firm believes the low inventory should eventually lead to higher prices.

 

The Fortune posting also cited a new study from a major bank that found homeowners now pay only 9.8% of their income in after-tax mortgage, tax and insurance payments, down from 17.2% at the 2007 peak. This means it’s now cheaper to pay a mortgage and the other major homeowner costs than it is to rent the same house in 28 out of 54 major markets.

Fortune further reports that where existing home inventories average close to seven months, a modest boost in demand will result in solid gains in home prices and new construction. This could happen quickly in markets now showing good job growth. Moody’s Analytics forecasts prices going up three to four points faster than inflation over the next few years in virtually all such markets. They see home prices rising with rents, with apartments in short supply. Of course, the housing recovery still requires job creation and consumer confidence back to normal, but we finally seem headed in that direction.

BUSINESS TIP OF THE WEEK…Avoid the hard sell–a soft sell approach is actually far more effective. Satisfy your customers’ needs and wants. Discover their pain points and be their problem solver. Do what really is best for your customer and see your reputation and business grow.

>> Review of Last Week

WALL STREET FLAT, WASHINGTON STAYS OPEN…Our representatives in Washington waited until the last minute to agree on budget cuts and avoid the first Federal government shutdown in 15 years. The media had a field day, but investors largely ignored it, understanding that the last thing any government wants to do is put a stop to its own operations. But there was enough other bothersome news--rising gold and oil prices, a declining dollar and a rate hike by the European Central Bank--to leave the Dow flat and the other two major stock indexes off a tick for the week.

 

But the ISM Non-Manufacturing index, which dipped slightly in March, still shows the services sector above 50 and growing. In fact, this index has been in that territory now for 16 straight months! It was also encouraging that initial weekly jobless claims dropped again, staying well below 400,000, which economists say stabilizes the unemployment rate, now under 9%, two months in a row. The minutes from the Fed’s March 15 meeting reported “the pace of economic activity…a little slower,” but “the labor market continued to show signs of firming,” which is key to the housing recovery.

For the week, the Dow ended flat, at 12,380; the S&P 500 was off 0.3%, to 1,328; and the Nasdaq was also off 0.3%, ending at 2,780.

 

There wasn’t much economic or auction news to bolster the bond market. Not even Portugal’s bailout request could motivate a flight to safety to help bond prices. Consequently, the FNMA 4.0% bond we watch ended the week down .91, closing at $97.19. Reflecting this, national average rates for conforming mortgages drifted up in Freddie Mac’s weekly survey, but rates are still historically low. Even better, demand for purchase loans hit its highest level of the year at the end of March.

DID YOU KNOW?…The Commerce Department reported the average price of a new home sold in December was the highest it’s been since July 2008–$291,400.

>> This Week’s Forecast

HOW MUCH ARE WE BUYING, WHAT ARE WE PAYING AND HOW’S BUSINESS?… Wednesday’s March Retail Sales are expected to show we consumers continue to buy more. We’re also paying more, as the Consumer Price Index (CPI) is forecast up a tad. But Core CPI is what the Fed focuses on, which excludes volatile food and energy prices. Some economists think food and energy hikes are exactly why the Fed should begin raising rates. Wholesale inflation is also moving up, measured by the Producer Price Index (PPI), and some experts say businesses will eventually pass these higher prices on to the consumer. Yet Michigan Consumer Sentiment is predicted to remain fairly positive.

 

How business is doing will be reflected in the Trade Balance, expected to show a $45 billion export-import gap, and the Empire State Manufacturing Index, forecast to report continued growth in the New York region. So the recovery inches up, a good thing for all.

>> 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 April 11 – April 15

 

Date Time (ET) Release For Consensus Prior Impact
Tu

Apr 12

08:30 Trade Balance Feb –$45.7B –$46.3B Moderate
W

Apr 13

08:30 Retail Sales Mar 0.5% 1.0% HIGH
W

Apr 13

08:30 Retail Sales ex-auto Mar 0.8% 0.7% HIGH
W

Apr 13

10:00 Business Inventories Feb 0.8% 0.9% Moderate
W

Apr 13

10:30 Crude Inventories 4/9 NA 1.952M Moderate
Th

Apr 14

08:30 Initial Unemployment Claims 4/9 385K 382K Moderate
Th

Apr 14

08:30 Continuing Unemployment Claims 3/26 3.700M 3.723M Moderate
Th

Apr 14

08:30 Producer Price Index (PPI) Mar 1.0% 1.6% Moderate
Th

Apr 14

08:30 Core PPI Mar 0.2% 0.2% Moderate
F

Apr 15

08:30 Consumer Price Index (CPI) Mar 0.5% 0.5% HIGH
F

Apr 15

08:30 Core CPI Mar 0.2% 0.2% HIGH
F

Apr 15

08:30 NY Empire State Manufacturing Index Apr 15.0 17.5 Moderate
F

Apr 15

09:15 Industrial Production Mar 0.6% 0.0% Moderate
F

Apr 15

09:15 Capacity Utilization Mar 77.4% 77.0% Moderate
F

Apr 15

09:55 Univ. of Michigan Consumer Sentiment Apr 66.0 67.5 Moderate

 

>> Federal Reserve Watch

Forecasting Federal Reserve policy changes in coming months…Friday, Dallas Fed President Richard Fisher said the Fed is close to the point at which it has to start reversing its “accommodative” monetary policy (i.e., raise the Funds rate). But economists still don’t expect that until much later in the 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
Apr 27 0%–0.25%
Jun 22 0%–0.25%
Aug 9 0%–0.25%

 

Probability of change from current policy:

 

After FOMC meeting on: Consensus
Apr 27 <1%
Jun 22 <1%
Aug 9 4%

 

 

 

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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