Austin Mortgage Market Update – For the week of December 7, 2009

For the week of December 7, 2009 – Vol. 7, Issue 49

>> Austin Mortgage Market Update

INFO THAT HITS US WHERE WE LIVE Positive economic reports on housing continue, with October Pending Home Sales UP 3.7%. This was the ninth month in a row Pending Home Sales rose and the index is now 31.8% over October last year. Since this tracks the level of contracts on existing homes, Existing Homes Sales should continue their impressive rise for the next couple of months.

The National Association of Realtors also predicted sales of previously owned homes would go UP 4.8% this year, reversing the downward sales trend of the previous two years. For 2010, the NAR projects existing home sales UP 10.8%, with a 3.6% hike in the median price. For new homes, the median price is expected to rise 3.9%. Of course, smart homebuyers will act now to avoid these anticipated price increases AND take advantage of the newly extended and expanded tax credits. High net worth individuals are already showing up–in a recent survey, 35% said they planned to increase their investments in real estate. 45% of them contend there are significant opportunities in residential markets, with many bargains to be had.

Anyone need further incentive? Freddie Mac reported mortgage rates down for the fifth straight week, now at record lows! The 30-year fixed-rate mortgage averaged 4.71%, with an average 0.7 point, for prime borrowers with 20% down payments. That’s a new low for the survey which has been tracking rates since 1971.

>> Review of Last Week

GOOD-BYE, DUBAI–HELLO, JOBS!… What a difference a week makes. Friday after Thanksgiving, investors were fretting over Dubai’s inability to pay back its debt. Those fears subsided early last week, then Friday, euphoria broke out among investors over an unexpectedly good jobs report. This included the first drop in the unemployment rate in a long time and job losses at their lowest level in nearly two years. The markets responded with all three indexes registering gains.

The week began with continued good news in manufacturing, the Chicago PMI UP almost 2 points. Tuesday, the ISM Manufacturing index was down slightly from its big October gain, but still well over 50, signaling industrial expansion for the fourth month in a row. Then we had strong Pending Home Sales covered above. Friday’s encouraging employment report was set up nicely on Wednesday when Chicago-based job placement firm Challenger, Gray & Christmas said November job cuts were down 72.3% from last year. New unemployment claims were at their lowest level since September 2008 and the four-week average of Continuing Claims hit its lowest level in eight months.

Friday’s jobs report showed a dramatic improvement in the employment situation for November. Payrolls declined only 11,000 for the month, but they were in fact UP by 148,000 after revisions to September and October added 159,000 jobs. Most surprising, the Unemployment Rate went DOWN to 10.0%, a turn-around not forecast until Q1 next year. Economists do not expect a decline every month, but many feel the unemployment rate will be significantly lower by late next year. And get this–total hours worked in the private sector was up 0.6%. But if the hours per worker had stayed the same, the increase in labor demand could have boosted payrolls by 650,000! Interesting.

For the week, the Dow went UP 0.8%, to 10388.90; the S&P 500 was UP 1.3%, to 1105.98; while the Nasdaq shot UP 2.6%, to 2194.35.

The bond market got clobbered thanks to the way-better-than-expected jobs data, which strongly pulled investors back into stocks. The FNMA 30-year 4.5% bond we watch dropped almost 100bp for the week, finishing at $101.53. Mortgage rates, as reported above, went to record low levels, but may not stay there for long if mortgage bond prices continue to slide.

>> This Week’s Forecast

RETAIL RULES… The king of the economic reports coming out this week will be Friday’s Retail Sales figures for November. These should give us an indication of how well the consumer will be contributing to the economic recovery during the holiday buying season. We also get a preliminary read on the Michigan Consumer Sentiment Index and the weekly updates on Unemployment numbers. Fed Chairman Bernanke will be speaking early in the week and it will be interesting to see whether he thinks the improving jobs situation may result in a rate hike sooner than most experts expect.

