Austin Mortgage Market Update – For the week of April 18, 2011

For the week of April 18, 2011 – Vol. 9, Issue 16

>> Austin Mortgage Market Update

QUOTE OF THE WEEK…“A pessimist sees the difficulty in every opportunity; an optimist sees the opportunity in every difficulty.”–Winston Churchill

INFO THAT HITS US WHERE WE LIVE…Optimists received some encouragement from data aggregator CoreLogic, who reported that home prices fell again in February, but the price drops appeared mostly with distressed sales–short sales and bank-owned homes, otherwise known as REO properties. Excluding these, the CoreLogic index was essentially flat, down just 0.1% versus a year ago. Their Chief Economist commented, “When you remove distressed properties from the equation, we’re seeing a significantly reduced pace of depreciation and greater stability in many markets.” During the month, 6 out of 10 of the country’s biggest markets saw home price APPRECIATION in non-distressed sales.

 

The Mortgage Bankers Association (MBA) predicts rates on 30-year fixed-rate mortgages could rise a bit in the second half of this year. They see this gradual rise in mortgage rates continuing, even if the Federal Funds rate does not increase for another six to 12 months, as many economists expect. That’s because both the Treasury Department and the Fed announced last month they would start selling their huge portfolios of mortgage-backed securities. Some analysts believe these moves will raise rates.

BUSINESS TIP OF THE WEEK…Two of the most powerful words in business are “thank you.” Let your customers and employees know how much you appreciate them. Say “thank you” often. Even better, write them a note–not an email, text or Tweet, but an old-fashioned, hand-written, personal note!

>> Review of Last Week

SLOPING SIDEWAYS…Stocks were down for the week, but only slightly, falling sideways, if you will. This seemed to stem from general investor unease over the U.S. budget deficit, the European debt crisis and a mixed reaction to Q1 corporate earnings. Alcoa beat estimates, but revenues were off. JPMorgan Chase topped expectations, but Bank of America missed. Even Google was punished for higher operating costs, while reporting in-line earnings and better than expected revenue. Yet, the 33 S&P 500 companies reporting so far had 7.3% higher sales and 38% better earnings than a year ago.

 

In other news, Retail Sales were on a roll in March, up 0.4% overall and up 0.8% taking out autos. That’s annual sales growth of almost 10%, so the consumer is clearly helping out. On the inflation front, the PPI showed prices for producers continued up in March, though less than anticipated. And these increases were NOT getting passed on to the consumer, since the Core CPI showed prices up just 1.2% from a year ago. However, most economists expect inflation to go up, and with that comes higher interest rates, so home buyers and refinancers should not be too complacent about today’s low rates. 

For the week, the Dow ended down 0.3%, at 12,342; the S&P 500 was off 0.6%, to 1,320; and the Nasdaq was also off 0.6%, ending at 2,765.

 

There were some solid gains in the bond market, supported by the better than expected inflation readings. There was also some safe-haven bond buying coming off European concerns, after Moody’s downgraded Ireland’s debt. The price of the FNMA 4.0% bond we watch ended the week up .96, closing at $98.15. In spite of this, national average rates for conforming mortgages edged up in Freddie Mac’s weekly survey. But rates remain historically low, “helping to maintain affordability in the housing market,” according to Freddie Mac’s Chief Economist.

DID YOU KNOW?…The Census Bureau reports the median size for a new home dropped to 2,135 square feet in 2009, down from its peak of 2,300 square feet earlier in the decade. The typical owner-occupied home has three bedrooms and two baths.

>> This Week’s Forecast

HOMES STARTED, HOMES PERMITTED, HOMES SOLD…This week looks at a good part of the housing market. March Housing Starts on Tuesday are expected to be up nicely, the same as Building Permits, which show planned starts a month or two out. Wednesday’s Existing Home Sales should report the annual rate back at 5 million, definitely a good thing.

 

Other data includes the Philadelphia Fed Index of manufacturing activity in that region, forecast down some for April. We’ll also look at the overall recovery with March Leading Economic Indicators, predicted up by a small amount. On Good Friday, the markets will be closed and there are no economic reports.

>> 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 18 – April 22

 

Date Time (ET) Release For Consensus Prior Impact
Tu

Apr 19

08:30 Housing Starts Mar 520K 479K Moderate
Tu

Apr 19

08:30 Building Permits Mar 538K 517K Moderate
W

Apr 20

10:00 Existing Home Sales Mar 5.00M 4.88M Moderate
W

Apr 20

10:30 Crude Inventories 4/16 NA 1.627M Moderate
Th

Apr 21

08:30 Initial Unemployment Claims 4/16 390K 412K Moderate
Th

Apr 21

08:30 Continuing Unemployment Claims 4/16 3.650M 3.680M Moderate
Th

Apr 21

10:00 Leading Economic Indicators Index (LEI) Mar 0.2% 0.8% Moderate
Th

Apr 21

10:00 Philadelphia Fed Index Apr 32.9 43.4 HIGH

 

>> Federal Reserve Watch

Forecasting Federal Reserve policy changes in coming months…Last week’s benign inflation readings mean the Fed can hold onto its rock bottom rates a while longer. Economists expect this to be the situation in the near term. 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 2%  
   
   

 

 

 

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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