Austin Mortgage Market Update – For the week of July 12, 2010

For the week of July 12, 2010 – Vol. 8, Issue 28

>> Austin Mortgage Market Update

INFO THAT HITS US WHERE WE LIVE Last week’s Inside Lending reported that on Friday, the President signed into law a bill that extends to September 30 the closing deadline for claiming the federal homebuyer tax credit. We want to add he signed a second bill that retroactively reinstates the National Flood Insurance program, which expired May 31, until September 30. This news is important for home buyers who are shopping in areas where flood insurance is necessary to get a mortgage. It would obviously behoove these buyers to close before September 30.

National average mortgage rates hit new lows again last week, as reported in Freddie Mac’s weekly Primary Mortgage Market Survey. However, the Mortgage Bankers Association revealed that it was refinancing homeowners who were principally taking advantage of these rates, making up the lion’s share of last week’s loan applications. Incidentally, with these heightened levels of refi activity, the effective rate of all outstanding mortgages was just under 6% in the first quarter of 2010, the lowest on record since 1977.

>> Review of Last Week

DOUBLE DIP DOUBLE TALK… Lately it’s been hard to ignore all the talk about threats of a “double-dip” recession. So last week it was refreshing to see The Wall Street Journal identify all this talk as “exaggerated fears of a double-dip recession.” They pointed out: “Growth may be slowing from its first-quarter peak…but most indicators point to continued global growth.” Investors quickly came to their senses, stopping the recent stock market slide and sending all major indexes up for the week by 5% and more!

There certainly was adequate support for a more positive economic outlook. The “continued global growth” the Journal mentioned was backed by the latest forecast from the International Monetary Fund. The IMF increased its estimate of 2010 GDP growth from 4.2% to 4.6%. Some fretted that the ISM Services Index dropped a tad from its May reading. But levels above 50 signal expansion, so June’s 53.8 shows our non-manufacturing sectors are still experiencing healthy economic growth.

Initial jobless claims came in better than expected for the week, dropping by 21,000. Retailers reported June same store sales, which weren’t the debacle some had predicted, with Macy’s and Nordstrom actually coming in with some pretty good numbers. Finally, the Q2 corporate earnings season begins this week and first estimates are that profits will be up 34% overall vs. last year. Does any of this sound like a dip to you?

For the week, the Dow ended UP 5.3%, to 10198.03; the S&P 500 was UP 5.4%, to 1077.96; and the Nasdaq was UP 5.0%, to 2196.45.

With stocks rallying, the bond market didn’t have such a great time of it. Nonetheless, the FNMA 30-year 4.0% bond we follow was actually UP 22 basis points for the week, ending at $101.50. As noted above, national average mortgage rates tracked by Freddie Mac’s weekly survey reached record low levels.

>> This Week’s Forecast

A DEEP LOOK INTO THE ECONOMY… Economically speaking, this week promises to tell all, except for the housing market. Tuesday’s May Trade Balance should stay pretty even, still showing nice export activity. Wednesday’s June Retail Sales are forecast to improve on May’s readings, a good indication of consumer health. We’ll also see if the Minutes of the FOMC Meeting on June 23 reveal anything new about the Fed’s economic outlook.

Inflation should remain benign as tracked by the Thursday’s wholesale PPI and Friday’s consumer CPI. Thursday will also be a big day for manufacturing, expected to stay in recovery mode as measured by the Empire and Philadelphia Fed Indexes, plus Industrial Production and Capacity Utilization. Q2 earnings will come from Alcoa, Intel, JPMorgan Chase, Bank of America, Citigroup, and GE.

>> 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 July 12 – July 16

Date Time (ET) Release For Consensus Prior Impact
Tu

Jul 13

08:30 Trade Balance May –$39.5B –$40.3B Moderate
W

Jul 14

08:30 Retail Sales Jun –0.2% –1.2% HIGH
W

Jul 14

08:30 Retail Sales ex-auto Jun 0.0% –0.8% HIGH
W

Jul 14

10:00 Business Inventories May 0.2% 0.4% Moderate
W

Jul 14

10:30 Crude Inventories 7/10 NA –4.96M Moderate
W

Jul 14

14:00 Minutes of the FOMC Meeting 6/23 NA NA HIGH
Th

Jul 15

08:30 Initial Unemployment Claims 7/10 449K 454K Moderate
Th

Jul 15

08:30 Continuing Unemployment Claims 7/3 4.425M 4.413M Moderate
Th

Jul 15

08:30 Producer Price Index (PPI) Jun –0.1% –0.3% Moderate
Th

Jul 15

08:30 Core PPI Jun 0.1% 0.2% Moderate
Th

Jul 15

08:30 NY Fed Empire Mfg Index Jul 18.0 19.57 Moderate
Th

Jul 15

09:15 Industrial Production Jun 0.0% 1.3% Moderate
Th

Jul 15

09:15 Capacity Utilization Jun 74.2% 74.1% Moderate
Th

Jul 15

10:00 Philadelphia Fed Mfg Index Jul 10 8.0 HIGH
F

Jul 16

08:30 Consumer Price Index (CPI) Jun 0.0% –0.2% HIGH
F

Jul 16

08:30 Core CPI Jun 0.1% 0.1% HIGH
F

Jul 16

09:55 Univ. of Michigan Consumer Sentiment Jul 74.5 76.0 Moderate

>> Federal Reserve Watch

Forecasting Federal Reserve policy changes in coming months Economists are still virtually unanimous in forecasting the Fed will keep rates at present super-low levels through the FOMC meeting in November. 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
Aug 10 0%–0.25%
Sep 21 0%–0.25%
Nov 3 0%–0.25%

Probability of change from current policy:

After FOMC meeting on: Consensus
Aug 10 <1%
Sep 21 2%
Nov 3 5%

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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