Austin Mortgage Market Update – For the week of February 15, 2010

For the week of February 15, 2010 – Vol. 8, Issue 7

>> Austin Mortgage Market Update

INFO THAT HITS US WHERE WE LIVE The National Association of Realtors last Thursday reported existing home sales UP 27.2% for the last three months of 2009 versus a year earlier. This amounted to a seasonally adjusted annual rate of 6 million homes. — a 13.9% increase over the third quarter’s annual rate of 5.29 million homes. Clearly, buyers are taking advantage of the low mortgage interest rates and the tax credit that was extended and expanded by Congress.

The existing home sales increase from Q3 to Q4 occurred in 48 states and D.C., with 32 of those states showing double-digit gains. Year-over-year, sales were higher in 49 states and D.C., up by double digits in all but 3 states. And distressed property made up just 32% of Q4 sales versus 37% of sales a year ago. The national median price of an existing single-family home, at $172,900, was down 4.1% year-over-year — but that was the smallest price decline in over two years. Even better, out of the 151 metropolitan statistical areas studied, 67 of them showed a RISE in the median home price!

>> Review of Last Week

ROCK ‘N ROLL… It was another raucous week in the stock markets, but this time the festivities ended with all three major averages headed UP! There wasn’t a lot of US economic news to stir things up, so investors instead fretted over Greece. Stock prices went up and down with the news, but when all was said and done, Greece was promised the support of the European Union (EU), the International Monetary Fund (IMF), the European Central Bank and the European Commission. Sure sounds like enough help. We note there is no major US bank exposure in Greece. Investors also got shook about China tightening its credit situation, but, hey, they’re just trying to prevent their double-digit economic growth from getting out of hand.

Wednesday saw the trade deficit for December come in at $40.2 billion, an increase of $3.8 billion over the prior month, but still $1.7 billion smaller than last year. Exports are actually up eight months in a row, growing at a 27.1% annual rate. Total international trade — imports and exports –is up at a 31% annual rate since bottoming in April last year, and up at a 42% annual rate in the last three months.

The week ended on more good news. Retail sales were UP 0.5% in January (UP 0.8% including upward revisions to previous months). In the past six months retail sales are UP 7.9% at an annual rate and since September they’ve blasted UP 10.9%. Observers put this to personal incomes on the rise, a substantial reduction in consumer debt and the beginning signs of improvement in the job market. In line with this last point, initial unemployment claims fell to 440,000, with the four-week moving average now down to 469,000 — around 100,000 lower than six months ago. Continuing claims are now down to 4.538 million.

For the week, the Dow was UP 0.9%, to 10099.14; the S&P 500 was also UP 0.9%, to 1075.51; while the Nasdaq surged UP 2.0%, to 2183.53.

Bonds endured an up-and-down week too, mimicking stocks but finally ending in the opposite direction — down for the week. The FNMA 30-year 4.5% bond we watch ended down 50 basis points, closing at $100.91. Nevertheless, mortgage rates continued at their historically low levels. But homebuyers and owners looking to refinance should remember the Fed says it will stop buying mortgage bonds March 31. Experts feel this will send rates up a bit.

>> This Week’s Forecast

NEW READS ON HOMEBUILDING, THE FED AND INFLATION…Markets are closed Monday for Presidents’ Day, then Wednesday we get a look at the mindset of homebuilders, with Housing Starts and Building Permits. The day will also reveal the FOMC Minutes from the Fed’s last meeting in January. Thursday’s PPI measures wholesale inflation. Then Friday we get the CPI consumer inflation reading that the Fed pays such close attention to.

>> 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 February 15 – February 19

Date Time (ET) Release For Consensus Prior Impact
Tu

Feb 16

08:30 NY Empire State Manufacturing Index Feb 18.00 15.92 Moderate
W

Feb 17

08:30 Housing Starts Jan 580K 557K Moderate
W

Feb 17

08:30 Building Permits Jan 615K 653K Moderate
W

Feb 17

09:15 Industrial Production Jan 0.8% 0.6% Moderate
W

Feb 17

09:15 Capacity Utilization Jan 72.6% 72.0% Moderate
W

Feb 17

14:00 Minutes of the FOMC Meeting 1/27 NA NA HIGH
Th

Feb 18

08:30 Initial Unemployment Claims 2/13 430K 440K Moderate
Th

Feb 18

08:30 Continuing Unemployment Claims 2/13 4.500M 4.538M Moderate
Th

Feb 18

08:30 Producer Price Index (PPI) Jan 0.8% 0.2% Moderate
Th

Feb 18

08:30 Core PPI Jan 0.1% 0.0% Moderate
Th

Feb 18

10:00 Leading Economic Indicators (LEI) Jan 0.5% 1.1% Moderate
Th

Feb 18

10:00 Philadelphia Fed Index Feb 17.0 15.2 HIGH
Th

Feb 18

11:00 Crude Inventories 2/12 NA 2.42M Moderate
F

Feb 19

08:30 Consumer Price Index (CPI) Jan 0.3% 0.1% HIGH
F

Feb 19

08:30 Core CPI Jan 0.2% 0.1% HIGH

>> Federal Reserve Watch

Forecasting Federal Reserve policy changes in coming months Fed Chairman Ben Bernanke told Congress last week that the Fed is well prepared to move on interest rates, but it will depend on economic conditions. Economists are beginning to feel the Fed may make a move after the first half of 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
Mar 16 0%–0.25%
Apr 28 0%–0.25%
Jun 23 0%–0.25%

Probability of change from current policy:

After FOMC meeting on: Consensus
Mar 16 1%
Apr 28 2%
Jun 23 10%

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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