>> 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 7 – December 11

Date Time (ET) Release For Consensus Prior Impact
W

Dec 9

10:30 Crude Inventories 12/04 NA 2.09M Moderate
Th

Dec 10

08:30 Initial Unemployment Claims 12/05 465K 457K Moderate
Th

Dec 10

08:30 Continuing Unemployment Claims 12/04 5.435K 5.465M Moderate
Th

Dec 10

08:30 Trade Balance Oct –$37.0B –$36.5B Moderate
F

Dec 11

08:30 Retail Sales Nov 0.7% 1.4% HIGH
F

Dec 11

08:30 Retail Sales ex-auto Nov 0.4% 0.2% HIGH
F

Dec 4

09:55 U. of Michigan Consumer Sentiment–Prelim. Dec 68.5 67.4 Moderate
F

Dec 4

10:00 Business Inventories Oct –0.3% –0.4% Moderate

>> Federal Reserve Watch

Forecasting Federal Reserve policy changes in coming months. Inflation remains in check, the economy is clearly recovering, and now the employment situation has begun to turn around. Will the Fed will continue to keep rates down? Most economists think so for now. 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 15 0%–0.25%
Jan 27 0%–0.25%
Mar 16 0%–0.25%

Probability of change from current policy:

After FOMC meeting on: Consensus
Dec 15 1%
Jan 27 1%
Mar 16 5%

This blog entry is an advertisement for Max Leaman. The material provided is for informational and educational purposes only and should not be construed as investment and/or mortgage advice. Although the material is deemed to be accurate and reliable, there is no guarantee of its accuracy. The material contained in the newsletter is copyrighted by PrimeLending, A PlainsCapital Company and cannot be reproduced for any use without prior written consent. It is designed for real estate and other financial professionals only. It is not intended for consumer distribution. The material does not represent the opinion of PrimeLending, A PlainsCapital Company. Š 2009 PrimeLending, A PlainsCapital Company. Trade/service marks are the property of PlainsCapital Corporation, PlainsCapital Bank, or their respective affiliates and/or subsidiaries. Some products may not be available in all states. This is not a commitment to lend. Restrictions apply. All rights reserved. PrimeLending, a PlainsCapital Company (NMLS #: 13649) is a wholly-owned subsidiary of a state-chartered bank and is an exempt lender in the following states: AL, AK, AR, CO, DE, FL, GA, HI, ID, IA, KS, KY, LA, MN, MS, MO, MT, NE, NY, NC, OH, OK, OR, PA, SC, SD, TX, UT, VA, WV, WY. Licensed by the Arizona Dept. of Financial Institutions-license #BK 0907334; California Department of Real Estate-license ID #01857468; California Department of Corporations- license #4130996; Connecticut Department of Banking-license #ML-13649; District of Columbia Department of Insurance, Securities and Banking- license #MLO13649, Illinois Dept. of Financial and Professional Regulation-license #MB.6760635; Indiana Dept. of Financial Institutions- license #11169; Maine Dept. of Professional & Financial Regulation-license #SLM8285; Maryland Dept. of Labor, Licensing & Regulation-license #11058; Massachusetts Division of Banking- license # MC5404, Michigan Dept. of Labor & Economic Growth-license #FR 0010163 and SR 0012527; Nevada Dept. of Business and Industry, Division of Mortgage lending-exempt license #732; New Hampshire Dept. of Banking- license #14553-MB; New Jersey Dept. of Banking and Insurance-license #0803658; New Mexico Regulation and Licensing Dept., Financial Institutions Division-license #01890; North Dakota Dept. of Financial Institutions-license #MB101786; Tennessee Dept. of Financial Institutions-registration #4023; Texas Regulated Loan License-license #7293; Vermont Dept. of Banking, Insurance, Securities and Health Care Administration- lender license #6127 and broker license #0964MB; Washington Dept. of Financial Institutions-license #520-CL-49075; Wisconsin Department of Financial Institutions-license #214170. NMLS# 151263

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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