Austin Mortgage Market Update – For the week of March 22, 2010

For the week of March 22, 2010 – Vol. 8, Issue 12

>> Austin Mortgage Market Update

INFO THAT HITS US WHERE WE LIVE February housing starts were down 5.9%, to an annual rate of 575,000 units, but this was higher than consensus expectations and almost all the drop came from multi-family units. Single-family homes were off only 0.6% in February and are still up 39.8% over their low a year ago. Meanwhile, new building permits for February fell 1.6%, to an annual rate of 612,000, but that was also better than estimates and permits are still up an estimated 11.3% from a year ago. The experts all thought we’d see a MAJOR drop in home building given the record snow storms on the East Coast. But we didn’t. The Mortgage Bankers Association (MBA) estimates we’ll see 694,000 housing starts in 2010, a 20% hike from 2009 numbers.

At last week’s meeting, the Fed confirmed it would end its purchasing of mortgage-backed securities, as scheduled, on March 31. This buying program has helped keep interest rates historically low the past year. Even though the Fed will stop buying, they have no plans to sell the bonds they’ve bought, which may have put pressure on rates to go up. The MBA currently predicts rates to rise very gradually for the rest of the year and keep rising in 2011 and 2012. But let’s face it. If mortgages get into the 6% range, which is NOT being forecast until NEXT year, they would still be at a very attractive level which should in no way slow the housing recovery.

Buyers who want to take advantage of today’s low Austin mortgage rates AND the homebuyer tax credit should note they need to sign a contract by April 30 and close by June 30.

>> Review of Last Week

NOW THAT’S MORE LIKE IT… Investors felt good enough about the economy to push stock market indexes up for the week, landing them at their highest levels in over a year. There was a modest drop in the markets on Friday, with India’s central bank hiking rates a bit and continued concern over Greek debt. But, hey, stocks had already gone up eight days in a row by that point. And for good reason.

Tuesday the Fed didn’t touch the rate and their statement still predicted “exceptionally low levels of the federal funds rate for an extended period.” Corporations and investors like cheap money as much as you and I, so this kept stock prices heading up. We also had nice quarterly earnings from FedEx, Nike and Guess, plus General Electric‘s forecast of an earnings turnaround at GE Capital, their financial division.

Both the Consumer Price Index and the Producer Price Index came in below expectations, showing inflation remains in check. Initial unemployment claims met estimates. Industrial production, capacity utilization and the Philadelphia Fed Index of manufacturing all surpassed estimates. It’s interesting that in the last two weeks, the economic data has outperformed what you would have expected, given the harsh winter weather. Payrolls, retail sales, manufacturing measures and housing starts all beat expectations. Some observers now expect a payroll increase in March. Let’s hope they’re right.

For the week, the Dow was UP 1.1%, to 10741.98; the S&P 500 went UP 0.9%, to 1159.90; while the Nasdaq headed UP 0.3%, to 2374.41.

Investors focused on buying stocks for four days, though Friday the mood changed to selling. So bonds, which usually head in the opposite direction from stocks, finished with some strength. The FNMA 30-year 4.5% bond we watch ended the week virtually flat, off just 4 basis points from the week before, closing at $100.84. Average mortgage rates stayed at their historically low levels, as reported in last week’s Freddie Mac Survey.

>> This Week’s Forecast

HONING IN ON HOMES AND Q4 GDP… We’ll get a good look into the housing market with February Existing Home Sales on Tuesday and February New Home Sales on Wednesday. Friday the third estimate of Q4 GDP comes in. This will give us a more accurate read on the recovery’s first quarter of economic growth. Thursday, Chairman Ben Bernanke will give his rescheduled Congressional testimony on the Fed’s “exit strategy” for easing rates up from their current super-low 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 March 22 – March 26

Date Time (ET) Release For Consensus Prior Impact
Tu

Mar 23

10:00 Existing Home Sales Feb 5.00M 5.05M Moderate
W

Mar 24

08:30 Durable Goods Orders Feb 0.5% 2.6% Moderate
W

Mar 24

10:00 New Home Sales Feb 315K 309K Moderate
W

Mar 24

10:30 Crude Inventories 3/20 NA 1.01M Moderate
Th

Mar 25

08:30 Initial Unemployment Claims 3/20 450K 457K Moderate
Th

Mar 25

08:30 Continuing Unemployment Claims 3/13 4.560M 4.579M Moderate
F

Mar 26

08:30 GDP – Third Estimate Q4 5.9% 5.9% Moderate
F

Mar 26

08:30 GDP Chain Deflator – Third Estimate Q4 0.4% 0.4% Moderate
F

Mar 26

09:55 Univ. of Michigan Consumer Sentiment – Final Mar 73.0 72.5 Moderate

>> Federal Reserve Watch

Forecasting Federal Reserve policy changes in coming months Even though the Fed stuck to its “keep rates low for an extended period” mantra, the dissenting voices on the FOMC are getting louder. The economy is picking up even, though jobs still lag. So more experts think we’ll see a rate hike the second 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
Apr 28 0%–0.25%
Jun 23 0%–0.25%
Aug 10 0%–0.25%

Probability of change from current policy:

After FOMC meeting on: Consensus
Apr 28 <1%
Jun 23 11%
Aug 10 38%

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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