Austin Mortgage Market Update – For the week of December 13, 2010

For the week of December 13, 2010 – Vol. 8, Issue 50

>> Austin Mortgage Market Update

INFO THAT HITS US WHERE WE LIVE There wasn’t a ton of news impacting the housing market last week, but we did get more talk about the move up in Austin mortgage rates. Freddie Mac’s weekly survey of conforming mortgages showed the average rate on a 30-year fixed-rate mortgage back at the level it was last June. That still puts Austin mortgage rates below where they were a year ago when everyone was happy to get in on those bargains. So none of this is bad news in the absolute sense but the trend should be noted. People who want to buy or refinance should not drag their feet!

It was encouraging to see new construction spending UP in October, now two months in a row, and the gain mostly came from a rise in residential construction. The U.S. Census Bureau put residential construction UP 2.4% in October to an annual rate of $240.3 billion. Though headed in the right direction, residential construction is still down 8% from a year ago.

>> Review of Last Week

DRIFTING UP… The Dow moved less than 20 points five days in a row, then finished the week with a 40-point gain. With this kind of flat performance, observers feel the stock market is drifting, rather than surging, higher, yet higher it goes. The S&P 500 in fact ended the week at a two-year high, as investors clearly are feeling a little more upbeat about the economy.

The centerpiece of the week for many on Wall Street was the tax compromise plan the President arrived at with Republican leaders. Some Congressional Democrats were not happy about the agreement, but investors believe a bill will be passed before January 1 that keeps lower tax rates in place for all taxpayers for the next two years. This is viewed by many as helpful to speeding up the recovery. An extension of unemployment benefits was tied into the deal, which will help those looking for work while the economy heals.

Other hopeful signs included University of Michigan Consumer Sentiment beating expectations, showing people feel better about the economy as of early December. October exports rose to their highest levels in over two years, as the U.S. trade deficit surprisingly fell better than 13%. Exports to China grew almost 30%, narrowing our trade gap with that country by 8.3%. Additional positive news: the government sold its remaining stake in Citigroup; AIG said it would pay back the final $20 billion it owes the New York Fed; and GE announced it will increase its quarterly dividend by 17%.

For the week, the Dow was UP 0.2%, to 11410.32; the S&P 500 was UP 1.3%, to 1240.40; and the Nasdaq was UP 1.8%, to 2637.54.

Bonds got hammered most of the week as stocks edged up. The FNMA 30-year 4.0% bond we watch ended down 120 basis points for the week, closing at $99.00. Yields move opposite to prices, so they went higher and that inched mortgage rates up for another week. As reported above, national average rates for fixed-rate mortgages went north a tad, which isn’t horrible in itself, since rates are still at historically low levels.

>> This Week’s Forecast

LOTS MORE THAN THE FED… We have another Fed meeting on Tuesday and no one expects the rate to move up, although the Fed’s policy statement will be carefully read as usual. The central bank’s economic views certainly bear watching, but there’s lots more in store. Tuesday’s Producer Price Index gives us wholesale inflation and Wednesday’s Consumer Price Index measures the consumer version, and they’re both expected to remain in check. Tuesday’s Retail Sales numbers should show a continued, though modest, growth in consumer spending.

Manufacturing gauges are forecast to improve slightly, although the Philadelphia region is expected to decline. Most important to us, November Housing Starts and Building Permits will come in on Thursday and observers expect more activity from builders, although we’re still not back to pre-downturn levels.

>> 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 December 13 – December 17

Date Time (ET) Release For Consensus Prior Impact
Tu

Dec 14

08:30 Producer Price Index (PPI) Nov 0.5% 0.4% Moderate
Tu

Dec 14

08:30 Core PPI Nov 0.2% -0.6% Moderate
Tu

Dec 14

08:30 Retail Sales Nov 0.5% 1.2% HIGH
Tu

Dec 14

08:30 Retail Sales ex-auto Nov 0.6% 0.4% HIGH
Tu

Dec 14

10:00 Business Inventories Oct 1.1% 0.9% Moderate
Tu

Dec 14

15:15 FOMC Rate Decision 12/14 0%-0.25% 0%-0.25% HIGH
W

Dec 15

08:30 Consumer Price Index (CPI) Nov 0.2% 0.2% HIGH
W

Dec 15

08:30 Core CPI Nov 0.1% 0.0% HIGH
W

Dec 15

08:30 NY Empire State Manufacturing Index Dec 3.0 -11.4 Moderate
W

Dec 15

09:15 Industrial Production Nov 0.3% 0.0% Moderate
W

Dec 15

09:15 Capacity Utilization Nov 75.0% 74.8% Moderate
W

Dec 15

10:30 Crude Inventories 12/11 NA -3.82M Moderate
Th

Dec 16

08:30 Initial Unemployment Claims 12/11 425K 421K Moderate
Th

Dec 16

08:30 Continuing Unemployment Claims 12/5 4.078M 4.086M Moderate
Th

Dec 16

08:30 Housing Starts Nov 545K 519K Moderate
Th

Dec 16

08:30 Building Permits Nov 558K 550K Moderate
Th

Dec 16

10:00 Philadelphia Fed Manufacturing Index Dec 12.5 22.5 HIGH
F

Dec 17

10:00 Leading Economic Indicators (LEI) Index Nov 1.2% 0.5% Moderate

>> Federal Reserve Watch

Forecasting Federal Reserve policy changes in coming months Virtually all experts expect no hike in the Fed Funds Rate at this week’s FOMC meeting. The current super low rate level is forecast to hold through the first half of 2011. But the threat of inflation or a speeding up of the economic recovery could start the rate back up. 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)

Comments are closed.